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Posted by patrickklepek (3398 posts) -

For the past six years, three ex-SNK fighting veterans have been toiling away at their own independent fighting game, Yatagarasu: Attack on Cataclysm. Hoping to expand, the team turned to Indiegogo and asked for $68,000. Fans rewarded them with enough enthusiasm to raise $118, 243, nearly twice the original goal.

If you use the Internet to pay for things, most likely you use PayPal on a regular basis.

Then, the money disappeared. PayPal, which handles transactions between creators and fans on Indiegogo, locked down the developer’s account, and said it could only have 50% of the funds. The rest would be released as development continued, based on PayPal’s assessment of the situation. PayPal was, essentially, going to become a producer on Yatagarasu going forward.

“This has nothing to do with payment processing,” said Nyu Media founder Seon King, one of the project leads. “And they’re kind of allowing themselves to join the project in a policing role where we become accountable to them. That was really ridiculous to read, to have to consider.”

Millions upon millions have been raised by game fans, and with FTL and Shadowrun Returns proving it can work, there’s few signs this new funding mechanism is going anywhere. If anything, we can expect more players to get involved. But the money is a pretty key component.

At the heart of the problem is PayPal, the eBay-owned financial transaction service that’s become one of the most ubiquitous mainstays on the Internet. Most sites these days offer PayPal payment options, so it’s impossible to avoid, forcing PayPal’s structural problems to the surface over and over again.

Just recently, PayPal president David Marcus posted a blog talking about how the company’s focus on global expansion “had taken precedence over our customers’ experiences for too long,” and it was launching a “Customer First” initiative. When you have to launch a program called “Customer First,” you have a problem.

King had been receiving emails from PayPal daily--more than 7,000--as fans contributed to the project. He’d started to zone them out. Two of those emails were notifications about the account status, but King didn’t find them until after discovering the account had been locked, a move that did not occur until after funding had closed and Yatagarasu had been promised to backers. PayPal asked King for information about his company, the game, and other details to establish legitimacy, which PayPal accepted. But the account was still locked, with PayPal asserting it would dole out funds for Yatagarasu as the months went on.

Yatagarasu was not the first to encounter the problem, and wasn’t even alone in dealing with the problem that week. Months prior, Skullgirls developer Lab Zero Games had encountered similar issues on a different scale. Skullgirls raised an astounding $828,768 on Indiegogo, despite only asking for $150,000. It was a monstrous, unexpected reaction from the game’s beloved fans, and it gave the game a new life.

Two weeks after Skullgirls’ campaign closed, Lab Zero went to access its mound of funds.

“I had pulled out like $700,000 and dumped it into our bank,” said Lab Zero founder Peter Bartholow. “I get a call from a [PayPal] guy who’s like ‘yeah, I can’t believe they let you do that, I’ve locked down the $35,000 you have remaining in your PayPal account.’ Just because.”

That “just because” is PayPal fears chargebacks from upset fans if a project falls through or doesn’t live up to expectations. Several developers were given this line. Despite crowdfunding having gone on for years at Kickstarter, this has not broken Amazon Payments, which handles transactions for Kickstarter. Nonetheless, PayPal touted this repeatedly to projects, in addition to citing concerns about potential fraudulent activity.

Lab Zero was in contact with PayPal long before its account locked. A PayPal representative touched base with Bartholow, asked about the campaign, and offered to present them with a merchant rate, which meant PayPal took a lower cut. Since a merchant rate required a campaign sustaining itself for three months, Bartholow passed, but the phone call ended with the representative wishing Bartholow good luck.

“That was it,” he said. “I thought the call was going to be super ominous.”

“I get a call from a [PayPal] guy who’s like ‘yeah, I can’t believe they let you do that, I’ve locked down the $35,000 you have remaining in your PayPal account.’ Just because.”

When the account became locked, Bartholow was presented with the same options as Yatagarasu: let PayPal become a producer and determine how the money is spent.

“So I sent him [the PayPal rep] all the documentation,” said Bartholow, “and he’s like ‘yeah, this all checks out. We still need to hold the reserve. It will last another six months or whatever, and you can contact me if you need me to release money and stuff like that. If you can demonstrate you are spending your money wisely and stuff.’”

With PayPal not presenting many decent options, Bartholow’s next move was to go public, and tell his backers what the problem was. If enough people rattled PayPal’s cage, maybe it would decide another way. It worked, and the problem was quickly resolved. When the Yatagarasu team encountered the same problem, it called up Bartholow, seeking advice. It was quickly decided that Yatagarasu would go public, as well.

When King disclosed Yatagarasu’s issue with PayPal, he was boarding a flight from Canada to the UK. When he stepped off the plane, the issue had been resolved.

“When I arrived, I had an email from PayPal saying ‘we’d lifted the restriction.’” said King. “No apology or anything like that.”

PayPal did follow-up with King days later, but seemingly remained confused at why a project would have trouble with restrictions that released the money in waves.

These are the most recent examples of PayPal’s tense exchanges with crowdfunded creators, but others have been dealing with PayPal for much longer. Back in March, Red Thread Games finished collecting $1.54 million from excited fans looking for a new entry in The Longest Journey. It offered a PayPal option, which generated more than $70,000. Almost immediately after the project closed, that money was locked away.

Red Thread Games founder Ragnar Tornquist sighed almost immediately when we started talking, and his story is familiar. Like Skullgirls and Yatagarasu, PayPal didn’t reach out until the campaign had closed, long after it had finished launching, promoting, and closing a successful crowdfunding campaign on a legitimate service. PayPal asked Tornquist for details about the company, the project, and the plans for the future, all in the interest of fraud concerns. PayPal noted the information, but refused to lift the restriction, and told Red Thread it would hand over the money when the game was finished, bucking the whole idea of crowdfunding.

“At that point, we had had a successful $1.5 million dollar Kickstarter,” said Tornquist. “You would think that would prove that we have something that was kosher. But it’s been incredibly difficult to get any answer from them, and every time we get in touch with them, it’s impossible to find phone numbers, it’s impossible to get in touch with people, nobody ever knows our story--we have to start over again every single time.”

Worse still, sometimes Red Thread would contact PayPal and reach someone who wasn’t even aware of what Kickstarter was, despite the service’s prominent existence for several years now.

“Our general manager had to spend time explaining to the first representative what Kickstarter was,” he said. “He was looking it up online as they were speaking. After that, they were like ‘oh, that sounds interesting!’ and nothing happened.”

But Tornquist wasn’t overly concerned about his company’s scuffles with PayPal, considering most of the funding had come through just fine through Kickstarter and Amazon Payments. But when plans were set in motion for JourneyCon, a convention celebrating The Longest Journey series, Red Thread was forced to accept ticket sales through PayPal. As those sales came through the same account, PayPal locked it down.

“Now, it started directly affecting our fans and backers,” he said. “That’s when I said ‘fuck this, now I’m just gonna make an issue out of it because it’s directly hurting people.’”

Red Thread started making noise on Twitter, alerting the @AskPayPal account to its problems. This was the same day as Yatagarasu’s conflict with PayPal. After our interview, I sent a PayPal rep a question about it, making note of Red Thread’s ongoing issues. Not long after that, Tornquist told me it has been resolved.

Lab Zero found resolution in the same unorthodox manner. When PayPal's "Customer First" policy was unveiled, Bartholow contacted PayPal, figuring this was an opportune moment. Instead, Bartholow was told his contact had changed departments, and PayPal couldn't assign him a new contact. Perplexed, Bartholow tweeted at @AskPayPal, which responded with a direct message request for the account's email address.

"Two days later, I logged into PayPal to pay contractors and the reserve had been lifted," said Bartholow.

PayPal was quick to issue statements in support of these campaigns with an apologetic tone, but the piles of stories make it difficult to take the company seriously, considering how many times this issue has been resolved by developers reaching out to the media and making it public. What happens to smaller campaigns?

“We want to reiterate that supporting these campaigns is an exciting new part of our business,” said a PayPal representative. “We are working closely with industry-leaders like IndieGoGo and adapting our processes and policies to better serve the innovative companies that are relying on PayPal and crowd funding campaigns to grow their businesses. We never want to get in the way of innovation, but as a global payments company we must ensure the payments flowing through our system around the world are in compliance with laws and regulations. We understand that the way in which we are complying to these rules can be frustrating in some cases and we've made significant changes in North America to adapt to the unique needs of crowd funding campaigns. We are currently working to roll these improvements out around the world.”

It’s easy to say the right thing. The true test, of course, will be the next wave of crowdfunding projects.

Staff
#2 Edited by derp267 (3 posts) -

Paypal has to be breaking some law in doing this. This won't stop until someone files a lawsuit and it sets a precedent. Crowd funding is a seemingly new concept and lawmakers will have to eventually step in--their concern being to prevent money laundering of course.

#3 Posted by Mars (310 posts) -

I've never understood the worlds love affair with PayPal. I'm not a fan.

#4 Posted by Aetheldod (3495 posts) -

SLeazy bastards ..... >:(

#5 Edited by AlmightyBoob (71 posts) -

Paypal knows they have an almost complete monopoly and we have to suck it up or go without. They have the same awful stranglehold on eBay and it's slowly but surely killing it.

#6 Posted by mhd420 (14 posts) -

@derp267: PayPal takes steps to avoid being considered a bank, allowing them to dodge a lot of regulation and FDIC insurance that real banks have. They've been pulling this same shit for years - essentially their T&C allow them to be the final arbiter in all decisions.

What I don't understand is why IndieGoGo keeps using them, surely PayPal's reputation is harming their own.

#7 Posted by BigD145 (175 posts) -

PayPal: Don't ask permission. Apologize later. Perhaps 2 months later.

#8 Posted by mhd420 (14 posts) -

@mars: They make life convenient for buyers, and were one of the first companies to make it fairly easy for small businesses to accept credit card payments online. They just completely fuck over sellers.

#9 Posted by Khann (2764 posts) -

Sounds like they need... Bitcoin.

#10 Edited by andrewd34n (6 posts) -

Organizations like Paypal are the very reason why I got into crowdfunding in the first place! Suffice to say, I'm never using them again.

#11 Posted by Hichael (159 posts) -

Wow, that's really shitty. Yatagarasu is actually a pretty fun game. I'm glad I've somehow always avoided using paypal.

#12 Posted by drakesfortune (286 posts) -

I certainly understand where you're coming from Patrick, but I don't think you're looking at this from all angles. As the owner of a company that sells online and takes almost 3/4ths of our payments through Paypal, I can tell you first hand that fraud is a huge concern for Paypal, on all sides. In many cases, if someone is defrauding the consumer, Paypal is left holding the bag. The credit card companies will demand the money from the seller (the fraudster) and Paypal has to cough it up. Period. In this case, they could be held liable for the whole amount. That's a big loss, even for Paypal.

On top of that, the internet is FULL of scammers. We have to deal with fraud on our website on a daily basis. It's a huge problem. Paypal probably loses a ton every year due to fraud, and any time someone is gathering $80,000 all of the sudden, with no history with Paypal, and for potentially nebulous reasons, they have reason to be cautious.

Is there a better answer than what they are doing? I don't know. They could, and maybe should, just say, no you can't gather that much cash here. Find another way to get the money. Then it's up to the receiver to decide if that's worth it to them. I just think you probably should consider this a bit more deeply than just reflexively looking at it from one side's perspective. Things are usually more complicated than they seem, especially when talking about moving this kind of money. Where I'm from, you can buy a house for that kind of dough, and there is ultimately a higher degree of risk involved from Paypal's perspective.

#13 Posted by Morningstar (2127 posts) -

@khann said:

Sounds like they need... Bitcoin.

Oh please :P

#14 Edited by Brendan (7667 posts) -

As someone who uses a credit card online I only begrudgingly use Paypal when I have to. I dislike the service and dislike that so many people ask for it as an option. Paypal should not be supported.

Online
#15 Posted by nofzac (35 posts) -

coming from the Transaction Processing industry, i can see why PayPal is trying to cover their asses...but they seem to be going about it in a shitty way.

You would be amazed at the laws relating to money transfers - especially when its for something like "a promise to make a game." You can see how a service like Kickstarter could potentially be used to launder money for drugs, terror, etc - since you arent really selling anything but a possibility.

I think it would be fair for Paypal to hold a reserve amount, but this info should have been discussed up front before the Kickstarter or Indigogo or whatever started...not after it had been funded and Paypal had a pile of cash to lord over.

#16 Edited by Pr1mus (3779 posts) -

You know what they're doing is illegal, or at the very least would not stand if challenged in court, when every stories like this that go public end up being resolved in a matter of hours.

#17 Edited by MATATAT (169 posts) -

I understand where PayPal coming from but there definitely needs to be changes. They either need to monitor accounts as money trickles in consistently and contact the project head when it's clear the project is gathering a lot of money and not after the fact, or assess the legitimacy of a proposal more carefully. The latter should fall onto sites like IndieGoGo.

Personally I try and avoid PayPal as much as possible. I always have really poor experiences when using their service that I get nowhere else.

#18 Edited by cikame (964 posts) -

I think it's worth noting that every decision Paypal made regarding all of these issues, was made with the protection of the customers money in mind.

They are the largest internet payment company in the world, millions are traveling through them daily, the fact that they can have safeguards in place protecting people from smaller projects like this is pretty great.

It's also worth noting, so far every issue like this has been resolved.

#19 Posted by patrickklepek (3398 posts) -

I certainly understand where you're coming from Patrick, but I don't think you're looking at this from all angles. As the owner of a company that sells online and takes almost 3/4ths of our payments through Paypal, I can tell you first hand that fraud is a huge concern for Paypal, on all sides. In many cases, if someone is defrauding the consumer, Paypal is left holding the bag. The credit card companies will demand the money from the seller (the fraudster) and Paypal has to cough it up. Period. In this case, they could be held liable for the whole amount. That's a big loss, even for Paypal.

I don't think anyone would argue that PayPal shouldn't have any policies in place, but that's exactly the problem here. They have no policies in place. Instead, it treats these on a project-by-project basis in a reflexive manner that helps no one, including PayPal.

Staff
#20 Posted by Nethlem (377 posts) -

This is hardly "news", PayPal has been criticized for years because of their shady behavior.
Essentially they offer services like a bank without being an actual bank, so they are not subject to banking laws, that's why they can pull off all that shit.

Over these past years there had been several calls to customers, shop owners and others people, to boycott PayPal due to their shady practices. But this has become more and more difficult considering how widespread PayPal has become by now.

And don't get fooled: The last thing they care about is customer protection, all they care about is money. They get interest on all the money that goes trough them, holding peoples money back = more interest for PayPal, that's the sole reason why they behave like this.

#21 Posted by alwaysbebombing (1509 posts) -

PayPal is disgusting. I've worked with different people who have all used PayPal for different reasons, artists, game developers, small independent business. I have more stories than I can count about PayPal fucking over good people.

#22 Posted by ch3burashka (4992 posts) -

Just recently, PayPal president David Marcus posted a blog talking about how the company’s focus on global expansion “had taken precedence over our customers’ experiences for too long,” and it was launching a “Customer First” initiative.

Oh, shut the fuck up. Do they think they're actually fooling anyone with that line of "we care about consumers" bullshit? I'm sure that, on the inside, it seems like everyone wins - both them and the consumers. On the outside, however, it looks and sounds as disgusting as you'd think, the blog being the shit cherry on top of the shit pie. We, as a society, need to establish a clear relationship between the consumer and the company - it is an antagonistic relationship; pretending otherwise is misleading and malicious.

#23 Posted by BlazeHedgehog (1082 posts) -

I wouldn't say Amazon Payments has been entirely smooth, either - Dan Teasdale has been complaining on and off on Twitter these last few weeks about Amazon jerking him around much in the same way it sounds like Paypal is doing for these guys.

#24 Posted by Swick (222 posts) -

Great article, Patrick. Though I'm not sure of what Paypal's interest is in ceasing funds is... for fraud prevention? Since when are they in the business of protecting backers from perceived bad investments?

#25 Edited by asurg (21 posts) -

@patrickklepek : By chance have you been able to get a direct contact / information straight from Paypal regarding this? I'd very much like to hear some direct responses from them, see if they are going to put some guidelines in place or perhaps share guidelines that were previously not transparent enough to the general populace regarding crowdfunding issues. The article itself is rather one sided- and while it is important to get a situation like this out in the open, I would like to hear more information, similiar to some of the responses above. No matter what, thank you for shedding light on this issue.

I can understand that Paypal has a rather unique situation on their hands, in trying to protect the backers, the project team and themselves from fraud - so I am willing to give them a slight bit of slack. It doesn't mean that they should have gone about this in the manner that has been stated here, though.

#26 Edited by Ravidrath (41 posts) -

@derp267: Nah, I'm pretty sure they're well within the law.

The disconnect, I think, is that they are functionally a bank for many people, but are actually a payment processor. So people are expecting the protections and regulations a bank would have placed upon them, but those don't actually exist for payment processors.

#27 Edited by patrickklepek (3398 posts) -

@asurg said:

@patrickklepek

: By chance have you been able to get a direct contact / information straight from Paypal regarding this? I'd very much like to hear some direct responses from them, see if they are going to put some guidelines in place or perhaps share guidelines that were previously not transparent enough to the general populace regarding crowdfunding issues. The article itself is rather one sided- and while it is important to get a situation like this out in the open, I would like to hear more information, similiar to some of the responses above.

I can understand that Paypal has a rather unique situation on their hands, in trying to protect the backers, the project team and themselves from fraud - so I am willing to give them a slight bit of slack. It doesn't mean that they should have gone about this in the manner that has been stated here, though.

There's a quote at the end of from them, which was in direct response to my reporting as it was happening. I didn't have a one-on-one interview with a PayPal executive or anything, though.

Staff
#28 Posted by AlmightyBoob (71 posts) -

@mhd420 said:

@mars: They make life convenient for buyers, and were one of the first companies to make it fairly easy for small businesses to accept credit card payments online. They just completely fuck over sellers.

They also make life a lot easier for scammers. Scams may not be very common but Paypal sides with the buyer almost every time without actually looking at the case.

#29 Posted by Pixeldemon (244 posts) -

Good article but I just can't believe that a financial institution would ever abuse the power they have over their customers.

#30 Posted by asurg (21 posts) -

@patrickklepek:

There's a quote at the end of from them, which was in direct response to my reporting as it was happening. I didn't have a one-on-one interview with a PayPal executive or anything, though.

Indeed. I was perhaps wondering if there was a followup in the works where they would be more... forthcoming. Thanks for getting this info out there.

#31 Edited by alwaysbebombing (1509 posts) -

Good article but I just can't believe that a financial institution would ever abuse the power they have over their customers.

Really?

#32 Posted by Spiritof (2017 posts) -
#33 Posted by FTomato (233 posts) -

@cikame: Not every situation was resolved. I've heard dozens of small merchants complaining about not being able to get their money from PayPal for years. They're not quoted in this article because A. they're not related to crowdfunding which is the article's topic and B. if they were known enough to be a relevant source they wouldn't have a problem getting the public to pressure PayPal into getting their money back.

#34 Posted by LiquidPenguins (181 posts) -

This sounds good to me. Anything to slow the release of awful indie games.

#35 Posted by Monkeyman04 (998 posts) -

@pixeldemon said:

Good article but I just can't believe that a financial institution would ever abuse the power they have over their customers.

Really?

Can't tell if he is joking or not. Internet and all. I hope that is the case.

Online
#36 Posted by chilibean_3 (1611 posts) -

Ugh, that's really gross. Nice article, Patrick.

#37 Posted by edgeCrusher (136 posts) -

Nice informative piece. It's a good thing to raise attention about these dumb policies and practices and hold PayPal's feet to the fire. But, as a personal side note, PayPal has been terrible for years, why would anyone use them, and trust them is beyond me. They locked my account too after I sold an item on eBay and then deposited the money in my bank account. I almost never use PayPal, so I didn't really care. I'm just surprised that these companies were so naive. Next step for crowd funding: Bitcoins. Think about it.

#38 Posted by BlackLagoon (1372 posts) -

I seem to recall PayPal freezing Notch's account back in 2010 too... They've been causing problems for people for a long time unfortunately, and getting answers from them is never easy.

#39 Posted by Ravidrath (41 posts) -

@asurg: Paypal's reasoning is specious, at best.

They're afraid of chargebacks. But chargebacks are likely to be absorbed by the credit card companies, which is where most of these payments come from. And an allowance for fraud and chargebacks should be built into their risk model, and thus their transaction fee.

So I'm not sure that if a project were to fail and people were going to try to get their money out that Paypal would actually be on the line for much of it at all.

But either way, the biggest problem is their "guilty until proven innocent" methodology in executing these actions. They have every right to protect their bottom line, but they're effectively overriding the will of thousands of people that backed the project without even asking questions first.

#40 Posted by Veektarius (4540 posts) -

Never liked Paypal. Don't have an account, don't use it, when possible.

#41 Edited by coaxmetal (1569 posts) -

Paypal has a long history of doing this, before crowd funding was common, and not just for games. For open source software conferences that took donations to paypal, they frequently freeze and hold the funds. Recently, a crowd-funded project called mailpile (http://www.mailpile.is/, the statement about paypal is at http://www.mailpile.is/blog/2013-09-05_PayPal_Freezes_Campaign_Funds.html ), which I backed on indiegogo, had about $45k frozen by paypal, demanding a lot of data about their company and project and saying they had to lay out a plan and they the funds would be released after the product was (it is an open-source self hosted mail solution). They immediately got a lot of bad press in the tech community though and released the funds after about a day or 2.

Anyway don't use paypal they are scum.

#42 Edited by Skr0lld0wn (6 posts) -

As someone who has used Kickstarter for a successful crowdfunding project, PayPal is a complete joke.

Withholding funds from legitimate users by default is NOT the way to mitigate a POTENTIAL chargeback problem. I don't pretend to know what the best way is but introducing another layer of uncertainty to crowdfunding is just going to make people go elsewhere.

Amazon has none of these issues with their payment system. PayPal's stance strikes me as Ebay mentality from a long-gone era of the internet.

IndieGoGo and other crowdfunding services using PayPal would be wise to abandon them.

#43 Posted by AaronChance (141 posts) -

Paypal have a long history of doing this. They did this to Minecraft before kickstarter existed. They see large amounts, and they do their best to hang onto them.

#44 Posted by Yohosie (37 posts) -

For those unaware paypal's issues spread beyond Crowdsourcing. They are essentially a digital bank with no bank regulations, and do whatever the hell they want.

Paypal is shit. Don't use paypal.

#45 Posted by Baal_Sagoth (1224 posts) -

Interesting. Bit of a shame to only get the nebulous accusations of one side that shows every sign of not knowing what the fuck they got themselves into. People aren't "forced" to use paypal, they make that decision when they'd like to make a lot of money with crowdfunding or whatever else. The example with one of the devs not reading the damn e-mails he's been sent kind of says a lot. The confused language while recounting Paypal's alleged statements doesn't inspire confidence either. I appreciate a certain level of naive passion by indie devs and I'm sure Paypal has some rather draconian regulations in place that make it very hard for certain companies but all of these factors are things you just have to consider before getting carried away by your dreams of crowdfunding and "sticking it to the man" (by getting in bed with Kickstarter, Indiegogo, Amazon and Paypal - truly some of the most altruistic, independent, almost communist ventures out there).

Now, the one critical point here is Paypal's apparent tendency to make issues involving rather insignificant amounts, that have a risk of attracting unwanted bad publicity, simply go away. That's the one factor that seems somewhat shady if very characteristic of almost all big companies. That certainly is Paypal's resposibility to figure out, clarify and develop a straightforward set of ground rules for. And pay their dues if they actually did something criminal, of which I see no real sign here. Everything else indicates devs being utterly unprepared to deal with their crowdfunding success and trying to blame Paypal with little proof as far as I can tell. Don't like their terms? Don't fucking use them to finance your business. Just like these people did with traditional publishers.

#46 Edited by JesseCherry (63 posts) -

Great story. Thanks Patrick

#47 Edited by Parsnip (1075 posts) -

Paypal continues to be paypal, news at 11.

I use it as little as possible, always opting to use other payment methods when available.

Online
#48 Posted by Deathpooky (1367 posts) -

I obviously don't know the law and liability in this area, but I'm surprised PayPal has that much exposure if there's fraud. PayPal just moves money from one place to another, I don't know why they have that much responsibility over the acts of either person in the transaction. You'd think there'd just a be a buyer beware situation when you make a PayPal transaction. I trust that using PayPal means my info won't get stolen, but it's on me to make sure that the seller is trustworthy and will follow through. If I mail money to a scammer I can't sue the postal service.

#49 Posted by Sup (50 posts) -

Fascinating, I didn't know about this before. I'm going to think twice before using PayPal in the future and probably never going to use PayPal if I ever ask for money on the internet.

#50 Edited by OppressiveStink (355 posts) -

@deathpooky: I work for a payment processor and am aware of the rules and regulations. If the seller has no money or refuses to pay back chargebacks, the payment processor is left holding the bag and thier only recourse is collections. That and many processors are charged a penalty per charge back ranging from 20 to 200 per transaction.

*dollars per transaction