Re: Facing a huge problem due to chargeback

Pragnesh C · ‎11-13-2019

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.

Goran V · ‎11-13-2019

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

Petra R · ‎11-13-2019

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.

Lisa J · ‎11-14-2019

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 🙂

Pragnesh C · ‎11-14-2019

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.

Pragnesh C · ‎11-14-2019

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.

Petra R · ‎11-14-2019

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.

Maskal B · ‎05-18-2023

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?

Aggarwal A · ‎06-18-2020

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?

Darius S · ‎01-05-2023

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.

Jonathan L · ‎01-06-2023

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.

Darius S · ‎01-06-2023

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.

Jonathan L · ‎01-06-2023

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

Tiffany S · ‎01-28-2023

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.

Tiffany S · ‎01-28-2023

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.

Tiffany S · ‎01-28-2023

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.

Lisa J · ‎11-04-2021

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.

Tiffany S · ‎01-28-2023

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

Robert Y · ‎07-24-2021

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.

Viacheslav K · ‎07-24-2021

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.

Robert Y · ‎07-24-2021

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.

Petra R · ‎07-24-2021

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.

Raul R · ‎07-23-2021

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...

Viacheslav K · ‎07-23-2021

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.

Raul R · ‎07-23-2021

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