Actually, they don't.
Assuming you're outside of the US: Even if there are orders that never make it through, they still have a ton of non-US customers... especially when compared to the many companies out there that avoid 100% of these arguments by simply not accepting any orders from outside of the US.
If you are in the US, then there's probably something missing from the story, either something you forgot to mention, or something they didn't want to reveal to you on their end. Using a proxy, for example, would probably be one good way to throw up a fraud flag.
It is the right thing to do. When it comes to fraud and protecting your merchant account, it's better to err on the side of safety--especially when you do Dreamhost-volume in an industry that is flooded with fraud.
There's also a good chance they're not telling you everything about why your order didn't go through, as they shouldn't. Who knows, even a typo in the address or phone number could be enough to throw up another flag, if there are already other suspicions about the order.
As already mentioned, only they know the specifics and there's only so much they'll be willing to tell you.
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