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Fraud By A Foreign Merchant?

by Jason Steele

A reader asks:

“I purchased something from a merchant online.  I did not know at the time that the merchant was overseas.  The transaction was in dollars.  The item purchased was of inferior quality.  I was charged a foreign exchange fee, and I was not able to dispute the quality of the item.  When I asked, the merchant said they were not subject to the law of the US.  So I am left with an inferior item, no protection, no recourse and I had to pay more for the item than I expected because I had no idea it was a foreign merchant.  My bank says there’s nothing I can do.  Is that true? It feels to me like I was defrauded into the transaction by a false price and terms and false expectations that it was  a domestic company.  HELP!”   -Matt”

Chargeback Protection

One of the special powers of a credit card is your bank’s ability to act as a mediator of the transaction.    Basically, if you purchase something with your credit card, and the item is not delivered, or the service is not performed, you can get a refund.   The bank will also refund your money if the goods are not delivered as agreed.  Whether or not the merchant feels that they are subject to US laws, rest assured that they are if  your bank is based in the United States.   Here is the web site for the Fair Credit Billing act enforcement for the Federal Trade Commission.

If the merchandise was never delivered, you have a pretty clear cut case.   If you order item A and they ship item B, again you have a pretty iron clad case for a chargeback.  The question then becomes trickier if you are delivered the merchandise your ordered, but are not satisfied with the quality of the product.   I am very picky and am never truly satisfied with most products that I purchase.  That said, I have never attempted to charge back an item due to poor quality.   I doubt that a credit card company will side with you unless the item is materially different than you described.   For example, if you purchased a DVD movie, yet received a bootleg copy you have a good case.  If you can document key differences between the description of the product and the one you received, you should be able to charge back the purchase.   If you simply don’t think your product is of good quality, you might be out of luck.    The key is to pinpoint key differences between the description of the product and what you received, and that documentation will be critical.

As with all chargebacks, you should always attempt to reconcile the situation directly with the merchant before contacting your credit card company.   It doesn’t hurt to tell the merchant that you are considering a chargeback, as such actions are extremely damaging to them.    The threat of a chargeback is often all that is necessary for a merchant to do the right thing.

Foreign Transaction Fees

These are extremely annoying fees that provide no real value to the consumer.   They only exist because credit card companies can get away with them.   In fact, credit card companies have settled a class action suit that cost them hundreds of millions of dollars because they failed to disclose these fees in the past.    That is why I make all foreign purchases with my Capitol One card, one of the select few cards that do not have such fees.   Occasionally, a company doing business in the United States will use a foreign credit card processor, and these fees will be added to your bill.   Other times, a company will give you no indication that they are operating outside of the United States, and you will get hit with an FTF.   You should not stand for this.  Contact your credit card company and demand that the fees be removed.   The fees really don’t pay for anything, and banks will typically refund the money at your request especially in light of their recent legal troubles.

Good luck with your credit card dispute!

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