In October, Halifax small business owner Laura MacNutt made a few big sales on her e-commerce store, totalling thousands of dollars of merchandise.
The customers picked up the items in person at KingsPIER Vintage, her luxury vintage clothing store. It wasn’t until weeks later that she found out the transactions were fraudulent.
She received an email from Shopify, the host of her online store, saying chargebacks had been initiated for the items through the credit cards that were used in the purchases. She was required to submit evidence.
“I’d never heard of a chargeback,” MacNutt said in a recent interview.
MacNutt wasn’t told the reason for the chargebacks — a consumer protection tool similar to a refund — just that the owners of the cards that were used to pay for the items were contesting the transactions.
Shopify dealt with the banks and gathered MacNutt’s evidence, including screenshots of security camera footage of the customers picking up the items.
But MacNutt still lost the items and the income. Shopify kept its processing fees and charged her a $15 fraud fee per transaction.
She estimates she’s lost $7,400 in total.
“It’s a monumental amount of money in my world,” MacNutt said. “I just can’t absorb that kind of loss. It’s devastating.”
‘A common fraud’
According to the RCMP, fraud in Nova Scotia is growing. Between January and September 2024, there were 601 reports of fraud in the province, totalling more than $6.4 million.
Cpl. Mitch Thompson, an investigator with the Nova Scotia RCMP’s commercial crime section, said what MacNutt is up against is called card-not-present fraud.
“This specific type of fraud is a common fraud that we’ll see, especially involving stolen credit cards,” Thompson said. “We see it targeting smaller merchants.”
Thompson said there are legitimate reasons to do chargebacks, like damaged property, services not rendered, or if your card was stolen.
MacNutt isn’t sure what happened with her store, but she’s left picking up the pieces.
“I’m finding it hard to believe that it’s this easy for someone to steal from small businesses,” she said. “And the corporations that are allowing it to happen are being applauded for their business acumen.”
MacNutt said she reported this to Halifax Regional Police but hasn’t come to a resolution through law enforcement or Shopify.
A spokesperson for Shopify did not respond to an interview request from CBC News.
Shopify’s website says it offers a service called Shopify Protect, which provides “free, built-in chargeback protection.”
It also has a “preventing fraud” page, which advises shop owners to do things like verify the IP address from which an order was placed, call the phone number on the order, verify that the billing and shipping addresses match, and install fraud prevention apps.
MacNutt said the transactions weren’t flagged as potentially fraudulent by Shopify, so she had no warning.
Businesses being ‘doubly victimized’
Vanessa Iafolla, a fraud victimization consultant based in Halifax, said this isn’t just a Shopify problem.
She said the use of an intermediary, like a business owner paying to use an e-commerce site, can leave them worse off if a fraudulent chargeback does happen.
“They’re going to be paying the processing fee for Shopify or any other third party,” Iafolla said.
“So the person who’s in business to make money, winds up being doubly victimized, right? They’re out the money, they’re out the item. And then to add insult to injury, they’re also out all of these extra fees.”
Iafolla said she’s aware of entrepreneurs that have lost tens of thousands of dollars to chargebacks, driving them out of business.
“I think it’s one of those cases where the public just thinks of this as a victimless crime,” she said. “That money is actually coming from a victim and the victim in that case is the retailer.”
Calling for change
Iafolla said this type of fraud is often hard to prove, and avoid. She said retailers could stick to brick-and-mortar stores to evade risk, but that could restrict sales.
She’s calling for stricter government oversight, and for e-commerce sites to offer more protection to their clients.
“Every point in the system is letting it happen, right? Shopify is letting it happen, credit card companies are letting it happen, banks are letting it happen, politically we’re letting it happen.”
MacNutt is also hoping for change.
“I think Shopify can be a really valuable resource, so long as the people who are providing the merchandise are respected and considered,” she said. “I’m not asking for much.”
