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aarticianpc
Community Member

Facing a huge problem due to chargeback

Recently we have encountered a huge problem due to chargeback.

 

One of upwork client has worked with us and done one project with us.

 

A contract was closed and the client provided a 5-star rating to us. After that upwork has paid to us for that job but a few days after we got an email from upwork that the client has filled chargeback and the amount paid to you by upwork should be returned to us.

 

What's wrong we did here? Upwork keeps money in the review period and then they release payments to us then how it could possible that the client can fill chargeback after review period and all payments completed? We don't understand. Why we are paying 20% fees to upwork. Why they do not have any restrictions on clients? 

 

Its been more than 45 days and we still have an issue with chargeback and not resolved. Upwork simply trying to earn money anyhow because if he charges 20% of the fee on each contract then imagine how much money they wanted to earn from each freelancer without providing them proper security.

 

Totally disappointed with the upwork policy & terms.

 

Any help from the community much appreciated.

42 REPLIES 42
g_vasilevski
Retired Team Member
Retired Team Member

Hi Pragnesh,

 

I understand your frustration with this and I`m sorry about the inconvenience this had caused you. 
I can see that you`re communicating with our team on your ticket. Please refer to the details shared with you on your ticket with number 27002591. If you have any additional questions feel free to post them there and our team will assist you further. Thank you.

~ Goran
Upwork
petra_r
Community Member


Pragnesh C wrote:

 

What's wrong we did here? Upwork keeps money in the review period and then they release payments to us then how it could possible that the client can fill chargeback after review period and all payments completed?


Unfortunately chargebacks are a real risk when doing business and Upwork, like any other platform, can not fully protect you. They are also very rare. (In 8 years and 250 contracts I've not encountered one yet.)

 

If a client paid with a stolen or hacked payment method for example, no matter what, the genuine owner of that payment method will be able to chargeback, and there is nothing Upwork can do about it at all.

 

On hourly contracts you'd be protected *IF* the work was logged according to the terms of the payment protection (in which case Upwork eats the loss.)

 

It's a pain but a reality of doing business online.

 


puda
Community Member

Just wanted to add that I just got a chargeback as well. First time ever. Almost 8 years, 68 contracts so that would basically be 1.5% of the time. I find this number to be pretty high when you think about it... Upwork is fighting it for me but nothing is guaranteed. I think I may rethink  my fixed-contract approach and switch to hourly more often.

 

Always a good reminder to change your approach a little bit 🙂

aarticianpc
Community Member

The number you gave me is pretty high and it definitely a serious matter for upwork to look into. Upwork really needs to introduce a better client policy and don't allow a fixed-price contract system for a client like many other great platforms do.

aarticianpc
Community Member

Upwork is allowing the client to make fraud by providing them an option to have a fixed-price contract. If they won't allow fixed-price contract then this fraud percentage will be reduced.


Pragnesh C wrote:

Upwork is allowing the client to make fraud by providing them an option to have a fixed-price contract. If they won't allow fixed-price contract then this fraud percentage will be reduced.


Then don't use fixed price contracts in future. But just because it happened to you once does not mean it will ever happen again.

 

Chargebacks, painful though they are, are very rare in the overall scheme of things, I've (luckily) not had one in over 250 contracts yet.

 

2ed5478f
Community Member

Fixed-priced contracts are used by scammer clients every day. I see many job postings, same script, same scam, The numbers you see may be low, co most freelancer gets scammed once and then they know that this is a scam. Bu then, the damage is done. Is my ACC shadow banned for 1 year? why?

Even I faced a chargeback and Upwork has deducted the amount from my account. So it has basically now turned into a free labour which included hours of hardwork. Were you able to solve your case?

No this is not a good idea. Upwork should force clients to create milestones and clear deliverable within all their contracts because hourly contracts that do not use the time tracker put the client at even more risk and the client is how Upwork gets paid. Without clients no one gets paid so why would we punish all the clients for the activities of a few clients. I had plan on using Upwork for 100s of thousands of dollars of work and because they have done absolutely nothing to help me after proving the freelancer has done nothing I and looking elsewhere until I get my money back. And my other business owner is going to help me tell the story, only the truth so that people understand their risk when they use the platform.


Darius S wrote:

hourly contracts thst do not use time tracker out the client at even more risk and the client is how Upwork gets paid.


Well, yeah. But none of those manual hours are protected for the freelancer, either. Both are at risk. And you, as the client, can dispute those hours each week and not pay a dime.

 


Darius S wrote:

Upwork should force clients to create milestones and clear deliverable within all their contracts


Ever heard of something called retainer? You should know about this, being in the software world. You should have at least had some exposure to IT pros who use that business model. Or lawyers. I'm currently on retainer as an design engineer for a company - mostly just converting terrible drawings by vendors into usable drawings with the company's title block, because that's the work they need done. I guarantee you, if my client and others who hire professionals on retainer were forced to negotiate milestones for every task in on-going relationships, they would refuse to do business here.

Jonathan,

I did dispute and as I mentioned above I did not get any money back. Upwork suggested that the freelancer pay me money and when he said,no, Upwork closed the dispute so your statement is not true.

Defining milestones up front follows a typical contractual model, when you write an SOW you define milestones for the project. For more expensive projects if you agree up front on the way the project will end and the milestones to get there, everyone is protected. I don't get why you think people would not like this, especially when it is industry standard. 
Retainers are not as common in the IT world for program managers or software engineers so that statement is not true it is not the norm. For legal, this is absolutely the norm, even when I have dealt with Legal they have given me an ideal project timeline with projected milestones in their own legal type of way.


Darius S wrote:

Jonathan,

I did dispute and as I mentioned above I did not get any money back. Upwork suggested that the freelancer pay me money and when he said,no, Upwork closed the dispute so your statement is not true.

Manual hours are not protected. It sounds like what you did is dispute payments already made at the end of the contract, which is different from disputing hours when they are billed, before they are paid.

 


Darius S wrote:

Defining milestones up front follows a typical contractual model, when you write an SOW you define milestones for the project. For more expensive projects if you agree up front on the way the project will end and the milestones to get there, everyone is protected. I don't get why you think people would not like this, especially when it is industry standard. 


Fixed-price milestones are an industry standard - one of several. There are also cost-plus, labor & materials, salary (like retainers), milestone ranged pricing, and hourly. And the protection from defined Scope-of-Work agreements is not an easy protection - there is a reason that arbitration, small claims courts, and regular claims courts exist: disagreements between customers and vendors over whether the accomplished work meets the defined SOW.

 

If you, as a vendor, deliver to a customer who decided that they don't like your work, or that they purchased more work than agreed and you didn't deliver, they can choose to not pay you at all. To then get paid for services rendered, you must enter into a potentially bare-knuckles, dragged-out legal exercise to convince a 3rd party that you deserve to paid. In contrast, with hourly, if your customer decides that they don't like the work or that you should be doing more than had been agreed, they simply end the contract. Of course, they can dispute / not pay the latest invoice, but on longer-term contracts, at least that invoice doesn't include the entirety of the milestone.

 


Darius S wrote:

Retainers are not as common in the IT world for program managers or software engineers so that statement is not true it is not the norm.


I didn't say that it is the norm for program managers or software engineers. I said that you should have had exposure to professionals who use the business model. The retainer model is a subscription model. It depends on the type of service as to whether milestones or project timelines are warranted.

 

ETA typo

 

Sounds like you waited too long. If you'd disputed during the review period, the money would never have been transferred to the freelancer in the first place. 

The client's risk is virtually zero if the freelancer does not use the time tracker. You check the hours logged for the week. If you haven't seen work that accounts for those hours, you dispute. Since the time tracker wasn't used, you win.

There is no reason for you to lobby Upwork to take choices away from other freelancers. If you think fixed price contracts are too risky, don't use them.

puda
Community Member

I realized that I never updated anyone on the chargeback and since I got a message asking me for this, I thought I would share.

Upwork was successfully able to fight the chargeback with the merchant and I got my money back. From what I remember, it took about 2 weeks. The client can always fight back (he had 30 days) but I never heard back so I am assuming that he either didn't or the merchant told him not to. Hard to say. In any case, it was ruled in my favor. Make sure you keep proof of all the work that was done. In my case, the client had left a raving review so it was hard to pretend that he had never hired me.

tlsanders
Community Member

The prevalence varies by industry. For example, retail loses about half a percent of their revenues to chargeback fraud. 

Petra R said:

 

If a client paid with a stolen or hacked payment method for example, no matter what, the genuine owner of that payment method will be able to chargeback, and there is nothing Upwork can do about it at all.

 

It doesn't happen if the client uses a legitimate payment method but has no funds left to pay the freelancer? In this case, the payment couldn't take place, but it would have the same end rusult from the freelancer's point of view.


Robert Y wrote:

Petra R said:

 

If a client paid with a stolen or hacked payment method for example, no matter what, the genuine owner of that payment method will be able to chargeback, and there is nothing Upwork can do about it at all.

 

It doesn't happen if the client uses a legitimate payment method but has no funds left to pay the freelancer? In this case, the payment couldn't take place, but it would have the same end rusult from the freelancer's point of view.


For milestones they need to have enough or it won't event fund it. And for hourly contracts upwork does pay the freelancer even if the card got declined.


Viacheslav K wrote:

Robert Y wrote:

Petra R said:

 

If a client paid with a stolen or hacked payment method for example, no matter what, the genuine owner of that payment method will be able to chargeback, and there is nothing Upwork can do about it at all.

 

It doesn't happen if the client uses a legitimate payment method but has no funds left to pay the freelancer? In this case, the payment couldn't take place, but it would have the same end rusult from the freelancer's point of view.


For milestones they need to have enough or it won't event fund it. And for hourly contracts upwork does pay the freelancer even if the card got declined.


Thanks - of course, I forgot the money is in escrow, so it's already been debited.


Robert Y wrote:

It doesn't happen if the client uses a legitimate payment method but has no funds left to pay the freelancer?


No, it doesn't happen. That is not a chargeback. (a chargeback is a transaction that has been paid, but was later "pulled back" by the financial institution because their customer claimed either fraudulent use of the payment method or non receipt etc)

 

In the case you describe, for a fixed rate contract the milestone couldn't be funded in the first place, and for hourly contracts, as long as the time was tracked in line with Upwork's terms of the hourly protection, Upwork would pay the freelancer out of their own pocket.

5a9e415b
Community Member

Have you managed to resolve this isue. I'm new to upwork, just completed 6 contracts and out of these, I received from upwork an email notifing me about a chargeback on 2 contracts from same client totaling 1200 USD.

 

One contract was closed 600 usd and the other one left open for further upgrades, all milestones completed at least a month ago. Now that I have pending in my account a similar amount of money it get's me more suspicious. 

 

Quote from that email:

 

"We have carefully reviewed your work activity and determined that the work billed does not qualify for Upwork Payment Protection because these are milestone payments."

 

Yes there are milestones in a fixed price contract.

 

Contract was closed, client reviewed me.

 

My work(2 trading bots) is siting on the client's VPS making money for him and I'll lose the money for my work?

 

Why does upwork claim to have payment protection plan? Of if is a matter of business/system flaw why don't they deal with it and do not just claim a payment protection, or make the chargeback from their funds not mine.

 

If I was aware of this, now every contract could endup this way, no guarantee... I have a small company and I'm payed in advance for my work on a contract. Here... I'm not asking for that but...


Raul R wrote:

Why does upwork claim to have payment protection plan? Of if is a matter of business/system flaw why don't they deal with it and do not just claim a payment protection, or make the chargeback from their funds not mine.


They don't claim it. When you accept a fixed-price contract there's a popup where you can read about it.

Please provide a screenshot or something because I cannot believe this os happening.

Raul,

 

There really is no true payment protection for fixed price projects.

 

For the time being, payment protection on hourly projects is far better than for fixed price projects. Considering that Upwork reported a loss of nearly $ 3.6 million in 2020 for chargebacks and other fraudulent behavior, solving this sort of problem is no doubt a priority for Upwork management.

 

And don't let anyone tell you chargebacks are "rare". No freelancer with a mere couple hundred projects over the past few years can have any real idea based on their own clients' behavior what is "rare" for all freelancers, Considering there are at least 15,000 or so projects completed per week on Upwork, a few hundred projects is less than a drop in the bucket as a measure of what is "rare" client behavior.

 

 

 

 


Will L wrote:

And don't let anyone tell you chargebacks are "rare"

Nobody has told him that, and it would be irrelevant in his situation because no matter how rare they are, he's affected by one.

 


Will L wrote:

Upwork reported a loss of nearly $ 3.6 million in 2020 for chargebacks and other fraudulent behavior


That's all transaction losses, not just chargebacks and fraud. It also includes all losses due to clients simply not paying. Overall, all transaction losses (bad debt, declined payment methods, fraud and chargebacks) put together make up around 1% and as chargebacks are merely part of that, they're still rare in the overall scheme of things.

 


Will L wrote:

No freelancer with a mere couple hundred projects over the past few years can have any real idea based on their own clients' behavior what is "rare" for all freelancers,


Everyone can read the annual report and see the actual numbers. 

 

 

 

But, Petra, those are the numbers for actual losses.

 

And if Upwork doesn't pay a freelancer because Upwork wasn't paid for fixed price projects, then Upwork doesn't report a loss. Only the freelancer loses money.

 

And no one knows how much that is annually or how "rare" those losses for freelancers are.

petra_r
Community Member


Raul R wrote:
And what about this

https://support.upwork.com/hc/en-us/articles/211062568-Upwork-Payment-Protection

It says  "See the Upwork Terms of Service and Fixed-Price Escrow Instructions for full terms and conditions"

 

Basically, if a chargeback can't be defended (and many can't be defended) and it's a fixed rate contract, or an hourly contract where the terms of the protection were not met, you lose the money.

5a9e415b
Community Member

Hi and thanks to all for interest,

Yes I'm new to the platform and I'm still trying to get my head around this, hopefully we'll help others too.


I've done just 6 contracts so far, and those 2 contracts that were affected by chargeback accounting for 25% of my work/income.


The last contract out of these 2 was finished in the middle of may. We are talking here about 2.5 months.


Last payment from upwork to me that includes these contracts was made 2 months ago. I even spent the money.


Now I have pending approval for about 1400 usd from 2 clients, it really seems odd in terms of timing, because I will not be able to withdraw part of it(1200) due to this incident

There are 3 types of chargebacks:

  1. Merchant error - don’t think is the case
  2. Criminal fraud - again don’t think is the case because upwork verifies id and payment before
  3. Friendly-fraud - As mentioned in upwork notification about this problem:
    “This reversal (chargeback) is a result of your client contacting their bank and asking them to reverse the payment for the following transaction(s):”

Taking into consideration that the client knew what he's doing, gave a review, changed back and forth discussions/modifications/tweaks/etc I have to stay chill and not worry too much.

 

Don’t know if upwork support can access my discussions with this client to use as proof that everything went ok and prove that he's a “dishonest buyer”.

 

Other things to mentions, also received from support:
“Please be informed that the client has the right to raise a chargeback, depending on the reason, up to 180 days after the payment date.”
It raises questions for the other 75% of my work so far.

 

I have to know for sure how I can prevent this and how it is differ to hourly work.

Why can’t a client request chargeback for hourly work? It’s also a card payment(chargeback occurs just on credit card payments?).

 

What should I do in the future? Please look at this:
https://support.upwork.com/hc/en-us/articles/211063748-Fixed-Price-Protection

 

If I do time tracking with the desktop app for fixed price contracts I’m fully covered?
“Track Fixed-Price Contracts
Fixed-Price contracts can be tracked using the Upwork Desktop App but they do not qualify for Hourly Protection, they only qualify for Fixed-Price Protection.


And I also have to find out how you can issue a chargeback and get away with it. Maybe I can order a 2000 usd TV on amazon and then issue a chargeback because it sounds very simple or make others work for free.
Please excuse all the nonsense, but I’m frustrated enough, I want to know what I can do:

  • Provide git repo to see changes/pushes of code
  • Conversations
  • Etc
  • Try to make myself justice?

I don’t even know the bank or location of the client(India). I didn't even know the veracity of the information.

 

Should I cut the client's access to github? Or if I still have access to the client’s server should I rollback the deploy(didn’t even try to access).
I’ll also wait for his response on the matter even though I don’t have hopes.


Again thanks for the support.
Regards

 

petra_r
Community Member


Raul R wrote:

I've done just 6 contracts so far, and those 2 contracts that were affected by chargeback accounting for 25% of my work/income.


That is really unfortunate 😞 - Were they with the same client?

 


Raul R wrote:

There are 3 types of chargebacks:

  1. Merchant error - don’t think is the case
  2. Criminal fraud - again don’t think is the case because upwork verifies id and payment before

2. Upwork only verify the client's payment method by verifying that the client has access to the payment method and that it can be charged. There is no routine ID verification.

 

The 2 main types of Chargeback are:

  • "Unauthorised use" - the owner of the payment method claims (rightly or wrongly) that they did not authorise the payment method to be used for the transaction
  • "Not received or faulty" - the owner of the payment method claims (rightly or wrongly) that they did not receive what they paid for or it was faulty / broken.

What you listed were 3 types of unjustified chargebacks.

 


Should I cut the client's access to github? Or if I still have access to the client’s server should I rollback the deploy(didn’t even try to access).

 

Don't do anything like that right now. You'd make matters worse.

Raul R.,

 

Generally speaking, if the client hasn't paid you for your work, you still own it until they do.

 

Are there any rules in the client's market or yours that prevent you from taking back what's yours?


Raul R wrote:

 

Don’t know if upwork support can access my discussions with this client to use as proof that everything went ok and prove that he's a “dishonest buyer”.

 

Other things to mentions, also received from support:
“Please be informed that the client has the right to raise a chargeback, depending on the reason, up to 180 days after the payment date.”
It raises questions for the other 75% of my work so far.

 

I have to know for sure how I can prevent this and how it is differ to hourly work.

Why can’t a client request chargeback for hourly work? It’s also a card payment(chargeback occurs just on credit card payments?).

 

What should I do in the future? Please look at this:
https://support.upwork.com/hc/en-us/articles/211063748-Fixed-Price-Protection

 

If I do time tracking with the desktop app for fixed price contracts I’m fully covered?
“Track Fixed-Price Contracts
Fixed-Price contracts can be tracked using the Upwork Desktop App but they do not qualify for Hourly Protection, they only qualify for Fixed-Price Protection.

 


Raising a chargeback is a violation of Upwork's terms of service. My understanding is that any client who does this will be banned from Upwork. Proving to Upwork that the client is dishonest wouldn't achieve anything extra.

 

Using the time tracker on a fixed price contract won't help. On fixed price the tracker is only for your own information. 

 

A client CAN raise a chargeback on an hourly job,  but on an hourly job Upwork will absorb the loss itself, PROVIDING that you meet all the requirements for hourly protection. 

 

All you can do to protect yourself is limit fixed price contracts to small jobs, avoid them altogether or choose your clients more carefully and then hope for the best. Chances are it won't happen to you again. 

This thread, and others like it, have caused me some concern recently. Are chargeback requests happening more often? I've never faced one myself, but does this apparent trend imply that some clients are increasingly using them to game the system and effectively get work for free?

 

As far as Richard's advice goes, "All you can do to protect yourself is limit fixed price contracts to small jobs, avoid them altogether or choose your clients more carefully and then hope for the best."

 

I would very much like to avoid fixed price contracts, but many clients insist on them (sometimes, even for larger jobs). The argument, of course, is always, "I need to know how much this is going to cost." Yes, but I don't know how long this is going to take. Any advice on how to win clients over to an hourly contract?

This is extremely, terribly unfortunate. I did 100+ contracts with about 100 clients and i never had a single chargeback. You should really get more picky as to who you work with. Vet your clients.

 

A good rule of thumb to tell if "Upwork is being unfair on me by doing X" is asking yourself what would happen in "offline" business world if same thing happened. So i can tell: some vendor who has 25% chargeback rate, almost inevitably loses access to the billing and will have a hard time signing with anyone else. There are literally shady billing providers who call themselves "fraud billing" outright, who'd accept clients with this sort of a chargeback rate...

>“Please be informed that the client has the right to raise a chargeback, depending on the reason, up to 180 days after the payment date.”

 

wait wait, aren't you confusing chargeback with a refund? as per Upwork terms of service, client has NO right to do a chargeback (he has, sometimes, technical abilility to do it, by calling their bank, but this breaks Upwork terms of service and automatically kicks out client from Upwork).


Alexander N wrote:

>“Please be informed that the client has the right to raise a chargeback, depending on the reason, up to 180 days after the payment date.”


Yes... yes

 


Alexander N wrote:

wait wait, aren't you confusing chargeback with a refund? as per Upwork terms of service, client has NO right to do a chargeback (he has, sometimes, technical abilility to do it, by calling their bank, but this breaks Upwork terms of service and automatically kicks out client from Upwork).


Not refund, chargeback

And if the client is kicked out what? Does it please the freelancer? Do you think the client walks emtyhanded? Who do you think needs the most the UpWork profile, the freelancer or the client. Clients comme and go.. so

rudhkul
Community Member

How did your issue resolve?

Hi Anirudh,

 

Thank you for your message. I see that you are already communicating with the relevant team via a support ticket. Please don't hesitate to follow up with them on the same support ticket if you have additional questions regarding your concern.

 

Thank you,

Pradeep

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