The credit card dispute

These things are worse than one-arm bandits. At least slot machines have lights and make noise to amuse you while they steal your money.

This scam is rather clever. It makes use of your thinking that you are making a quick pile of cash and you even get to see the real receipt for the money. How it goes for lawyers, and I would guess it works the same way for regular people, is that the guy waits until about two weeks before his short trial or hearing. So far nothing unique about this situation. I can’t even begin to tell you how many people have come in at the last minute. But two weeks is the giveaway with this one for two reasons.

The first reason is that you will probably have enough time to get ready so you will take their case. You see, they call around and tell the legal secretaries about how they have this hearing coming up and they have a lot of money but work has been superbusy and they haven’t been paying attention, etc. They sound earnest and if your secretary says you don’t have something else going on the day of their hearing, they want to come in right now. The second reason is that these guys usually think they only have 30 days to do this scam but credit cards must give you 60 days to dispute charges.

Usually the first thing they say when they meet you in the initial visit is that their hearing will only take about two hours or so. They will ask you if they can put $2,300 or something on their credit card. You do take plastic, don’t you? With this scam it’s almost always an odd number like $1,723 or $2,300 for reasons you will see in a minute. They will say that if your bill goes over the $2,300 they will move some money around and you can charge the rest on the card. You tell him that you’ll take the case but you’re going to check the card and make sure it goes through first. It will go through fine, of course. This isn’t the ‘stolen credit card’ scam. You will probably also copy his driver’s license and call Discover or Chase Bankcard Services or whatever to make sure the card’s not stolen anyway but I can basically guarantee that it will check out.

Everything will go fine in the next two weeks except that the trial will end up taking a whole day because they almost all do. You expected that but $2,300 is too good to pass up even if you can’t bill the rest. Your fee agreement says you can run the card number over the phone until it gets paid in full anyway, even if it takes years.

You probably won the hearing but no matter what happened the guy says you did a great job. He’s going to give you a very sincere thank you at the courthouse and offer to buy you a beer next time he sees you out, which will be like never. You spend the next few days doing some paperwork like writing the Judgment and personally walking it over to the courthouse to get signed because the guy was so pleased with your work. You send him the bill and transfer the $2,300 out of your trust account into your checking account thinking it’s time to take the wife to Vegas for the weekend.

Then you get a strange email from the guy saying you did a great job.  He says he really appreciates all the hard work you did on his really little case for $230, just like you promised. He wants you to send him a bill for the rest, if any, but he knows there aren’t any other charges. You did exactly what you said you were going to do and you even came in right on budget. He’s going to recommend you to all his friends, yadda, yadda, yadda.

Wait, did that guy say $230 in that email? You agreed to $2,300. What’s going on? Well, about a week and a half later you find out. You get a certified letter from his credit card company saying that based on what they have seen there is a genuine dispute and the charges are being reversed. You have to quickly move $2,300 back into your trust account because if you don’t you will get in trouble for taking the money from your other clients. Depending on your bank, you will probably also have to pay some fees.

Do you know what happens next? Let the voice of experience explain what you are going to go through. You are going to spend hours on the phone with some fraud investigator in Connecticut who obviously thinks you are lying. You are going to spend hundreds and hundreds of dollars in staff time, not to mention your own time billed out at $175 an hour, writing letters and making copies just to get more letters from the bank and a demand that you and your staff all fill out ‘affidavits of non-forgery’ or something. They are going to want you to get a transcript of the hearing, which will take weeks and cost you $650 or more for it to be transcribed. It was an entire day long hearing, remember? It’s going to take months to deal with – if it ever gets fixed at all. You might even give up once you spend what you figure to be at least $2,000 so far on your end trying to collect with no resolution in sight.

When your client contested the charge with the credit card company, he scanned and photoshopped the fee agreement so it only says $230. You were probably polite when he sent that email talking about the $230 fee and said something ambiguous like “OK, thanks!” and that you sent the bill out last week. There is really zero risk for him so long as he contested the charges within the legal time limit and he probably wins these things more often than it’s decent to print. Pretty good scam, huh?

-Samuel Owen

© Samuel Owen 2012. All rights reserved. Please read important notices and disclaimers by clicking here.

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