Chargebacks represent a form of customer protection, allowing credit card holders to dispute a transaction and to reclaim their money, provided their chargeback claim is indeed accepted. A binary options chargeback will essentially void the transaction through which the trader made his/her deposit with the broker, forcibly removing the funds from the broker’s account and returning it to the balance of the credit card holder.
Have you been scammed by a binary options or Forex broker? Don’t miss the below step-by-step Practical Guide for Recovering Lost Funds!
As a fallback option for the consumer, the chargeback is a powerful tool indeed. Its power however should not be abused in any shape or form. Most people seem to consider chargebacks the slightly-more-radical equivalents of refunds. That, they are not.
Introduced by the Fair Credit Billing Act of 1974, chargebacks were meant to protect consumers from fraudulent transactions perpetrated by criminals, as well as from the sub-par services and abuse of various unscrupulous merchants. As such, binary option traders can use it to recover their monies from brokers, who they feel took advantage of them one way or another. Sub-par services and downright fraud is unfortunately quite wide-spread in the world of binary option trading, so having such a tool at their disposal is definitely a net positive for traders. In order to properly wield the power handed to them by this customer-protection tool, traders need to understand the nature of the chargeback thoroughly.
First of all: in what ways are chargebacks different from refunds? When filing a chargeback, the customer goes over the head of the merchant and has the bank forcibly return his money, without the consent of the latter. By contrast, a refund is an agreement between the two parties involved in the transaction, and as such, it does not bring the bank into the dispute as a decision-maker.
Chargebacks offer a plethora of advantages to traders – in the short-run – and to all market participants over the long-haul. Their mere existence keeps merchants honest and always striving to offer their customers the best possible services and products.
When can one legally resort to a chargeback?
In case of fraud (such as a string of unauthorized transactions resulting from identity-theft) the card holder has every legal right to resort to this “weapon”. Indeed, there have been cases involving binary options chargebacks, which were meant to recover money stolen by fraudsters. When the existence of fraud is merely suspected though, card holders are always advised to contact the merchant first. The way of the refund should always be the preferred one, as it’s much quicker from the perspective of the customer and it allows the merchant to recover its merchandize and sell it again for profit. Refunds also stave off the possibility of “friendly fraud” and spare both parties the unpleasant ramifications resulting from chargeback-abuse.
What exactly is friendly fraud? In essence, it is chargeback abuse. Sometimes, consumers decide to skip the refund process, because it is too cumbersome. They may experience buyer’s remorse, they may run out of patience waiting for the merchandize to arrive or they may aim to avoid certain handling fees. In such cases, chargebacks are unjustified, and as such, they stray into the realm of fraud.
The Chargeback Process
Here’s what really goes on when you file a binary options chargeback: you first notify your issuer (your bank) and request a refund. The bank then reviews the request, and if the claim conforms to regulation, it is accepted. If it doesn’t, the chargeback is voided. The issuer swings into action and simply strips the acquirer (the bank account of the broker/merchant) of the money in question. It credits it to the trader’s account.
The acquirer then takes action and notifies the account owner of the chargeback, according to regulation. The merchant/broker usually has the right to dispute the chargeback, which it probably will, given the dire consequences of the move for its operation. The acquirer then takes action on behalf of the broker/merchant, re-presenting the chargeback, providing evidence delivered by the broker/merchant.
The issuer reviews the evidence presented, and it takes action, either upholding its initial verdict, or reversing it and posting the transaction again to the acquirer.
From the above, it is rather clear that the chargeback process is a lengthy and costly one. Its consequences are significant for the broker/merchant, as well as for the customer. Repeated chargebacks will result in the levying of fines upon the merchant and eventually the closure of its bank accounts. A MATCH list entry is also in the books for the affected operator, which in essence kills the chances of it using payment processing services for 5 years. For less severe cases, a hiking of the processing fees and rolling reserves is in order.
From the perspective of the customer, refused chargeback claims are identified as fraud attempt, and they may result in the closure of their bank accounts. In the case of a successfully disputed chargeback, the customer will end up stuck with the chargeback costs. Due to increased chargeback risk, merchants may hike their prices to compensate.
The bottom line is that while they are indeed potent customer-protection tools, chargebacks can be double edged. They should only be used responsibly, as a last-resort and by no means as a kneejerk reaction when seeking a refund.
Practical Guide for Recovering Lost Funds
If you were scammed by a binary options or Forex broker, these are the steps we recommend taking:
- The first thing you need to realize is that if you were trading with a non-regulated broker and you have made profits, you will usually not be able to withdraw your profits. You should only focus on getting back the money you deposited.
- If you still have a balance, you should first try to withdraw the money in the conventional way. Make sure your account is fully verified by sending the required documents to the broker. Required documents may include a copy of your credit card, a bank statement, a government issued ID and proof of address, such as a recent bill. Don’t just submit the withdrawal request via the broker’s website. Send them a formal email, maybe even a letter. Also, try calling them. Warn them that you will be taking further legal steps if they fail to return you your money. You can tell them you will do a charge back which can be very damaging for them or complain with the FBI (you can do that at ic3.gov). Some people have told us they were able to get a withdrawal by simply threatening the broker that they will complain to yours truly… the Binary Options WatchDog.
- If you don’t have a remaining balance because your broker traded it away without your consent, you should ask for a refund. Again, do so via a formal email or letter, or by calling them and threatening them as described in #2.
- If the broker is still refusing your withdrawal or refund, the next step would be to contact your bank, credit card company or the ewallet you used to deposit the money and see if they are able/willing to help you initiate a charge back for free. Many times they will refuse, especially if more than 2-3 months had passed since you’ve made the deposit. However, try pressuring them saying that you had fallen for a dangerous scam. Many people are aware nowadays of the binary options scam.
- The last step we can recommend before hiring a lawyer and taking your broker to court is to use a professional chargeback service. However, you should keep in mind that they will only be able to help you if you’ve deposited $5,000 or more via a credit/debit card or $10,000 or more via wire/bitcoin/ewallet. There are many companies that provide this service, but there’s one company I work with which specializes in binary options and Forex chargebacks. You can CONTACT THEM HERE.
If nothing works, please feel free to contact us and let us know which steps you already tried and where you got stuck. In some cases, there’s nothing which can be done unless you’re willing to travel to the country where the broker is located and sue them. There are also a few law firms that allow you to take the broker to court without being physically present.
If anyone reading this was able to use a charge back service or law firm successfully and got back their money, or if you used any other method of getting back lost funds, please enlighten us and share how you did it as a comment below. We’d love to hear and learn from your success stories.
As a postscript to this article on binary options and Forex chargebacks, we’d like to remind you that prevention is better than cure! Don’t get involved with non-regulated companies. Binary options and Forex trading can be highly rewarding when done with legitimate brokers and signal services. Always consult with our new Forex brokers and signals section, list of regulated binary options brokers and binary options signal services page before sending your hard earned cash to anyone.