Stripe can completely ruin your 6-figure business in one minute(twitter.com)
twitter.com
Stripe can completely ruin your 6-figure business in one minute
https://twitter.com/FlurlyApp/status/1624177183626530816
62 comments
As mentioned above, this post's title is misleading.
The blog post makes clear this is a regulatory issue and that the decision wasn't made by Stripe. A card network found the business in violation (due to illegal transactions) and issued the fine.
In any case, this is a sad situation. If you're building a marketplace on Stripe, you need to use Connect (as the majority of businesses accepting multiparty payments do) and ensure you are clear on who assumes liability (as mentioned in the blog post).
The blog post makes clear this is a regulatory issue and that the decision wasn't made by Stripe. A card network found the business in violation (due to illegal transactions) and issued the fine.
In any case, this is a sad situation. If you're building a marketplace on Stripe, you need to use Connect (as the majority of businesses accepting multiparty payments do) and ensure you are clear on who assumes liability (as mentioned in the blog post).
More context at the Flurly site: https://flurly.com/blog/flurly-stripe-shutdown
But Stripe seems just like the middleman here? All these actions are originating from "a card network", presumably Visa or Mastercard.
But Stripe seems just like the middleman here? All these actions are originating from "a card network", presumably Visa or Mastercard.
Previous discussion: https://news.ycombinator.com/item?id=34746870
If getting shut down, blacklisted and fined $425000 is "a bit of bad news", I wonder what Stripe considers actually bad news.
The first email had a couple of typos in it too, made me a little suspicious as I’d assume Stripe would be using templates for such messages.
I guess this doesn't happen often enough to have a template.
It is always interesting see a large company lurch into action when they have to execute a series of high stakes manoeuvres that falls outside of their documented procedures. Even more interesting when they charge a low level employee to action it.
If you have a look at their products, they seem completely dodgy - I mean, one's just listed as "Credit Card Payments - $10", so is Stripe really in the wrong here?
So essentially Flurly is a payment processor for small businesses running atop on Stripe (that is the same) that runs atop of Visa and Master Card.
Go figure there will be problems.
Go figure there will be problems.
And apparently with zero due diligence on what these small businesses are actually doing
Pro-tip: if your system is easy to be misused by bad actors, they will be most of your users
Pro-tip: if your system is easy to be misused by bad actors, they will be most of your users
Ye it would not surprise me at all if most revenue is from small scale money loundring, e.g. card thefts.
Paying for a non-physical item seems way too perfect for that.
Paying for a non-physical item seems way too perfect for that.
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The business even admits they took on a ton of liability by not using Stripe Connect. They switched to Connect but grandfathered old accounts.
If you’re taking liability for what your customers do, you can end up getting fines like this. Stripe doesn’t want this. It’s not like they get the money from the fine, if anything they’re on the hook for it.
So, why again is this a scam?
If you’re taking liability for what your customers do, you can end up getting fines like this. Stripe doesn’t want this. It’s not like they get the money from the fine, if anything they’re on the hook for it.
So, why again is this a scam?
As you claim, if they are a payment processor, then they shouldn't need another payment processor to handle money for them... their prospective customers could just use stripe directly.
I misunderstood your post, I thought you were blaming stripe.
I agree with you though there is sometimes value in payment gateway aggregators. Having one for managing multiple processors, including payment methods stripe doesn’t support.
Stripe itself is a payment processing aggregator: you could just implement the direct integrations from the banks/card networks.
But yes fintech is built on middlemen building on top of middlemen. Sadly it’s too expensive to build from the lowest layer, so businesses tend to start from the highest one and only rebuild a layer below if they’re successful and have money.
It’s only fixable with more open source fintech layers imo.
I agree with you though there is sometimes value in payment gateway aggregators. Having one for managing multiple processors, including payment methods stripe doesn’t support.
Stripe itself is a payment processing aggregator: you could just implement the direct integrations from the banks/card networks.
But yes fintech is built on middlemen building on top of middlemen. Sadly it’s too expensive to build from the lowest layer, so businesses tend to start from the highest one and only rebuild a layer below if they’re successful and have money.
It’s only fixable with more open source fintech layers imo.
I think the worst part is these "companies" get shut down by stripe, and then wind up posting here as if we'll get out our pitchforks and demand stripe reinstate their accounts... we seem to get like one of these per month here...
That's not the first time Stripe is pointed fingers at, and most probably rightly so, but, for someone like me, totally unaware of what Flurly is, damn their service description seems shady, at best.
"Sell any digital product in under a minute and keep 99% of what you make after payment processing fees. No monthly fees either."
How is that shady?
How is that shady?
Two reasons:
1/ sounds very much like "Make $10k/month from the comfort of your couch. No strings attached"
2/ "sell any digital product" sounds like "we're not looking". " in under a minute" is an exaggeration most probably. "99%" is clearly psychological bait. "After processing fees" is a red flag because it's the one place in two description that is not metered.
It's the accumulation of small things that draw a big red flag, to me.
1/ sounds very much like "Make $10k/month from the comfort of your couch. No strings attached"
2/ "sell any digital product" sounds like "we're not looking". " in under a minute" is an exaggeration most probably. "99%" is clearly psychological bait. "After processing fees" is a red flag because it's the one place in two description that is not metered.
It's the accumulation of small things that draw a big red flag, to me.
Not verifying the legitimacy of the merchant making the transaction. Banking and payments are very tightly regulated and there are AML-KYC laws (anti-money-laundering/know-your-customer) that need to be complied with.
It's a sad state of affairs when things not verified to be legal are presumed illegal.
Say you buy a bicycle helmet for your kid.
2 are available. Helmet A mentions its certifications. Helmet B doesn't, but claims to be as safe.
Would you consider helmet B?
2 are available. Helmet A mentions its certifications. Helmet B doesn't, but claims to be as safe.
Would you consider helmet B?
The conversation was about reducing privacy to assist law enforcement. Your question relates to whether a lawful society is preferable to a lawless one, and as far as I can tell has no bearing on privacy.
I'd be happy to answer your hypothetical question, but I don't want to stray further off topic, so I'll decline.
I'd be happy to answer your hypothetical question, but I don't want to stray further off topic, so I'll decline.
You're dodging.
The discussion and your point was about presumption of lawfulness and I made an analogy about presumption of safety.
The discussion and your point was about presumption of lawfulness and I made an analogy about presumption of safety.
Indeed it is a sad thing organized crime and terrorism exist, but such is the world we live in.
Don't forget to think of the children. https://en.wikipedia.org/wiki/Four_Horsemen_of_the_Infocalyp...
Given these are fines from the card networks, the business, if it's in the right, can go to court quite readily.
Illegal processing is no joke. This isn't as much "Stripe ruining a business" as it is "a business appears to have been processing illegal activity, which puts it into liability".
To be clear, in some jurisdictions and depending on the activity, illegal processing also carries a jail sentence! The most extreme of which is, of course, terrorist financing.
Illegal processing is no joke. This isn't as much "Stripe ruining a business" as it is "a business appears to have been processing illegal activity, which puts it into liability".
To be clear, in some jurisdictions and depending on the activity, illegal processing also carries a jail sentence! The most extreme of which is, of course, terrorist financing.
How come both the card network and Stripe get to continue operating by simply firing their bad customer, but Flurly doesn't get that chance?
I don't mean "they had a chance to avoid the problem by switching everyone to Connect". I mean, how come Stripe and the card network both get to say "I'm good, just one of my customers is bad, so I'll just get rid of them now that you have told me you don't like them." But Flurly doesn't get to say that?
The card network gets to keep running as long as they do something about their bad customer Stripe. Stripe gets to keep running as long as they do something about their bad customer Flurly. They recieve a consideration that they don't grant in turn.
Don't base the answer on how obviously dodgy Flurly seemed to be "asking for it", without being able to show that Visa is never used for any illegal activity.
I don't mean "they had a chance to avoid the problem by switching everyone to Connect". I mean, how come Stripe and the card network both get to say "I'm good, just one of my customers is bad, so I'll just get rid of them now that you have told me you don't like them." But Flurly doesn't get to say that?
The card network gets to keep running as long as they do something about their bad customer Stripe. Stripe gets to keep running as long as they do something about their bad customer Flurly. They recieve a consideration that they don't grant in turn.
Don't base the answer on how obviously dodgy Flurly seemed to be "asking for it", without being able to show that Visa is never used for any illegal activity.
Because for the card network and for Stripe, it’s just a bad customer. For Flurly, it’s a lot bigger than one client.
Stripe doesn't get a say here.
Your 6-figure business tend to get ruined if you sell shady stuff and end up blacklisted by card networks, Stripe or not. You have someone else to blame on social media when you use Stripe, though.
Am I reading that correctly, that you're required to submit to a corporate guilty-until-proven innocent court, for vital payment network access?
The problem with running an innocent-until-proven-guilty payments network is that you will lose a mountain of money in fines, chargebacks, and fraud.
As it turns out, nobody is interested in paying the fees of a network that pays a lot of fines, chargebacks, and fraud.
As it turns out, nobody is interested in paying the fees of a network that pays a lot of fines, chargebacks, and fraud.
Setting up an automated paywall hosting system using a third party payment provider is honestly a minefield waiting to explode. The business owner knew this:
>Over time, this set up proved risky with legal liabilities. So last year I migrated to Stripe Connect’s direct charges model where customer payments would go directly into sellers' Stripe accounts
Sadly, he thought he could keep existing users on the old scheme:
>there were still legacy sellers that depended on Flurly for their living. Thus I "grandfathered" in these accounts and let them keep using the old Flurly system
So it was just a matter of time before one of these accounts were used for selling non-compliant things or doing illegal transactions. So it's not Stripe which ruined his business as the title indicates; it was one of Flurly's customers breaching Stripe's TOS and still being linked through Flurly's Stripe account. Only logical they shut him down, a risk the owner acknowledged in this blog post.
>Over time, this set up proved risky with legal liabilities. So last year I migrated to Stripe Connect’s direct charges model where customer payments would go directly into sellers' Stripe accounts
Sadly, he thought he could keep existing users on the old scheme:
>there were still legacy sellers that depended on Flurly for their living. Thus I "grandfathered" in these accounts and let them keep using the old Flurly system
So it was just a matter of time before one of these accounts were used for selling non-compliant things or doing illegal transactions. So it's not Stripe which ruined his business as the title indicates; it was one of Flurly's customers breaching Stripe's TOS and still being linked through Flurly's Stripe account. Only logical they shut him down, a risk the owner acknowledged in this blog post.
Is it legal for a private company to impose a financial penalty on you without even explaining the reason?
Yes, you can enter contracts that include penalties. Stripe has them with the card networks, you have them with stripe.
The fines haven't been decided upon from what I understand, and you could fight them once they've been announced, Stripe is simply freezing their assets to cover the potential fine.
The fines haven't been decided upon from what I understand, and you could fight them once they've been announced, Stripe is simply freezing their assets to cover the potential fine.
Not in the UK; contractual penalty clauses are illegal. You can only be held liable for damages caused by a breach of contract.
I'm sure the card networks can do what they want and it'd be months before a court could catch up though.
I'm sure the card networks can do what they want and it'd be months before a court could catch up though.
That's interesting, so you couldn't set up a contract that said "I deliver 10 units of X every 10 days, and you pay me 100 units of money. If I fail to deliver the units, I pay you 50 units of money"?
Only if 50 units of money is a reasonable estimate of the losses of the other party for failure to deliver.
A judgment in 2015 clarified the test of a penalty clause:
"[T]he true test is whether the impugned provision is a secondary obligation which imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation. The innocent party can have no proper interest in simply punishing the defaulter. His interest is in performance or in some appropriate alternative to performance."
via https://www.pinsentmasons.com/out-law/guides/practical-impli...
A judgment in 2015 clarified the test of a penalty clause:
"[T]he true test is whether the impugned provision is a secondary obligation which imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation. The innocent party can have no proper interest in simply punishing the defaulter. His interest is in performance or in some appropriate alternative to performance."
via https://www.pinsentmasons.com/out-law/guides/practical-impli...
But that's very vague. Sure, you can't have a $400k penalty on a $100 delivery, but online payment handling deals with incredible amounts of money, so a $400k penalty between multi-billion dollar companies doesn't seem out of all proportion.
The problem in this case would be that Stripe passes on the liability for the penalties to its customers if those customers are breaking the contracts. Obviously a problem for the customer, but also not unreasonable from Stripe's perspective. If you're setting up a marketplace and want to act as a payment-provider for third parties, you're creating a very different liability environment than if you're setting up an account to sell your own products. If you start with a seller-account and then transition your product into a marketplace, someone will have to eat that additional risk, and I can't see a good argument for why Stripe would be the one.
The problem in this case would be that Stripe passes on the liability for the penalties to its customers if those customers are breaking the contracts. Obviously a problem for the customer, but also not unreasonable from Stripe's perspective. If you're setting up a marketplace and want to act as a payment-provider for third parties, you're creating a very different liability environment than if you're setting up an account to sell your own products. If you start with a seller-account and then transition your product into a marketplace, someone will have to eat that additional risk, and I can't see a good argument for why Stripe would be the one.
The recent definition isn't vague (no punishment beatings), but it is situational. So a massive number in a standard contract will be seen as punitive to anyone but a mega merchant. Particularly as it also precedes cancellation of the contract which seems like the right restitution for a merchant who is persistently miscalculating or misdeclaring transaction risk (rather than causing specific losses to the card network).
Does their TOS allow it? I haven't seen it but I'd expect an acre of fine print in there.
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"<your payment processor/financial institution> can completely ruin your N-figure business in one minute"
Fixed that for you. This isn't a Stripe problem, it's a "you need to learn how to color inside the financial lines" problem.
Fixed that for you. This isn't a Stripe problem, it's a "you need to learn how to color inside the financial lines" problem.
>fine of $425,000
Legally speaking, can Stripe keep that money? Flurly will be broke and cannot payout their customers. Aren't those customers as entitled to their money as is Stripe or the card networks?
Legally speaking, can Stripe keep that money? Flurly will be broke and cannot payout their customers. Aren't those customers as entitled to their money as is Stripe or the card networks?
Stripe can keep the money on Flurly's account. That's why clients' money is often put on seggregated clients money accounts.
The issue of Flurly's debts is between them and it is creditors.
The issue of Flurly's debts is between them and it is creditors.
From a previous discussion Stripe's response seems to be reasonable. They have a solution to avoid this kind of situation.
https://news.ycombinator.com/item?id=34747702
It seems that Flurry's well intentioned call (not asking legacy customers to move immediately to the right payment mechanism) backfired.
https://news.ycombinator.com/item?id=34747702
It seems that Flurry's well intentioned call (not asking legacy customers to move immediately to the right payment mechanism) backfired.
There appear to be no less than 4 guilty parties here: CC network, Stripe, Flurly and newsawp.com.
According to the blog post, they would have been fine if all Flurly accounts would have been migrated to Stripe Connect direct charges.
According to the blog post, they would have been fine if all Flurly accounts would have been migrated to Stripe Connect direct charges.
Well this has now made me reconsider ever using Stripe.
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> Your account has been found in violation by a card network
Those last 4 words there are key.
> Despite our efforts to provide evidence to the counter
In other words, they were trying to help. Your problem is the card network in question.
Those last 4 words there are key.
> Despite our efforts to provide evidence to the counter
In other words, they were trying to help. Your problem is the card network in question.
Should have been using monero. Hell, even bitcoin.
Yes, turning 99% of your potential customers away is a brilliant business move.
Seriously? With the ongoing crypto meltdown?
The meltdown is only in 'modern' things like nfts. Classic things like monero, eth, and bitcoin are chugging along fine.
So all those services that went kaput and took users funds with them don't count?
And from what I can tell, BTC has lost 60% of it's USD value from the peak only a bit over a year ago. And you want people to depend on this for payments?
And from what I can tell, BTC has lost 60% of it's USD value from the peak only a bit over a year ago. And you want people to depend on this for payments?
If you are using monero or bitcoin for payment then it's up/down value isn't as important. Use it as a currency not a bank.
The rotten orgs around the service are getting flushed, which is good for honest users and uses. Don't trust other orgs with your holdings. Hold your own crypto keys.
The rotten orgs around the service are getting flushed, which is good for honest users and uses. Don't trust other orgs with your holdings. Hold your own crypto keys.
Thank you for proving the only real use-case for cryptocurrencies is facilitating illegal transactions.
If you've followed HN for any time, you know to avoid stripe.
All I’ve learned from HN post on Stripe is that shady companies or companies that use Stripe as a pass-through often have problems.
> In addition, per card network rules, you and your business have been added to MATCH or another terminated merchant file operated by the card networks.
This is now a problem between Flurly and Visa/Mastercard/whoever decided to fine them. Stripe is really just delivering the bad news on-behalf of whichever network decided to bring the axe down. Also, obviously, being added to MATCH/TMF means that your business cannot process credit cards. Just...at all. It doesn't matter which gateway you use in this case. The same outcome would happen with Braintree or any other gateway.