Client chargeback request of $12,500 after one year.

[#1]

Hi!

I worked for a client a year ago, and we finished alot of work together with different people creating websites, etc.

I used to record all hours manually as they’re mostly calls and communication, as I’m a project manager.

Now, one year later, Upwork is sending me an email that the bank is requesting a chargeback of more than $12,500 from my contract one year ago.

Then a few more freelancers who used to work with the same client contacted me and told me Upwork informed them with the same thing but with different amounts. I have a feeling that this client was a fraud or using another person’s account, or went broke.

Whatever the reason is, doesn’t matter. Upwork now is asking for proof of my work, which I sent, to TRY to tell the bank that those charges were done for freelancers who actually worked on something. But they also said the final decision will be the bank’s. So I feel my odds are not too great.

I contacted this client and he informed me he didnt do any chargebacks, validating my theory abit more that he is a fraud or broke.

The problem is, Upwork is freezing my withdrawals from my account till I pay the $12,560.

I do not have this amount, and I do not know what to do.

All of this is because according to Upwork, I did not log in the hours with their software and did it manually instead.

This is demotivating me from this platform after 3 years full time of working on it and being Top Rated Plus.

If anyone has any advice, please share.

Also a couple of questions, what if I refuse to pay even after the bank decided that they want the money back, does that put me in a bad legal position or could only lead to my account being banned?

If my theory is proven correct and this client was actually using another person’s card, shouldn’t that put Upwork the least bit accountable for anything?

The process of speaking to a bank could take 45 days, so I’ll just sit and do nothing till then.

Kindly advise,
Thanks,
Al

[#2]

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Alexander N wrote:

And there is no thing like "enter the two random small amounts we just charged to prove you have access to the bank account"?

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There is. That credit card will have been verified the way you describe above, and it's most likely that initially the use was authorized.

Until it no longer was.

Or a business relationship went sour.

Or a marriage.

Just because use was authorized once or 5 times or for a year, that doesn't mean "forever".

[#3]

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Petra R wrote:

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Alexander N wrote:

And there is no thing like "enter the two random small amounts we just charged to prove you have access to the bank account"?

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There is. That credit card will have been verified the way you describe above, and it's most likely that initially the use was authorized.

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There is not.

I added one more CC to my "client's" account just a few days ago without any verification. Of course, that is my card and there is exactly the same name on as my account name, and account already proved by many contracts and payments, by tax ID, etc. ... but anyway, the card was added without any verification and 2 minutes later I used this new "unverified" card to created I fixed-rate contract.  And yes, it was convenient for me...

But in fact - in some cases, it's possible to add a credit card without verification, and we don't know which criteria "if/then" works there.  

[#4]

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Paul T wrote:

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Petra R wrote:

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Alexander N wrote:

And there is no thing like "enter the two random small amounts we just charged to prove you have access to the bank account"?

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There is. 

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There is not.

I added one more CC to my "client's" account just a few days ago without any verification. 

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OK, let's say "There usually is".

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Paul T wrote: Of course, that is my card and there is exactly the same name on as my account name, and account already proved by many contracts and payments, by tax ID, etc. 

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There you go...

[#5]

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Petra R wrote:

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OK, let's say "There usually is".

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Paul T wrote: Of course, that is my card and there is exactly the same name on as my account name, and account already proved by many contracts and payments, by tax ID, etc. 

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There you go...

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You can't be sure which criteria using there. Maybe you just need to have something like a "1-year old" account and 5 finished contracts.

[#6]

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Paul T wrote:

I added one more CC to my "client's" account just a few days ago without any verification.

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Did your bank sent you an email/sms about the charge? Does it show in your account a flagged transaction that there is a charge with a merchant you didn't use previosuly? Does your bank require to input a security code when you use the card to purchase online? Do you see the transaction in your bank statement? If not ... then you should look if your bank offers such options ... if not ... change the bank!

[#7]

Thank you very much for your advice.... 🙂 but I think you have a bit of misunderstanding of how banks could process payments in some cases.

And the bank is a big one in the North American continent.  Each other is similar here more or less 🙂

[#8]

I wonder if somebody steals my credit card info and buys a car with it, can I a year later go to the car dealership and ask the money back. I'm not sure about the laws, but it seems illogical in fraudulent cases like this for the Freelancer or Upwork itself be owing money to the rightful card-owner. 

[#9]

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Tatevik G wrote:

I wonder if somebody steals my credit card info and buys a car with it, can I a year later go to the car dealership and ask the money back.

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Depending on the rules of your credit card company, a chargeback can include charges up to a year ago. In most cases the limit is 3 to 6 months.

Your example doesn't quite work. Your credit card issuer would take the money from the car dealership, who would then go after the "buyer".  If they can't find the buyer, they lost the money.

You don't go to the car dealership.

You don't go anywhere other than to your bank.

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Tatevik G wrote:

it seems illogical in fraudulent cases like this for the Freelancer or Upwork itself be owing money to the rightful card-owner. 

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Who would you expect to be owing the money to the card owner?

That's the way it is. The bank took the money out of Upwork's account. There was nothing Upwork could do to prevent that. They fought the chargeback, but winning an unauthorized use chargeback is very hard, often impossible.

[#10]

Tatevik,

The bank will have reversed the original payment to Upwork, so Upwork has had to repay that money to the bank as the original recipient of the payment from the "client's" credt card..

Upwork wants that loss it has now incurred due to the refund to the bank covered, so they require a refund from the freelancer, who is now on the hook for returning the money Upwork paid to him due to no fault of his own.

Not all banks allow for credit card holders to wait so long to contest charges to their credit cards, but that is usually a matter of the credit card owner's or the bank's local law or the rules of the national or international credit card organization.

To avoid this problem for large value projects Upwork should allow for client and freelancer to agree to use a direct bank-to-bank wire transfer from the client's bank to Upwork's bank to fund either fixed milestone or hourly work payments as true escrow. The cost and  extra effort of using such a payment process would not be worthwhile on small projects, but this would create an escrow account balance that would be much less likely to be reversible by a dishonest client. So Upwork (and hard-working freelancers) would not experience such reversals of payment as M A has experienced here. 

[#11]

Thanks for clarifying, I guess I thought the bank that issued the card would take the losses or the original card owner. 

Another easier thing to implement would be asking the client to send a photo or video of the credit card where you can see the name and see if there is a mismatch. Clients who spend a lot of money on Upwork maybe could be required to pass that verification on top of simply verifying that credit card works. 

[#12]

On your blog you wrote that you're one good terms with the client, not that he's a fraud or broke. Apparently he also lives locally. Why don't you pursue it in small claims court? 

[#13]

Hello Amanda,

I used to be on good terms before this problem occurred, now I'm absolutely not.

Hundreds of comments are directing me towards going legal, it's just not my area of expertise. I'm a business consulting freelancer. Yet, I might eventually have to.

[#14]

You clearly have grounds against the client. I would pursue this before it gets too far away. It's already 6 months past the reversal of the charge. 

[#15]

You do understand that if you "go legal", such legal action will have to be directed at your client, not at Upwork, right? 

How far you'd get with that given that you haven't actually had any losses because you so far haven't paid Upwork what you owe them, would remain to be seen..... I would suspect that legal action might become somewhat complicated.

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M A wrote:

I used to be on good terms before this problem occurred

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I don't think you were. The contract, worth a couple of Dollars short of $38k, was ended in July 2020 by yourself without feedback from the client, and just 5 stars without a word from yourself, indicating that not all was sweetness and light at that point. Who works with a client for that long and for that much money and doesn't even have a handful of words to say about it if all was well?

Also, you wrote the post here, where you call the client fraudulent, many months before you wrote your blog post, in which you describe the client as such a super nice person you trusted so much.

[#16]

Hello Petra,

I do understand. Again, I'm not a legal person. I'm only focused at what I do.

I did ask for feedback after the contract, the client said himself that Upwork deactivated his account, so he can't give me feedback, which is true if your account is deactivated, you can't even log in.

I did trust the client. But that's irrelevant. I'd assumed that even if he went broke or that he was not a "good" person, that wouldn't be my problem. I did everything with him on legal grounds, designs, documents, etc. 

The client being super nice, is irrelevent to him being fraudulent. Frankly, in both cases, that is supposed to be Upwork's responsibility of vetting him before allowing him to hire me for over 1500 hours, and then asking me back for third of that.

Thanks,

[#17]

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M A wrote:

Frankly, in both cases, that is supposed to be Upwork's responsibility of vetting him before allowing him to hire me

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Where did you get that idea from? They verify the payment method. 

I completely get that this sucks incredibly, but you really are directing your anger and disappointment at (and are trying to manipulate) the wrong party. Chargebacks are, unfortunately, a fact of life. Yours was HUGE. But to date, you haven't even paid any of it.  Upwork have paid it. They're the victim here at this point.

[#18]

I agree, chargebacks are and always will be there.

If they had verified the payment method. Then simply put, any client could ask for any money they invested in any freelancer back in a year or so from their bank, and Upwork will have to return it, which wouldn't be fair. So it's a win-win for any client, and a prayer for each freelancer.

[#19]

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M A wrote:

I agree, chargebacks are and always will be there.

If they had verified the payment method.

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They did verify the payment method. Otherwise you would never have been paid anything.

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M A wrote:

Any client could ask for any money they invested in any freelancer back in a year or so from their bank, and Upwork will have to return it, which wouldn't be fair.

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I think you are missing a very important point here: The money has been taken from Upwork. They had no say in the matter. When a chargeback is done, the money vanishes from the account of the person or company.  Upwork tried to defend the chargeback, but were unsuccessful. They did not get the money back.

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M A wrote:

...which wouldn't be fair. So it's a win-win for any client, and a prayer for each freelancer.

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But you haven't paid any of it back. You keep trying to project an image of a victim who lost so much money, when the only party who actually lost those $12.500 is Upwork.

How's that "fair"?

[#20]

Upwork is a multi-billion company Petra, they have insurance for such cases. If they don't have that, then they should. The backbone of their company is their freelancers. If there's no security for them, then this is a huge flaw that the freelancers and Upwork should be aware of.

I'm a full-time freelancer on Upwork, Petra. The day I received this email. This means I'm unemployed. Whether you believe it or not, I am a victim at that moment as they cut off my entire work supply by freezing my ability to withdraw. How is that fair? 

They could've increased their commission to 30-40% as well, till the amount is covered. But asking me to work all those hours, as a full-time Upwork freelancer, is not the best way.

Thank you!

[#21]

Upwork has no insurance against business losses, no company has. If that were insurable, no company  would ever go bankrupt due to clients not paying, only insurance companies would. 

[#22]

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Martina P wrote:

Upwork has no insurance against business losses, no company has. If that were insurable, no company  would ever go bankrupt due to clients not paying, only insurance companies would. 

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It is insurable, there is such a thing as "chargeback insurance" - but such insurance is prohibitively expensive. If a freelancer wants to have insurance against chargebacks, they have to take out such insurance themselves. It is completely irrational to expect a payment processor to do so.

Freelancers are independent businesses, not employees. 

It gets difficult when people want to be freelancers when it all goes well, but expect to be protected from the realities of being an independent business.

You can't have it both ways.

[#23]

You will go mad listening to "gurus" on here. The only good advice is consulting a lawyer, which should have been done as early as possible. Even if a lawyer can negotiate a lower amount, that will leave you on better terms.**Edited for Community Guidelines**

[#24]

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RaeAnna S wrote:

You will go mad listening to "gurus" on here. The only good advice is consulting a lawyer, which should have been done as early as possible. Even if a lawyer can negotiate a lower amount, that will leave you on better terms. **Edited for Community Guidelines**

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**Edited for Community Guidelines** "Guru" is a title that automatically activates Upwork when you've commented a certain number of times. **Edited for Community Guidelines**
On the other hand, the topic that OP has raised here is very interesting because it can happen to anyone, that's why I think there is so much discussion. OP is answering very patiently. This helps everyone.
This does not mean that there are some people who think that there is something shady here.
**Edited for Community Guidelines**

[#25]

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RaeAnna S wrote:

You will go mad listening to "gurus" on here. The only good advice is consulting a lawyer, which should have been done as early as possible. Even if a lawyer can negotiate a lower amount, that will leave you on better terms. Be careful of those who dont work on Upwork but comment on the threads all of the time!

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RaeAnna, I won't name names, but I happen to be a guru and there are some who drive me mad, and others who are knowledgeable and give useful advice, and everything in between. Likewise, there are some prolific forum participants who also earn prolifically as freelancers, presumably because of superior time management skills, but I don't think it's fair to make a blanket statement about Upwork gurus because it's a diverse group, and my experience both reading posts & posting here is that there are plenty of contributors, gurus and otherwise, with a genuine desire to help, though they may have differences of opinion and different ways of expressing themselves. For example, I personally prefer getting to the point to beating around the bush, but some people could find that abrasive.

[#26]

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M A wrote:

The client being super nice, is irrelevent to him being fraudulent. Frankly, in both cases, that is supposed to be Upwork's responsibility of vetting him before allowing him to hire me for over 1500 hours, and then asking me back for third of that.

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I'm sincerely sorry that this happened to you, but I'm curious as to what kind of vetting Upwork could have done in this case, apart from verifying that the credit card payments were going through (which they did, for two years?). You met the client yourself, worked side-by-side with him and thought that he was a nice guy for months on end, so if you didn't see any indications that he was a fraud, how was Upwork supposed to know?

If he was using a stolen credit card, it seems odd that the rightful card owner didn't notice tens of thousands of dollars in payments going through, over a period of two years. Any thoughts on how that happened?