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Credit-card companies have long griped about adult Web sites that lure the curious only to slap them with exorbitant charges--charges many customers dispute. But efforts to curtail disputed charges may be penalizing small firms that do business online.
In April, Visa and MasterCard issued guidelines that impose tough consequences, including steep fines, on companies that report too many disputed charges. At Visa, those who exceed the new limits--by generating more than 50 "charge-backs" a month accounting for 2.5% of total transactions--face fines of $5,000, plus $100 per disputed charge. What's more, a former three-month grace period to settle such disputes has been eliminated.
"Unfair!" say small-business owners, many of whom are new to e-commerce and unsure of their ability to comply. "It will have an adverse effect on smaller merchants, who will have less leeway to make errors," says Bob Aguirre of Cardservice International, an Agoura Hills (Calif.) credit-card processor. Card companies say they have to do something, arguing that the charge-back rate for adult Web sites can reach 30%. Talk about guilt by association.
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