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Do not use Donation Service
06-28-2011, 05:40 PM
Post: #1
Do not use Donation Service
I strongly recommend against using the donation service that DreamHost suggests.

I used it for close to two years and it was fine - covered all my costs and I had $200 credit balance pre-paid.

But one donor whom I don't know apparently did a paypal charge-back of his $20 donation.

I received a very nasty message from DreamHost, saying they were deducting the $20 and charging me an additional $50 fee. They also said: "If your account is not settled in one week your account will be disabled on the basis of fraudulent charges and non-payment."

When I asked why I was being accused of fraud when I did nothing wrong, and non-payment with a $200 credit balance (or how I could "settle it"), it took a week for them to respond.

They finally admitted that it was probably a donor who did the chargeback and I had done nothing wrong. Three days later, my account was disabled.

It took them a full day to respond to my frantic requests for information on why it had been disabled. Then all they would say was it was due to that charge-back from the donor, and they were going to restore my account, but they required me to promise that I wouldn't use their donor system any more.

One charge-back from an unknown donor using the system that DreamHost promotes and suddenly DreamHost customer service staff starts calling good customers nasty names for no reason and messes up their account.

I've been happy with DreamHost for two years, but this experience was appalling.

If all it takes is one donor you don't know to dispute their credit card charges, I don't know if the donation system is worth it.

- Pete Guither #572603
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06-28-2011, 06:18 PM
Post: #2
RE: Do not use Donation Service
Since you opened the door, I hope dreamhost will tell their side of the story, but I doubt they will honestly.

The only thing they warn against is using the service with adult content. The only gray are I can see would be, donation button on a website with no adult content, and multiple other sites on the same account all with adult content.
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06-28-2011, 06:59 PM
Post: #3
RE: Do not use Donation Service
There were no adult sites involved in any way here.

The impression I've gotten from the DreamHost staff is that they're so paranoid about PayPal chargebacks, that the customer service staff are practically required to nail somebody for it, and with the donation system, the only one they can go after is the innocent customer. So they do, viciously.

I've asked them to put a disclaimer on the donation page to warn others about this.

Of course, how can you know whether someone who is donating to your site is going to do a chargeback? There's no way to know or prevent it. I imagine it's rare, but still, I wouldn't wish what I just went through on anyone.
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06-28-2011, 07:27 PM
Post: #4
RE: Do not use Donation Service
I'm not sure I understand how they determined the fee of $50.00 plus the amount of the chargeback, it seems a bit steep for a fee that I don't find declared anywhere.

In fact the only place I can really find that charge backs are discussed by dreamhost is on a files forever page, and there the only penalty for a chargeback is the chargeback itself and .50 transaction fee.

http://wiki.dreamhost.com/Files_Forever
"What happens if somebody charges back their credit card for a file they bought from me?

This works pretty much the same way as if you decided to refund their money yourself. We'll automatically remove the money from your account, take away their ability to re-download the appropriate files, and you'll only be out the $.50 portion of the transaction fee.
"
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06-29-2011, 06:00 AM
Post: #5
RE: Do not use Donation Service
Chargebacks are addressed in the Terms of Service

http://www.dreamhost.com/tos.html
"Disputed charges ("chargebacks") associated with any DreamHost account may, at DreamHost's discretion, result in immediate and permanent disablement."

A bit harsh and no specific fee is mentioned, but I wouldn't object to the $50 fee if I had done the chargeback. While I found it excessive, I understand that chargebacks are detrimental to DreamHost.

What I found seriously offensive was the fact that they accused me of fraud and non-payment and disabled my account when I had done nothing.

DreamHost controls the donation system. I have absolutely no control over who donates through that system. They're the ones "responsible" for that charge-back.

Who knows how something like this happens? Someone makes a donation and forgets to tell their spouse. They make a donation to a website and don't remember what "DreamHost" is. If there had been numerous chargebacks from someone's donors (a disreputable "type" of reader, perhaps), that might be a red flag to disable the donation system for that account, not the account. But one chargeback from a donor? Total? Over years?

If DreamHost wants to have a donation system (and it's a good one otherwise) they've got to understand it themselves. They can't start attacking their customers just to have someone to attack.
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06-30-2011, 12:45 PM
Post: #6
RE: Do not use Donation Service
This is an issue we're looking into. We understand that chargebacks on donations aren't necessarily an issue you can control, and treating them the same way as credit card chargebacks is excessive — we do end up getting penalized for Paypal chargebacks, though, so we can't just ignore them.
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06-30-2011, 01:20 PM
Post: #7
RE: Do not use Donation Service
Andrewf -- I understand that you get penalized for PayPal chargebacks, so you can't ignore them, but going after the account holder does absolutely nothing for DreamHost except alienate the customer. Since the customer has no control over the actions of his donors, there's no deterrent value achieved by attacking the customer.

There is the long shot that some sites might somehow be disreputable in some way that could increase the likelihood of donor charge-backs. I have no idea if this is true. More likely, donation charge-backs are random and completely unpredictable.

If you really need to do something about donation charge-backs (in other words, if it's a big enough problem that it needs addressing), simply put on the donation set-up page the following:

1. If a donor charges back his donation with PayPal, we will have to charge your account $15. We're sorry and we know it's not your fault, but PayPal hits us when there is a chargeback.
2. If this happens a second time, we will unfortunately have to disable your donation link, and you'll need to get donations through a different method.

Whatever you do, do not accuse your customer of fraud and disable his account.
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06-30-2011, 05:06 PM
Post: #8
RE: Do not use Donation Service
(06-30-2011 01:20 PM)Guither Wrote:  Andrewf -- I understand that you get penalized for PayPal chargebacks, so you can't ignore them, but going after the account holder does absolutely nothing for DreamHost except alienate the customer. Since the customer has no control over the actions of his donors, there's no deterrent value achieved by attacking the customer.

There is the long shot that some sites might somehow be disreputable in some way that could increase the likelihood of donor charge-backs. I have no idea if this is true. More likely, donation charge-backs are random and completely unpredictable.

If you really need to do something about donation charge-backs (in other words, if it's a big enough problem that it needs addressing), simply put on the donation set-up page the following:

1. If a donor charges back his donation with PayPal, we will have to charge your account $15. We're sorry and we know it's not your fault, but PayPal hits us when there is a chargeback.
2. If this happens a second time, we will unfortunately have to disable your donation link, and you'll need to get donations through a different method.

Whatever you do, do not accuse your customer of fraud and disable his account.

+1 I say. Excellent short-term fix.

For myself - not a big fan of PayPal and consequently don't do business with them - at all. Not a big fan of Google either but their chargeback fee is only $10.
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07-01-2011, 09:01 AM
Post: #9
RE: Do not use Donation Service
Wait a second, so anyone can cause trouble for dreamhost users by doing a donation-chargeback? That's an interesting attack vector.

There needs to be a better fix for this security hole.
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07-01-2011, 09:33 AM
Post: #10
RE: Do not use Donation Service
(07-01-2011 09:01 AM)spiralofhope Wrote:  Wait a second, so anyone can cause trouble for dreamhost users by doing a donation-chargeback? That's an interesting attack vector.

There needs to be a better fix for this security hole.

Actually there is! This is an optional service that you don't have to set up. You can also bypass dreamhost as the middleman and get your own paypal donate button.
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