Upwork's Horrendous Chargeback Protection

[#1]

Hello everyone,

I've unfortunately had to come across my first chargeback situation with Upwork. A client, after losing a dispute decided to chargeback the transaction 2 months after the fact. Thus the dispute process it self doesn't matter. You just have to chargeback the amount to 'win'.

I didn't realise the fact that Freelancers aren't protected against chargebacks. Naively, I was under the impression that much like PayPal/Venmos Seller Protection, if there was a chargeback they would cover the difference and dispute the claim themselves. Instead I was told by the support team to pay back the amount owed... 

It's just made me disappointed, as I love working on Upwork and have met many wonderful clients on here. But this incident really demoralized my motivation. By this logic any one of my clients could chargeback, whether its $1000, $10,000 or even more. I'm utterly shocked that Upwork advertises it self as a mediator/third party, whilst also promoting "payment protection", "escrow secured" to entice freelancers to come in under the false notion that their pay is secured.

I don't understand how Upwork is better than simply getting your transaction done via PayPal's seller protection plan (probably a lesser % fee). Their business model has to change in the future (I hope), as this is very unsustainable. 

Anyways just wanted to share my frustration/disappointment about Upwork's No Chargeback Protection. 

[#2]

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Tiffany S wrote:

You're confusing two different issues. 

A chargeback is when the client reports the charge as fraudulent or for some other reason improper and the bank or card issuer reverses it. This is a challenge all merchants face, and brick and mortar businesses face losses from chargebacks as well. When a chargeback is issued, the bank calls the money back from Upwork. Upwork does have an opportunity to fight the chargeback, but I've seen no indication that they take advantage of that opportunity, since I've never seen a single freelancer who complained about a chargeback say that Upwork requested information from them to help fight the chargeback. 

The dispute process has absolutely nothing to do with chargebacks.

---

Tiffany, a previous FEATCON did report about having a chargeback and winning. It's somewhere here in the forums. 

[#3]

Tiffany, I don't know how common it is, but I've attached a discussion from today where the OP posts a message from Upwork requesting that he authorize them to dispute the chargeback.

Recent chargeback response 

[#4]

This and Amanda's comment above are encouraging. I have seen the occasional freelancer mention being asked to authorize a dispute in the past. What has troubled me is the large number of freelancers complaining in detail about their chargeback experiences who never mention having been asked for the type of documentation that would be required to fight a chargeback. In some cases, Upwork may have sufficient information in the account history to do that, but that can't be true across the board. 

[#5]

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Tanveer S wrote:

Hello everyone,

I've unfortunately had to come across my first chargeback situation with Upwork. A client, after losing a dispute decided to chargeback the transaction 2 months after the fact. Thus the dispute process it self doesn't matter. You just have to chargeback the amount to 'win'.

I didn't realise the fact that Freelancers aren't protected against chargebacks. Naively, I was under the impression that much like PayPal/Venmos Seller Protection, if there was a chargeback they would cover the difference and dispute the claim themselves. Instead I was told by the support team to pay back the amount owed... 

It's just made me disappointed, as I love working on Upwork and have met many wonderful clients on here. But this incident really demoralized my motivation. By this logic any one of my clients could chargeback, whether its $1000, $10,000 or even more. I'm utterly shocked that Upwork advertises it self as a mediator/third party, whilst also promoting "payment protection", "escrow secured" to entice freelancers to come in under the false notion that their pay is secured.

I don't understand how Upwork is better than simply getting your transaction done via PayPal's seller protection plan (probably a lesser % fee). Their business model has to change in the future (I hope), as this is very unsustainable. 

Anyways just wanted to share my frustration/disappointment about Upwork's No Chargeback Protection. 

---

Have you read Paypal's Seller Protection Program terms? Eligibility hinges on a number of criteria (starting with the primary address of your PayPal being in the US) and is ultimately at PayPal's discretion. The bar is pretty high for intangible goods.

Freelancing essentially amounts to operating a small business and it is up to each of us, the business owners, to look past the marketing messages of the tools we use and make sure we understand their terms of service. If we take what we pick up from advertising or word-of-mouth at face value, hearing what we want to hear without investigating further to protect ourselves by fully understanding the terms, that's on us.

Chargebacks are a potential risk with any credit card payment. UW can't change or control that. It can and does (1) provide the bank with relevant information to challenge the chargeback, and (2) kick the client to the curb. Fees collected from FLs are to cover the costs of operating the marketplace including facilitating contracts and payments. UW is not a party to project contracts nor is it a party to financial transactions. Those are between client and FL. (Someone commenting in this thread claims that UW was "a party to" his arbitration but the document he shared clearly indicates the arbitration is "client vs. freelancer". If a client refuses to comply with arbitration by refusing to pay up or by filing a chargeback to recover funds already paid, I'm sure UW will kick them to the curb and in the case of a chargeback, challenge it at the bank. But I don't see UW suing the client because UW is not a party to the transaction. It would be up to the FL to pursue a legal remedy if it's feasible given the amount of money in question, jurisdiction(s) involved, and other factors.) 

There's no way to risk-proof freelancing. There are payment processors that claim to offer more protection against chargebacks but to the extent they do so, their systems are rife with fraud and scams. (Google "zelle + fraud" for a taste of what goes on.) 

FLs who are completely risk-averse and want guaranteed payment protection on UW must confine their activity to hourly contracts and use the desktop time tracker precisely as directed. Even then, protection is limited to around $2,000-2,500 per contract per client(I recently learned). 

[#6]

Not to mention PayPal's intention to fine me $2500 for writing or saying something they consider to be "misinformation".  

Closed my PayPal account that day --

[#7]

Over the years Upwork made it harder for freelancers to register and seems to be vetting them more, but has done NOTHING, to do the same with clients. 

I had this situation as well. And it's even worse than just teh simple chargeback. The client charges back teh full amount, while we get only 80%. So absically the freelancer works, Upwork amkes money, client gets free work, freelancer should earn 120% of the amount to be able to work and earn again.

2 of my clients recently did that (both with 5 star reviews and work delivery evidence), but guess what, after 3 months, the bank has decided to stil go through with it and meanwhile Upwork still takes my 20%. And it's not even small amount, it's 3000$

So yeah, each day I regret spending 7 years on this website, building teh profile and such, to then get this. I'm done and I hope that with all those chargeback stories happening more and more often, that there will be a massive freelancer exodus.

[#8]

Hi! Miss Nare A

I understand the situation, would you like share some experience about this. How can you manage this, either through pay charge back fully in one go or got adjusted through your future earning. 

[#9]

Considering, that usually those chargebacks happen way later, when the funds aren't there anymore, you basically have to earn 120% of the amount to pay it back or you won't have any way of releasing your funds to your bank account. You would be lucky to pay it on one go, if the chargeback happened sooner than you've taken the money to your bank account.

In my case, as the amount is pretty big: 3000$, I have decided to say goodbye to the amount that resides on my account, that won't go anywhere and just stop working on this horrible website, warn everyone about not working here and just get some emotional satisfaction out of seeing their annual losses and stocks going down. 

[#10]

The thing is, if you want to use any other freelancing website to look for jobs, there will still be the risk of a chargeback. If you find clients on your own, you're also risking chargebacks, unless they all pay you in cash or a bank transfer. That will be quite a limitation on your business. How do you plan to get around this?

[#11]

The difference is that 1. Upwork is notorious of not vetting clients at all. Over the years they made it harder for teh freelancers and easier for schammers. Many other websites don't have such a history. 2. Most other websites don't charge such high fees. If I'm getting chargebacks, while paying 5-9% fees to website, then it's neither as infuriating, when the website isn't helpful at all. And secondly, then it isn't as hard to earn the chargeback amount as it is, when you have to earn 120% of big amounts like 3-10k. 
So my problem isn't as much that the chargebacks are possible. My problem is that upwork hasn't done anything over the years to try to filter clients, started some innovations that will make freelancers to spend more on connects and such, charging extremely high fees, while providing 0 security. So far the ONLY "pro" for me is that I've spent 9 years on building my profile, but the "cons" are so much, that it's just isn't worth it.

[#12]

Please provide examples of marketplaces that only charge 5-9% that are not industry-specific websites. Because when I searched in May 2022 before choosing Upwork, everyone was a minimum 10%, across the board, no opportunity for lower fees.

[#13]

There are some out there, but the amount and type of jobs tends to be pathetic.

[#14]

guru.com for example (Also they don't allow clients to post very low wage jobs unlike Upwork). Also 10% is also way lower than 20%.
Also why doesn't industry specific count? 
Also for some types of jobs (not just 1 industry specific) there's also Behance that doesn't have many job postings per day, but also applying to those is free absolutely.

[#15]

This is why I generally - almost always - complete work hourly. 

[#16]

All of this kerfuffle about unjustified chargebacks could be largely avoided if Upwork allowed/forced clients to use less reversible methods of payment than credit cards. Nearly three-quarters of all Upwork's client  revenue for the first nine months of 2022 came from US clients, substantially all of whom have more reliable payment options available to them.

If I owned a company that lost $73 million in the same time period, $19 million of which was due to fraud and other "transaction losses," I'd be working hard getting that problem resolved.

However, to its great credit Upwork does provide real payment protection on hourly projects, which is no doubt a significant portion of that $19 million.

I'm rooting for you finding a solution soon, Upwork.

[#17]

I'm just reading this and I have a similar problem now on this topic, I didn't realize that Upwork is keeping also with the fee of my (not paid) work!! Would have to only work for hours now! This is awful!

[#18]

Francisco,

If Upwork reverses payment to a client Upwork also returns it fees on the same transaction.

For example, if a freelancer earns $100 on a project, Upwork will take a $20 (20%) fee and the freelancer receives $80. If the payment is refunded to the client, or a chargeback occurs on the $100 payment, the freelancer only reverses the net amount received ($80) and Upwork covers the rest ($20).

I don't know where people on this thread have gotten the impression/information that Upwork keeps its fee and requires the freelancer to cover the entire amount of the refund/chargeback payment reversal. 

[#19]

I myself got my assumptions from communications with Upwork. 
It works this way: if the chargeback amount is 100$, you must get to 100$ on you account, which means: earning 120$. Then! After returning the funds to the client they will return the 20% to you. So yeah, you still have to earn more than you got, which is harder with this high of fees (when the charge back amount is big) and then, after weeks or maybe months of free work you just will get the 20% back.

[#20]

That is very interesting, Nare. I have never noticed that on the small amounts I have been forced to "refund" to  a handful of clients over the years. Maybe none of these "refunds" were due to chargebacks. I'll have a look.

In my most recent "refund" to a client my transaction history shows a deduction for my earnings in $X (the total amount of the "refund") and an addition to my earnings of $Y amount (Upwork's fee). So I guess Upwork thinks it needs to take the full amount out of the freelancer's earnings in question, which  translates into the interpretation you have gotten. Upwork could just require the freelancer have the net amount due, but that is not how it works.

But Upwork does credit the amount of its fees back to the freelancer, so the freelancer's net "loss" is the net amount originally paid by Upwork to the freelancer, which would have been net of Upwork's fees.

[#21]

Yes, refunds work differently. I have had 1 refund over the years and at that point the client requested a refund of 1 Milestone and to let him get back the rest from Escrow, which was a very different case than the chargeback. 

Yes, Upwork required me to have the full amount due and then will grant me the fees after all the payments are done. 

It's just if it was about small amounts, that would be more doable. When the amounts are in thousands, and its not every day that such works are on the website, it means, that it's way harder to get to those 120%, while you earn 80% each time.  

[#22]

I went through to the TOS of another freelancing website and they explicitly require clients not to file chargebacks, which would be a TOS violation (and may eventuate in the suspension of the client's account). Does Upwork address the issue of chargeback in its TOS?

[#23]

Yes. It's the same way on Upwork.

Disputing with credit card companies is a serious TOS violation. Will result in a client being suspended.

[#24]

It is so, but it's very easy for the clients to register, so being suspended doesn't mean at all that in 15 minutes they wouldn't take another name and register again. So for shammers it's not a big deal.