(June 24, 2008) Assurz Inc., the 3-year-old company that sought to boost consumer confidence in making Internet transactions by offering money-back guarantees on behalf of online merchants, filed for protection under Chapter 7 of the federal bankruptcy code on Monday. The company earlier this month abruptly shut down its service, leaving a trail of frustrated merchants and consumers, including some customers who had reportedly returned merchandise but had not received a refund.

No one is answering the phone at Assurz’s office in Redwood City, Calif., and its Web site has apparently been pulled down. Steve Hoffman, the company’s chief executive, has not returned calls from Digital Transactions News.

“To sum it all up, they just screwed everyone over,” says Andrew Brown, president of New York City-based Toolfetch.com LLC, which had been an Assurz client for about seven months. Because of problems some customers are having getting refunds, Brown says he expects to get more chargebacks than usual. “We’ve only dealt with a few so far,” he says. “It’ll probably come in waves.” The merchant of home-improvement products has refunded customers who could return their goods, and for those who had already sent merchandise back to Assurz’s warehouse, Browns says Toolfetch has given out what phone numbers it has for the company and its third-party fulfillment agent. “I don’t know how far they’re getting,” says Brown.

Toolfetch received an email message from Hoffman late last month telling it Assurz was shutting off its service because of what it termed the merchant’s excessive volume of returned merchandise, Brown says. Assurz reportedly sent similar messages to other clients at the same time, according to a report that appeared June 3 on a Web site maintained by Internet Retailer magazine. Other than this sudden termination, Toolfetch received no notice or explanation of the termination of service, Brown says.

The Assurz service, which guaranteed online shoppers a refund for merchandise plus shipping costs when they were dissatisfied and couldn’t get a refund from the merchant, was designed to overcome a common problem with e-commerce: consumers’ fear of getting less than they paid for. For Toolfetch,com, it ran well until recently, Brown says. He speculates, in fact, that it may have run too well, with more customers returning more goods than Assurz could generate cash for. Assurz charged 3% on each transaction, a sum the consumer paid or was covered by the merchant (Digital Transactions News, Sept. 27, 2007). Until this year, Assurz had had some success signing merchants, including Tiger Direct, a major online seller of electronics gear.

In its bankruptcy petition, filed in the U.S. Bankruptcy Court for the Northern District of California., Assurz reports assets of $427,364, with liabilities totaling more than $5.2 million. Revenue for the year through April was $350,516, compared to $23,659 for all of last year. At the time of filing, it has cash on hand amounting to $7,828, not including two security deposits totaling more than $32,000. The value of returned inventory is $150,000, according to the filing. Accounts receivable come to more than $227,000.

The case has been assigned to Judge Dennis Montali. The first meeting of creditors is set for July 30 in the San Francisco office of the trustee, Janina M. Elder.