One of the reasons Bitcoin exists is because people want to avoid chargebacks.

I think the Bitcoin protocol already allows for a chargeback system. But its optional and selected by the payer. If you want more info youll have to ask one of the developers.

From http://www.flexcoin.com/?page_id=103

If it requires vendor approval, it's not a chargeback. It's a refund.

Chargebacks imply 3rd party arbiter with the power to reverse the transaction if vendor does not comply. That arbiter would be you.

If you are prepared to do this, lay down arbitration rules and make chargeback protection optional, I'm sure few people will object.

It's an interesting idea.. but it seems like it's centralised on a single website, which is a single point of failure (and vulnerable to things like DMCA takedown notice).

It may be that you can't solve the problems without centralising, but I'd hope someone smart would come along and come up with something better.

As far as chargebacks go.. you'll end up with a messy dispute mechanism if you're not careful.  In the case of fraud they're invaluable (and you'll never be able to safely take credit card/paypal without such a mechanism, and the dwolla mess wouldn't have been an issue with it in place) but user A saying user B didn't send an item through the post?  That's how paypal came unstuck...

It does not have to be this way. Payment processing and dispute arbitration can be done by different entities. Payer and payee agree on terms of payment, choose an arbiter and instruct payment processor that in case of a dispute arbiter will have a final word on whether payment needs to be reversed or not.

This is basically the same as a chargeback, except in case of a chargebacks payment processor and arbiter are always the same and you cannot opt-out.

Sorry, if it sounded too generic. When I referred to Payment Processor I meant FlexCoin. Since you hold both payer and payee accounts and you process the transaction you have full control over its reversal. Just don't monopolize arbitration.

It could work something like this:
1. Some of your customers designate themselves as an 'arbiter'.
2. When making or requesting payment one can add a stipulation - this payment is bound by the terms this agreement (text and hash of agreement) and the arbiter is <flexcoin account id>
3. If there is a dispute later, arbiter is notified, makes his decision and instructs flexcoin to (not to ) reverse this transaction.

If I'm understanding it correctly this does not require any influence on bitcoin system itself.

Remember how the system we envision works though...  the second you accept that transfer it's final.   Until you accept he could change it.  after you accept it's done and finalised.

I use paypal to sell on eBay and we get a few chargebacks, either becasue there is suspicion of fraud (a stolen account etc) or because the buyer claims they never received the item.
The fraud side I can understand, although it's open to abuse as someone just needs to claim their account was stolen .
Chargebacks from buyers who claim non-receipt are rare because most sensible people know how to use email and will simply contact us. Most people know that a percentage of items will get lost in the post and expect that a reputable seller will simply solve their problem (by resending or refunding).
For most buyers I would be happy to accept chargebacks as it gives them a little confidence that they will not get ripped off and that there is a final solution should I fail to deal with their potential problems in the correct manner. ie it increases their likelihood of buying.
The weakness of paypal's system is that it is not voluntary - I, as a seller, am forced to accept any buyer irrespective of their past history or lack of reputation. If someone with zero positive feedback in eBay buys 50 items off me, I have to just trust that they are reputable.
I think a voluntary chargeback system could work well as an extra layer to bitcoin, but it should also include a trust rating for both parties, so that both buyer and seller can make a decision on how the specific transaction should work. Also the mechanism of arbitration should include a period in which both parties need to show they have made every effort to communicate and resolve the problem themselves without the involvement of a 3rd party.
(I realise that's not what you are implementing, but these are my opinions on charge-backs in general)

damm good idea.