What Is Friendly Fraud?

One reason getting a chargeback or a wire recall is so difficult is that many banks are quick to suspect friendly fraud. “The customer is always right” does not mean that the bank will always assume that every credit card or debit cardholder is always right. After all, for banks and credit card companies, merchants are their customers too. 

Friendly fraud is a digital form of shoplifting. Customers purchase items that they like, they arrive on time, they are exactly what they ordered, and they are in good condition. However, they nonetheless file a claim for a credit card chargeback. They may complain falsely that they never received the item, it was not what they were promised or that it was damaged. 

A chargeback — the reversal of charges made using a credit card or debit card because of fraud committed against the cardholder —  can be a complex process that involves banks, the merchant, the customer, and, at times, a regulator. This process is complicated by the increase in friendly fraud which creates suspicion about customer complaints. 

The number of chargeback requests is increasing year-to-year. But most are due to chargeback fraud committed by customers. As a result, banks have become more selective while vetting and investigating these disputes. They may be less likely to honor a return item chargeback request than in the past. This is why it is important to approach the chargeback process with seasoned fund recovery experts. 

MyChargeBack experts guide consumers who are dealing with credit card and debit card chargebacks. We consult with clients, research brokers and merchants, and create a compelling file that has to be submitted to the issuing bank to raise a dispute.

Why Is Friendly Fraud Also a Problem for Customers with Legitimate Complaints? 

There is no doubt that the increase in friendly fraud has caused problems for merchants and banks. Merchants are seeing these chargeback requests eat away at their bottom line. This can be deadly to online retailers, which are already facing stiff competition. 

Likewise, chargeback fraud is also a major problem the issuing banks, because if too many chargeback requests are settled on behalf of customers committing friendly fraud, the they may lose the affected merchant’s business. 

Chargeback fraud, therefore, takes a huge toll on cardholders who have legitimate reasons to expect a chargeback. Exacerbating the problem is that the requirements for a chargeback may vary from one credit card company to the next. At the very least, they may vary their definition of what constitutes merchant fraud, what kind of disputes they will honor or the deadline for raising a dispute. 

Consider, for example, the following scenario: An investor transfers funds to a brokerage using a credit card or debit card. The broker, however, will not permit a withdrawal without the payment of additional substantial fees that dwarf the initial investment. That may not fit the definition of merchant fraud established by the credit card company, even though it is clearly fraudulent behavior. 

Instead, most credit card companies will allow a credit card chargeback in the case of fraud or if a merchant dispute was settled in their favor. Unauthorized charges made using a lost or stolen credit card or debit card, however, are considered fraud by definition. In such cases, a chargeback should be quickly and easily be obtained. 

However, if the cardholder claims that the product or service was not delivered as ordered or was inadequate, that is considered a merchant dispute. The issuing bank may first ask the cardholder to attempt to settle the matter one-on-one with the merchant. Only if that does not work will the cardholder be allowed to proceed with the chargeback process. 

How do chargebacks work? Basically, the customer files a complaint and the issuing bank sends it along to the merchant’s bank, known as the acquiring bank. The merchant is given a certain amount of time to reply. The issuing bank will then decide whether the chargeback will be granted or not. 

Friendly fraud has complicated this process for all parties. It forces the issuing bank to request more evidence and conduct more research to decide if a chargeback is truly warranted. In many cases, the bank may reject a chargeback claim outright if there isn’t enough evidence. It may also suspect friendly fraud, particularly if the cardholder has requested multiple chargebacks in the past. 

How to Prove that Your Case Is Not Friendly Fraud

The burden of proof for friendly fraud usually falls on the customer filing the complaint. However, because of the rapid increase in chargeback fraud due to the explosion of e-commerce, particularly due to the COVID-19 pandemic, issuing banks will expect more compelling evidence than in the past. They will also not be as quick to accept a chargeback request.

To improve your chances of success in the chargeback process, you will need the following: 

  • Photos or screenshots of the product or service
  • Terms and conditions issued by the merchant
  • Any relevant contracts you might have signed
  • A copy of all communications with the merchant or broker
  • A screenshot of product descriptions, promises and guarantees
  • Proof of the transaction 
  • A timeline of your dealings with the merchant
  • An expert fund recovery service

This is just a partial list of what you will need to prove your chargeback request is not friendly fraud. The item or product must be shown to have been defective or inadequate. You should be ready to return the item to demonstrate it. To prove that a service is unsatisfactory or fraudulent, you will need unimpeachable documentation, since a service, unlike goods, is not physical. 

How MyChargeBack Will Help

Find a fund recovery agency with a solid reputation, understands how to negotiate with banks, and has vast experience with the chargeback process. They can validate your claims, remove suspicion of friendly fraud and improve your chances of fund recovery success. 

MyChargeBack has engaged with more than 800 banks around the world. We understand the concerns of banks and present our clients’ cases in using the professional jargon that bankers understand. We have a long track record of success and work for our clients even in the most complex chargeback cases. Talk to MyChargeBack professionals today and take the first step toward chargeback success. 

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