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Tell HN: Anthropic expires paid credits after a year

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Re: Tell HN: Anthropic expires paid credits after a year

#21

Post by neom »

backprop1989 wrote: post #6

Accounting rules. If the credits last indefinitely, any unused credits cannot be counted as revenue. Ran into this at my last company when we signed a big contract and gave them hundreds of thousands of dollars in non-expiring credits. Our accountant went nuts when we told him.

When we hired our pre-ipo CFO at DigitalOcean to start getting it ready, he brought in this whole finance team ofc, full FP&A...anyway they spent a couple months going through everything and then one day the controller called a meeting with me and was like "errr... so what's the story with all the credits?" And I was like "huh?" and he said "well we have millions of dollars of credits you've issued to people..." and I explained "oh, it's just like Tom Dale and Alex Sexton and stuff, they're cool they're not going to spin up $10k+ in infra don't worry" and he basically facepalmed and explained to me the liability I'd created. Whooops! :)

Re: Tell HN: Anthropic expires paid credits after a year

#22

Post by jkaplowitz »

backprop1989 wrote: post #12
stingraycharles wrote: post #7

Earlier quoted context omitted.

Correct, then you effectively become a holder of someone else’s money, which creates all kinds of legal trouble (you need to put that money into a separate, third party’s account that shields it from bankruptcy etc). What they could do is automatically refund the credits to the original account as soon as they expire, but that would mean it’s not the deposit but every API request that would be counted as revenue, whi…

Exactly, now you’re a bank (or maybe selling unlicensed securities, either way it’s jeopardy). We ended up revising the contract so that the credits expired after three years. That opened up its own suboptimal outcomes. It was a lesson that was very much learned by us. On the topic itself - agreed that Anthropic should take a step back and review its policy around comms and good will in general. They’re supposed to b…

> Exactly, now you’re a bank (or maybe selling unlicensed securities, either way it’s jeopardy).

This seems unlikely - after all, a US federal law (the Credit CARD Act of 2009) requires closed-loop (store/brand-specific) gift cards to be valid for at least 5 years after activation and some states like Florida and California don't allow them to expire at all, so for simplicity national companies don't usually let them expire at all regardless of state. But neither a 5-year expiration nor indefinite validity turns the seller into a bank or an unlicensed securities seller or otherwise puts them in jeopardy.

Naturally, service credits and gift cards are probably treated differently by the CARD Act, but service credits are still not a source of legal jeopardy in the sense you were describing of being an unauthorized participant in the regulated financial world, any more than gift cards are.

I can completely believe, however, that an approach similar to how gift cards must be handled is financially worse on the company's accounting statements than quickly expiring credits. That worse financial accounting consequence would be a completely sufficient explanation for why the company switched approaches.

Re: Tell HN: Anthropic expires paid credits after a year

#24

Post by tom_m »

stingraycharles wrote: post #7
backprop1989 wrote: post #6

Accounting rules. If the credits last indefinitely, any unused credits cannot be counted as revenue. Ran into this at my last company when we signed a big contract and gave them hundreds of thousands of dollars in non-expiring credits. Our accountant went nuts when we told him.

Correct, then you effectively become a holder of someone else’s money, which creates all kinds of legal trouble (you need to put that money into a separate, third party’s account that shields it from bankruptcy etc). What they could do is automatically refund the credits to the original account as soon as they expire, but that would mean it’s not the deposit but every API request that would be counted as revenue, whi…

If they're non-refundable?

Re: Tell HN: Anthropic expires paid credits after a year

#25

Post by msgodel »

mrbungie wrote: post #5
reactordev wrote: post #4

“Oops, we burned through your money, please give us more by this date” - are you serious? Unfortunately they basically can do whatever they want with credits. https://www.anthropic.com/legal/credit-terms

Gets "funnier" when you think those credits can be burned in useless tokens (i.e. they have almost negative skin on the game regarding outcomes and incentives to maximize token usage).

Do they? useless tokens take just as much compute to generate as useful tokens. Burning a customer means acquiring a new one which is super expensive.

Re: Tell HN: Anthropic expires paid credits after a year

#26

Post by htrp »

backprop1989 wrote: post #12
stingraycharles wrote: post #7

Earlier quoted context omitted.

Correct, then you effectively become a holder of someone else’s money, which creates all kinds of legal trouble (you need to put that money into a separate, third party’s account that shields it from bankruptcy etc). What they could do is automatically refund the credits to the original account as soon as they expire, but that would mean it’s not the deposit but every API request that would be counted as revenue, whi…

Exactly, now you’re a bank (or maybe selling unlicensed securities, either way it’s jeopardy). We ended up revising the contract so that the credits expired after three years. That opened up its own suboptimal outcomes. It was a lesson that was very much learned by us. On the topic itself - agreed that Anthropic should take a step back and review its policy around comms and good will in general. They’re supposed to b…

"you either die a hero or live long enough to see yourself become the villain"

Re: Tell HN: Anthropic expires paid credits after a year

#27

Post by FireBeyond »

SilverElfin wrote: post #15
FireBeyond wrote: post #13

Earlier quoted context omitted.

Customers in California and Washington (at least) may beg to differ. In both of those states, prepaid credit (gift certificates, etc.) is not allowed to have an expiry date attached.

Is that specific to gift certificates or any kind of credit, whether digital or on paper?

Credits of a dollar value, not service, I believe.

Like "for a dinner" can expire, because the COGS associated with that can go up, and a business is being cost $100 for a dinner that they may have only been paid $50 for previously.

But if for a dollar amount, then it cannot be expired.

Ashley Home Furnishings, since this reminds me, are all sorts of out of compliance here. We were given gift cards by them for issues with purchases. Fine. Then when we bought our home, several family went there, and purchased gift cards with cash. We tried to use them and were told they could not be used on anything that was discounted or on sale, despite them having received cash for the card. (Side note, guess how easy it is to find anything there that is not ostensibly discounted?)

Re: Tell HN: Anthropic expires paid credits after a year

#28

Post by mrbungie »

msgodel wrote: post #25
mrbungie wrote: post #5

Earlier quoted context omitted.

Gets "funnier" when you think those credits can be burned in useless tokens (i.e. they have almost negative skin on the game regarding outcomes and incentives to maximize token usage).

Do they? useless tokens take just as much compute to generate as useful tokens. Burning a customer means acquiring a new one which is super expensive.

Yes, obviously it does cost compute (to them) but customers are not paying for the compute per-se, but rather for correct results/outcomes. This is a big alignment and accountability problem, relevant enough to some make companies like Lovable refund credits to customers when errors and token/credit mishandlings are too serious to ignore. That seems unsustainable in the long run though.

I expect this to become even bigger when the hype cools down and companies start looking for ROIs.

PS: I obviously talking about model errors (i.e. like use N tokens in a LLM solving a problem by just deleting/deactivating a test), and not end-user mistakes.

Re: Tell HN: Anthropic expires paid credits after a year

#29

Post by mrbungie »

backprop1989 wrote: post #6

Accounting rules. If the credits last indefinitely, any unused credits cannot be counted as revenue. Ran into this at my last company when we signed a big contract and gave them hundreds of thousands of dollars in non-expiring credits. Our accountant went nuts when we told him.

Even with a CFO-level explanation, it feels like a weak excuse for "fuck the customer" as always.

Notice that in some places (with good enough customer protection rules) pre-paid credits can't expire, as expiration itself is a clear abuse of market power: they are forcing out revenue from services not given, even if it is "made clear at buy-time". Especially at such short time horizons like 1-year.

And yet they are supposed to be the good guys.

Re: Tell HN: Anthropic expires paid credits after a year

#30

Post by muzani »

eviks wrote: post #20
backprop1989 wrote: post #6

Accounting rules. If the credits last indefinitely, any unused credits cannot be counted as revenue. Ran into this at my last company when we signed a big contract and gave them hundreds of thousands of dollars in non-expiring credits. Our accountant went nuts when we told him.

There are other numbers besides 1 and infinity, though

Tracking "revenue" past one financial year is its own accounting hell.
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