Client filed a chargeback

kimg93 · ‎02-06-2023

Hello all,

I would like some advice - Upwork have informed me a client has filed a chargeback for $1250 for a project I completed in December. The project was creating measurement specifcations for 12 of their existing garment designs.

As a result, I cannot withdraw any funds for up to 90 days. This is really detrimental to me and unfair as I completed the project and the work was submitted and approved with no issues.

I have been in contact with the client. They have said they weren't aware that a chargeback was made, and that someone else in their team must have done it. And that someone else in their team had been communicating to me on Upwork about the project on their behalf.

She then came back to me and said the chargeback was filed because they couldn't open the Wetransfer link for the files, and also because they had decided not to move forward with these designs. Firstly, the link was fine when I submitted the work, and I know this because whoever I was communicating with said they were looking through the files. Also, I would have resent the link/files to them at any point again if they had requested it, with no problem. Secondly, whether they choose to move forward in manufacturing these designs or not is none of my business - as far as I'm concerned I carried out a service successfully and should be paid for it.

She now keeps saying she is going to check the work (I resent her the files today) and ask her team to clarify what the problem is. This is really confusing, as if there was a problem with the work she should have contact me directly on upwork, not filed a chargeback with her bank. This isn't a big company, I don't think they have even launched yet.

I have emailed Upwork with the files and all this information, but was wondering if there is anything else I can do? It all seems very unfair. I thought Upwork was supposed to protect us against things like this.

Thanks,

Khimi

lysis10 · ‎02-06-2023

ouch. So Upwork told you that you can't withdraw for 90 days or can you just replace that money with your earnings and keep going until the chargeback is dealt with?

kimg93 · ‎02-06-2023

Thanks for your message.

Yes I think I can replace the money with my earnings, but it's a lot of money and completely unfair for me to have to do that. So they are making a rebuttal for me against the bank, but that could take 90 days they said, and I can't withdraw anything in the mean time.

lysis10 · ‎02-06-2023

Khimi G wrote:
Thanks for your message.
Yes I think I can replace the money with my earnings, but it's a lot of money and completely unfair for me to have to do that. So they are making a rebuttal for me against the bank, but that could take 90 days they said, and I can't withdraw anything in the mean time.

oooooh ok now I understand. So if you earned enough to put yourself back in the black then you could withdraw but you can't have that money until 90 days if they win the chargeback. Gotcha! I wanted to make sure they don't lock your account for 90 days because that would be bs.

prestonhunter · ‎02-06-2023

re: "if there was a problem with the work she should have contact me directly on upwork, not filed a chargeback with her bank."

Khimi:
This has nothing to do with the quality of your work.

This is nothing more than a client who is willing to violate Upwork ToS and behave immorally and use a chargeback to steal money from you.

I'm very sorry that this is happening to you.

kimg93 · ‎02-06-2023

Thanks for your message and for this reassurance. It's crazy that the client has the ability to do this. I would have thought Upwork would provide some kind of protection for these things.

prestonhunter · ‎02-06-2023

It's crazy, but it is really more of a credit card problem than an Upwork-specific problem.

Credit cards make it extremely easy and convenient for companies to accept payments online from people around the world. But the big problem for businesses/merchants/freelancers is that clients can request chargebacks, and thus take money away after they paid people.

Upwork does what it can to prevent that, such as by making it a violation of Upwork ToS for clients to issue chargebacks. But Upwork is not able to overcome the fact that credit card holders can request chargebacks.

This is why some businesses and service providers do not accept credit cards as a form of payment.

parisi-michael · ‎02-07-2023

Except Upwork is not standing behind their escrow protection. If this is the case, it seriously brings into question if Upwork is doing their part. I would consider leaving Upwork if they did this to me. There is a number of ways Upwork could solve this problem. Not accepting credit cards is just one of them. Or making sure clients are trustworthy.

tlsanders · ‎02-08-2023

It sounds like maybe you neglected to read the terms you agreed to. I can assure you that Upwork does not make any representation that they will pay you out of their own pocket if a client issues a chargeback (or a client used a stolen credit card and the real cardholder issued a chargeback).

narcis404 · ‎02-08-2023

Hi Khimi, in your conversations with your client, at any point did he express concerns about the quality of work? Or said something that made you think he was not happy with the work?

kimg93 · ‎02-10-2023

Nope, nothing at all!

wlyonsatl · ‎02-06-2023

Hi, Khimi G.,

This is one of the greatest weaknesses of Upwork's system - no protection on fixed price projects for client chargebacks.

Here is some recent information from Upwork in regards to this problem:

Payment reversal by client - Upwork Community

"Some reversals (chargebacks) are a result of the client contacting their bank and asking them to reverse the payment.

In these cases, we look to our Terms of Service (TOS) for guidance and follow it by taking two steps:

1. We seek reimbursement from freelancers/agencies in cases where their client makes a payment, asks their bank to reverse it, and the bank does. (see more detail in sections 6.3-6.5 in our TOS).

2. We review the client’s Upwork account because reversing a payment, in most cases, is against our TOS and can result in us permanently suspending their Upwork account.

Aside from these steps, the Upwork team also helps the freelancer or agency challenge the reversal.

Our team can submit a rebuttal to the client’s bank on the freelancer’s behalf if they provide a proof of the work or deliverables. They would need to move quickly, so please provide the requested proof within 48 hours of being notified of the reversal if you’d like us to proceed. Keep in mind that it can take the bank up to 90 days to review and provide their final decision. The client’s bank will have the final say regarding the rebuttal and we have no control over the outcome."

Good luck!

kimg93 · ‎02-06-2023

Thanks for your message. I have sent all the info for Upwork to make the rebuttal. Looking through the forum I can't see anyone who has been successful with this, which is quite disheartening.

m_terrazas · ‎02-06-2023

Khimi G wrote:
Thanks for your message. I have sent all the info for Upwork to make the rebuttal. Looking through the forum I can't see anyone who has been successful with this, which is quite disheartening.

Very sorry. There are clients who would be nice to be able to kick their butts.
Upwork, like other platforms where payments are made, cannot do anything against this, beyond helping you in the rebuttal and banning the client's account.
By the way, if they don't refund the money, the work is yours (you can use it to add to your portfolio, or maybe sell it to another client?) and they can't use it, so keep an eye out.

And yes, we know of at least one freelancer who was successful in refuting the chargeback, so there is still hope.

25005175 · ‎02-06-2023

Must have been an ethical bank. Because I can't think of any business incentive that a bank would have for accepting the rebuttal and canceling the chargeback. By continuing with the chargeback, they regain that liquidity, which I would think has more utility than the pending credit interest (even if the credit card has a nice, fat interest rate). In addition, they keep the loyalty of the card holder.

kimg93 · ‎02-07-2023

Thanks for your message. Yes it's a complete nuisance! But thanks for highlighting that one person has been successful, so fingers crossed for me.

Regarding the work being mine - from the conversation with them it now seems obvious that the reason they have filed the chargeback is because they decided to not carry on with these designs for their brand (which I didn't design, I only created the measurement specs for). So because of their change in direction for what designs they want to use for their brand, they are obviously trying to get money back to help them fund the new designs. Which is so unfair and ridiculous, but it also means I have no incentive to indicate they can't use my work, and the work is not useful for any other clients anyway.

25005175 · ‎02-07-2023

Khimi G wrote:

from the conversation with them it now seems obvious that the reason they have filed the chargeback is because they decided to not carry on with these designs for their brand (which I didn't design, I only created the measurement specs for). So because of their change in direction for what designs they want to use for their brand, they are obviously trying to get money back to help them fund the new designs. Which is so unfair and ridiculous

I hate seeing people do that when they order food at a restaurant!

parisi-michael · ‎02-07-2023

You need to sue the client. Take them to small claims court. The client will need to hire a lawyer, you do not need one. The client will loose, and will have to pay or have the money removed from their bank account. Start by getting a lawyer to send them a letter asking them make this completely right, including all fees, and mentioning legal action will pursue if they don't pay. You also can contact the any employment organizations within the country as they are in violation of employment law as well and wage theft. Writing reviews on GlassDoor regarding the company is also a good step. Upwork needs to ban the client, permanently, from Upwork and they should cover this under escrow. Might want to have a lawyer stand up with you on this one if they refuse.

If this happened to me, I would tell Upwork that I will stop working on the platform unless they cover this.

They will thus do the following equation:

What Mikes Earns > Covered Loss

They will then cover it or they will be out all future work.

25005175 · ‎02-07-2023

Michael, I believe legal action is an action that any business should be willing to consider. But you must remember that Upwork is a global marketplace. The laws where the FL lives and works AS WELL AS the laws where the Client lives and works will determine the jurisdiction of any court - the proper court(room) that has jurisdiction must be selected for a suit to work at all.

Not everywhere has a small claims court. The rules of each court vary regarding size of claims permitted, permissibility or necessity of licensed legal counsel, and size of filing and serving fees. And, depending on the location of the Client vs the location of the FL, the FL may not be able to execute an award/judgment in their favor.

kimg93 · ‎02-08-2023

Thanks for your message. I am looking into getting a lawyer to send a letter.

Regarding -

"If this happened to me, I would tell Upwork that I will stop working on the platform unless they cover this.

They will thus do the following equation:

What Mikes Earns > Covered Loss"

- Has anyone ever tried this and been successful? I just have a feeling upwork don't care

prestonhunter · ‎02-08-2023

re: "Has anyone ever tried this and been successful?"

I highly doubt it.

re: "I just have a feeling Upwork don't care"

I agree.

I don't think a freelancer threatening to stop working on the platform is going to make any difference.

lysis10 · ‎02-08-2023

Khimi G wrote:
Thanks for your message. I am looking into getting a lawyer to send a letter.

Regarding -
"If this happened to me, I would tell Upwork that I will stop working on the platform unless they cover this.
They will thus do the following equation:
What Mikes Earns > Covered Loss"

- Has anyone ever tried this and been successful? I just have a feeling upwork don't care

Letters from lawyers are great. I've done it like half a dozen times maybe in my life and the other party's opinion on me getting what I want and telling me I'm SOL magically changed. It's so great.

Not sure if it'll work though if these people are not local. In all of my cases, it was fighting for money from some corp local to me. I also had the pleasure of having free attorney services but he got disbarred 😞 He was so good too.

tlsanders · ‎02-08-2023

" Take them to small claims court. The client will need to hire a lawyer, you do not need one. "

This depends entirely on the jurisdiction. In my state, for instance, a corporate defendant must appear by counsel, but only if the claim is $1,500 or more.

"Employment laws" don't apply to freelancers and "wage theft" is an employment concept.

25005175 · ‎02-09-2023

Hey Mike, it is good forum etiquette to specify what edits you made. I know that I would have addressed your incorrect claims regarding labor/employment laws in my earlier response if it had been present at the time I posted.

tlsanders · ‎02-08-2023

It is disheartening, but it has nothing to do with Upwork. Any business that accepts credit cards is subject to the same problem. Businesses lose hundreds of millions of dollars to chargeback fraud every year.

bobafett999 · ‎02-06-2023

In this particular instance, you lost money.

In future don't just have one milestone for the entire 12 designs. Break it up in 6 little chunks, don't work on milestones unless previous milestone is paid for and current one is funded.....they would have little difficult times justifying 5 or six chargebacks over a period of few months.

kimg93 · ‎02-07-2023

Thanks for your message - that's good advice that I will take on board. Sometimes it's difficult to work this way with certain types of work though.

parisi-michael · ‎02-07-2023

I'm sorry, but this seems wrong. I would encourage you to speak to your legal representative regarding this. Upwork escrow system should cover you here, otherwise why are they charging us 20%? I'd also consider legal action towards the client if its not fixed. Have your lawyer write Upwork and the Client a letter, I suspect their position may change given an appropriate header to the letter. If what you say is correct, I suspect someone will be back peddling given the correct levels of attention this deserves.

25005175 · ‎02-07-2023

Michael, there are a few things in what you said that deserve attention.

Upwork escrow system should cover you here, otherwise why are they charging us 20%?

Fixed price protection is not actual protection. It is a promise to offer dispute mediation (non-binding decisions), followed by a pre-established third-party arbitration - the cost of which must be paid in equal parts solely by the Client and FL.

The 20% fee (on the first $500 only per client-FL relationship) is for Upwork's operating expenses. Web hosting, having a full-time operating staff that includes a multinational team of lawyers, and advertising are not cheap. Which is why, when you review Upwork's SEC filings up to Q3 2022, they did not make a profit.

I'd also consider legal action towards the client if its not fixed.

What do you think arbitration for fixed price is, if not legal action? And legal action is certainly something to consider, but even determining where to file a lawsuit can get very complicated.

Have your lawyer write Upwork and the Client a letter, I suspect their position may change given an appropriate header to the letter. If what you say is correct, I suspect someone will be back peddling given the correct levels of attention this deserves.

Upwork will - quite appropriately - scoff at any letter written by a FL's lawyer. They won't scoff at a subpoena, but no subpoena will require that Upwork take any actions not in compliance with their Terms of Service. And no subpoena to Upwork will have any bearing on the chargeback - which is usually decided by banks. I don't know about other nations, but in the US, banks have all the power when it comes to chargebacks.

Threatening to sue the Client might have an effect. But it is ill-advised to threaten to sue unless you are actually prepared to sue and can prove such to the adverse party.

wlyonsatl · ‎02-07-2023

Arbitration is a form of legal action, Jonathan L., but not the only form. Arbitration is only undertaken if both parties agree to it. Only one side has to initiate a lawsuit, and if the other side refuses to participate they typically lose the lawsuit. Two very different situations.

And Upwork, like most US companies, might try to limit its liabilities via provisos of its Terms of Service, but a judge would ultimately determine if any particular element of any company's TOS is enforceable. Companies don't always get what they want in this respect.

But I suspect threatening a lawsuit is rarely useful on Upwork projects because they are often of such low value that they don't warrant the cost, the freelancer and client are in different cities or countries, etc.

prestonhunter · ‎02-08-2023

You can't be threatening to sue if things don't go your way on Upwork.

The math does not work out.

An Upwork freelancer in a disappointing situation may think she is being treated unfairly.

Fine. Let's agree that she is correct. She IS being treated unfairly.

That does not mean she can sue someone, especially Upwork, and come out ahead financially.

Upwork has pages and pages of legal boilerplate you agree to (without actually reading it) that was put there by an army of lawyers specifically so that freelancers can't successfully sue Upwork.

Trust the system.

And by "trust the system" I mean:

What happens on Upwork needs to be handled on Upwork, or not at all.

Work within Upwork. Going to the police or the FCC or MiB or FBI or attorneys is not going to be anything but a waste of time.

wlyonsatl · ‎02-10-2023

I wasn't referring to anyone suing Upwork, Preston. If Upwork isn't paid by a client, Upwork has no obligation to pay that client's freelancer. I don't think that is a legal issue - it's clearly how Upwork works and Upwork's TOS and other documentation should leave no one in doubt in this regard.

But I suspect Upwork might be told by a judge or regulator to stop using the term "payment protection" in regards to fixed price projects if it ever became a legal issue. I am not a lawyer, so that's not a prediction.