If you’re a business owner, chances are you’ve had to deal with one form of credit card dispute fraud or another. In today’s world, unfortunately, a growing number of consumers are resorting to credit card dispute fraud. 

It comes in many forms. Some consumers have figured out that they can buy products and pretend they were never delivered to their homes, when in fact the products did arrive. Others like to pretend they didn’t receive a quality product when indeed it was in great condition upon delivery.  Some even go as far to lie about someone “stealing” their credit card information and using it to purchase things.

This sort of fraud looks something like this:

#1 – A customer makes a purchase and receives their order.

#2 – The customer files a claim with the bank who issued the payment card (i.e. Wells Fargo, Citibank, Capital One, etc). 

#3 – The customer alleges that something has gone wrong.

#4 – The bank looks closely at the cardholder’s claim. If it seems reasonable, a chargeback is issued.

#5 – If by chance the merchant disagrees with the claim, they go through the representment process. This includes seeing the merchant gather evidence and resubmit the transaction to the bank. The bank will then examine the evidence and issue a ruling. It will either uphold the transaction or file a second chargeback.

What happens When Consumers Are Caught Committing Friendly Fraud?

Wrongly submitting a request for chargeback is considered “Friendly Fraud.” The truth is that filing frivolous chargebacks is often hard to prove, but there are some consequences for filing false chargebacks. Usually they won’t end up in jail, but they can lose banking privileges, experience a credit score drop, and/or be blacklisted by the merchant that they wrongly reported. 

And just in case you wonder, chargeback laws were put in place back in 1974 to protect consumers, and historically fraud cases are left up to the banks and credit card companies to prosecute. 

Of late, there has been a lot of talk about standardizing the chargeback process. Stay tuned, as you never know if things will change.

Last Words

The secret to your success is making sure you establish policies and operations that take chargebacks into consideration. The more information you can collect throughout the sales process, the more you will protect your bottom line.

Need help understanding chargeback processes and protecting your bottom line? You should definitely consider learning more about Chargeback360. We manually review every chargeback, gather evidence, and send re-presentment to the bank to demonstrate that the transaction has been properly processed. As a result, you are far less to be affected by “friendly fraud.”

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