Chargeback Risk Management

Overview

This document outlines Smoke App’s comprehensive approach to managing chargeback risk in the tobacco and vape e-commerce space. By implementing a multi-layered verification system, strict delivery protocols, and clear policies for disputes, Smoke App minimizes financial risk while maintaining regulatory compliance.

Customer Verification Process

Pre-Purchase Verification

• All customers must complete a comprehensive ID verification process before making any purchas.
• Verification includes:
  • Government-issued ID validation through third party services
  • Age verification (21+)
  • Address verification
  • Annual re-verification requirement

Delivery Verification

• Valid government ID must be presented at the time of delivery
• Face-to-face delivery required for all orders (no “leave at door” option)
• Delivery personnel trained to verify age of receiver
• Verification failure results in order return and penalty fees

Delivery Management

Smoke App Delivery Service

• Real-time delivery status updates integrated with Smoke App platform
• All delivery status changes tracked and logged in the system
• Comprehensive audit trail of delivery attempts and outcomes
• Automated notifications to customers about delivery status

Undeliverable Order Protocol

• If order cannot be delivered, DoorDash returns product to origin
• Return status automatically updated in Smoke App system
• Detailed reason for delivery failure documented
• Appropriate follow-up actions triggered based on failure reason

Financial Policies

Penalty Structure for Failed Verification

When an order is undeliverable due to customer ID verification failure:

• Order processing fees
• Smoke App platform fees
  • $3.00 compliance fee
  • $2.75 customer service fee
  • Delivery fee, calculated based on distance from origin
  • Return fee, calculated based on distance from origin
• Remaining amount refunded according to Terms of Use
• Customer account flagged for enhanced verification on future orders

Refund Policy

• Refunds issued if product was delivered in damaged condition
• Drop shipper (retailer) responsible for incurring fees in case of product quality issues
• Clear documentation requirements for refund requests
• Structured review process for all refund claims

Dispute Resolution

Customer Support

• Dedicated support channel for order issues
• Structured process for investigating complaints
• Resolution options based on issue type and responsibility
• Detailed documentation of all customer interactions

Chargeback Defense

• Comprehensive data collection to dispute invalid chargebacks
• Evidence package including:
  • Verification records (initial and at delivery)
  • Delivery confirmation and timestamps
  • Customer agreement to Terms of Use
  • Communication history
  • Signature or delivery confirmation
• Automated system for responding to chargeback claims

Technical Implementation

Data Collection and Storage

• Secure storage of all verification data
• Timestamped transaction records
• Delivery status API integration
• Comprehensive audit logs
• Compliance with data retention requirements

Reporting and Analytics

• Regular analysis of chargeback patterns
• Identification of high-risk customers or behaviors
• Performance metrics for verification effectiveness
• Continuous improvement based on data insights

Risk Mitigation Outcomes

• Reduced financial exposure from fraudulent chargebacks
• Enhanced regulatory compliance through robust verification
• Improved customer trust through transparent policies
• Decreased operational costs from dispute management
• Protection for retailers from verification-related losses