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FINALLY – Chargeback Fraud Leniency for Merchants

Posted by Alex Neir on Tue, December 07, 2010 @ 01:41 PM
Chargeback dishonesty
Issuing banks have finally begun to side with merchants over chargeback fraud commonly called ‘Friendly Fraud’. Friendly fraud is the practice of a consumer making a purchase and then claiming that “it wasn’t me” in effect stealing from the merchant and bank.

It has been reported by Lexis Nexis that nearly 23% of fraud losses reported by merchants are a result of friendly fraud. As the economy continues to correct the prevalence of this type of fraud is likely to increase. The main reason – it’s easy to commit and get away with.

Most banks advertise that fraudulent charges will be hassle free with zero liability for the consumer. However, the increase in friendly fraud is forcing issuing banks to look into claims in much more detail.  When the consumer claims fraud they call their credit card issuing bank and claim they did not make the purchase in question. At that point the chargeback process begins.

The chargeback process is the banks evaluation of the claim to determine who is telling the truth. Both sides present their evidence and a re-presentment is issued in which the result is rendered. Some banks are now requiring consumers to provide notarized affidavits pertaining to the claim. If the consumer wins, the money is refunded to the consumer and revoked from the merchant. If the merchant wins the money is awarded to the merchant. According to Julie Fergerson at, a fraud prevention firm, banks are siding with merchants much more often lately.

In addition, according to the annual Merchant Risk Council survey, the “win” rate for merchants is up 14% from 3 years ago.

How Can You Protect Your Business From Friendly Fraud?

  1. Always get a signature for the purchase
  2. If your business is shipping products,  require a signature upon delivery

Tags: Chargebacks, Fraud Protection, Friendly Fraud