As someone who works for a bank, I can shed some light on this.
> ... he said this is a bit of a mess-up as he forgot that there is “a credit card connected in his account that wasn’t actually his”.
The typical chargeback is for a billing dispute, but this does not describe a billing dispute. If the client was authorized by the cardholder to use the card (ever, not just for these charges), the bank considers the charges authorized. The bank isn't going to get involved in a conflict with the cardholder and an authorized third-party. However, if authorization was never provided and the charges are reported timely, the bank will take liability and pursue their collection. In case of fraud, the bank might charge back to the merchant, but only if the merchant failed follow their contractual obligations in accepting the payment. In any case, I presume you have no way to knowing that the card was not your client's card, since you did not actually process the payment. This should be enough to get you off the hook, but only if you were truthful about your interactions with your client.
> Why would a bank take my side (a freelancer from another country) instead of his own actual client who never actually requested those services?
Because their business model depends on it: They make money when their clients get charged. If the cardholder ever get the client permission to use the card, the charges are valid, and the bank makes money.
> Let me get this straight — Upwork, a billion-dollar company, wants me, a freelancer, to work for free on their platform for approximately 230 hours (with my hourly rate) because a client on their platform was using someone else’s credit card?
This sounds generous. Often, payment processors want immediate repayment of chargebacks, especially ones as larges as these.
> How in god’s name is that my fault?
That depends. If you tried to protect your client by hiding from Upwork the fact that your client acknowledged using someone else's card, then that's how. If you were honest with Upwork, then I don't see they can recoup these charges from you, unless the contract you have with them says so.
My experience on the merchant side of things is that if the cardholder claims a charge was unauthorized the bank believes the cardholder unless the merchant can prove that the charge was authorized.
For proof they want us to to FAX them a copy of the receipt signed by the cardholder or a signed copy of our contract with the cardholder.
We of course do not have those since we are an online merchant selling digital consumer goods.
Even if the cardholder has been a subscriber to one of our services for many years, being charged every month without complaint, and whenever they have received a new card promptly coming to our site to update their account with the new card number and/or expiration date--something that a fraudster with a stolen card would not be able to do--the bank still accepts the cardholders claim that they do not recognize and did not authorize the charge they are trying to chargeback and won't budge unless we can FAX the signed receipt.
> ...the bank still accepts the cardholders claim that they do not recognize and did not authorize the charge they are trying to chargeback and won't budge unless we can FAX the signed receipt.
This is not true. Of course you won't have a signature for an online purchase, but this isn't novel; online purchasing has been around for a while. Merchants can and do fight chargebacks successfully, or else most merchants wouldn't be in a position to accept online payments at all for fear of chargebacks. (Not to mention, we'd never hear a consumer complain about unresolved disputes if the bank just charged them all back routinely!) Banks don't only accept faxed copies of signed receipts, because they usually don't exist online. Banks want evidence. If a merchant isn't keeping good records, that's on the merchant.
In this case, it sounds like the contractor should have sufficient evidence, or else how did they come up with figures to enter manually for hours worked? Evidence that work was performed, combined with Upwork's billing policies and the disclosure about the card usage by the contractor's client should have been sufficient to address these chargebacks. Either not all the evidence was submitted (whether by the contractor or Upwork), or story is incomplete.
The "light" you've "shed" might be relevant in some idealized scenario. How does anyone (issuing bank, acquiring bank, Upwork, or contractor) figure out whether "the client was authorized by the cardholder to use the card"? Do they just ask the client? Do they just ask the cardholder? Of course neither of those parties may be trusted at this point. A court could render an opinion, if the case ever got to that point. However, it won't get to that point, because of the actions of the acquiring bank. They have just decided it's the contractor's fault with minimal investigation, and have charged Upwork the maximum. Please note: this what banks usually do, regardless of the lies you might tell your customers.
> How does anyone (issuing bank, acquiring bank, Upwork, or contractor) figure out whether "the client was authorized by the cardholder to use the card"?
This is a reasonable question, but the answer is quite simple: The bank asks. You'd be surprised how readily cardholders admit to giving their card to someone.
If the cardholder claims charges are unauthorized, that claim is investigated as fraud, not as a billing dispute. In either case, for the amount of these charges, the bank would do more than a minimal investigation. Lying to pursue a chargeback for your own charges is just as fraudulent as someone else making unauthorized charges.
> ... he said this is a bit of a mess-up as he forgot that there is “a credit card connected in his account that wasn’t actually his”.
The typical chargeback is for a billing dispute, but this does not describe a billing dispute. If the client was authorized by the cardholder to use the card (ever, not just for these charges), the bank considers the charges authorized. The bank isn't going to get involved in a conflict with the cardholder and an authorized third-party. However, if authorization was never provided and the charges are reported timely, the bank will take liability and pursue their collection. In case of fraud, the bank might charge back to the merchant, but only if the merchant failed follow their contractual obligations in accepting the payment. In any case, I presume you have no way to knowing that the card was not your client's card, since you did not actually process the payment. This should be enough to get you off the hook, but only if you were truthful about your interactions with your client.
> Why would a bank take my side (a freelancer from another country) instead of his own actual client who never actually requested those services?
Because their business model depends on it: They make money when their clients get charged. If the cardholder ever get the client permission to use the card, the charges are valid, and the bank makes money.
> Let me get this straight — Upwork, a billion-dollar company, wants me, a freelancer, to work for free on their platform for approximately 230 hours (with my hourly rate) because a client on their platform was using someone else’s credit card?
This sounds generous. Often, payment processors want immediate repayment of chargebacks, especially ones as larges as these.
> How in god’s name is that my fault?
That depends. If you tried to protect your client by hiding from Upwork the fact that your client acknowledged using someone else's card, then that's how. If you were honest with Upwork, then I don't see they can recoup these charges from you, unless the contract you have with them says so.