comment continued from other below:

I don't know for certain if this is the correct way to address this but after I issued 2 refunds to guests over the last month that included payment processing fees of $109 and $145 - i had to do something without changing my payment rules from 50% down and 50% due 60 days before check in to something else like 10% or 25% down and he rest due 60 days before check-in.

Now after alot of research and reading in VRBO help guides - I think I wasn't required to issue a refund for those processing fees as Stripes terms don't return them and I didn't really follow the "correct" cancellation process and refunded directly from Stripe and then clicked "Cancelled by Guest" after - not waiting 24 hours to see what VRBO to update the reservation in their system - and VRBO mentions to contact Uplisting or Stripe for guidance (and they also mention that certain payment processers refund terms are different):

Cancellation process:

Find the reservation in your software.

Change the status of the reservation to ‘Canceled by Traveler’.

Allow 24 hours for the reservation to update on Vrbo.

Ensure the refund the traveler is entitled to based on your cancellation policy is refunded in your payment processor.

Note: This process may vary depending on your software provider and payment processor. Contact your software provider or payment processor if you have questions or need help with the cancellation and refund process.

Service fee refunds

If a traveler initiates a cancellation within the 100% refund window and you’ve refunded the full amount, we'll return the service fee automatically. Follow the correct cancellation process to ensure the traveler receives the service fee refund.

Yes! Other PMS systems like Escapia offer custom cancellation and refund policies as options in their UI that syncs with VRBO. I currently have a custom seasonal cancellation policy defined in my VRBO listing description and in my rental agreements that also addresses that refunds issued do not include the Stripe payment processing fees as outlined by Stripes terms. But since we cannot set custom cancellation rules - I have to have the policy set to "Strict" on VRBO as the cancellation policy listed there supersedes my custom policy terms (so I have to have the 60 days terms on VRBO in order to have that custom cancellation and refund) Then I just include a disclosure at the beginning of my description that refers guests to review the custom policy I have written at the bottom of the description.

VRBO help guides do state:

"Though hosts can set their own policies, typically they apply one of the following policies: ... Relaxed, Moderate, Firm, Strict ... Custom policy:

Some properties may have custom cancellation policies that differ from those stated in this table. Custom policies may have different cancellation terms and fees associated with them. These terms are usually available for review directly from the property page. If the cancellation policy isn’t displayed, please contact the host directly to review their cancellation terms."

They also state that you can:

"Set up a cancellation Policy

In your PMS, select policies based on these listed Vrbo policies.

Some PMS allow custom cancellation policies as a feature. Contact your PMS provider Support to find out about custom cancellations and how to set them up.

Custom refunds

You can override your cancellation policy and refund a custom amount within your PMS/payment processor. The custom amount must be at least the amount due according to your cancellation policy.