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Chargebacks911 Unfriends Friendly Fraud

Posted on 9.22.2013

Managing an e-commerce site is tough business. Handling “friendly fraud” can make it even more cumbersome (and costly). 

Friendly fraud is when a customer makes a purchase, receives the item or service, then disputes the charge and gets an unwarranted refund. Over the last several years, Monica Eaton-Cardone, CEO and owner of Chargebacks911, says that incidents of friendly fraud have grown exponentially—and the reasons can vary, according to Cardone:

-Consumers live and work in a fast paced environment. Unfortunately for many, a chargeback has become a quick fix remedy that has the illusion of having no real consequence.

-Forgetting to contact the merchant within their return policy timeframe in order to get a refund has proven to be a leading source of friendly fraud chargebacks.  Consumers will claim they never authorized the charge associated as a last ditch effort to get a refund.

-Consumers who want something for nothing in return will often pretend that an identity thief used their credit or debit card and contact their bank to dispute the charges.

Eaton-Cardone warns merchants against dismissing the threat of friendly fraud as trivial, as the repercussions can be serious:

-Preparing the case documents required to fight these types of chargebacks takes valuable time and money and often requires a higher level of expertise. 

-Having chargeback cases reviewed can result in a separate and additional fee imposed by the processor.

-A potential arbitration fee between $250 and $500 may be charged in the event the case progresses beyond the first appeal. 

-Too many chargebacks can result in increased fees, fines and processing costs or rates, leading to increased prices to the consumer and less profits for the merchant.  

The entire process can last up to six months, often at an expense which far exceeds the cost of the originally purchased item. However, per Eaton-Cardone, by implementing tactics that detect and deter friendly fraud, merchants can likely decrease the number of consumers initiating chargebacks.

“The best way to fight friendly fraud chargebacks is to limit and prevent their occurrence by being proactive—you have to stay one step ahead and be prepared,” said Eaton-Cardone.  “Merchants have to realize that the viability of their businesses is at risk and the responsibility of limiting that risk lies upon them.”

Chargebacks 911 responds to chargeback cases with a three-step sequence:

1. Receive and identify the chargeback customer on the company’s behalf, which automatically stops any future sale from recurring by stopping any subscription related to the customer.

2. Classify the chargeback using Chargebacks911’s coding system to determine a risk-reward prediction (whether or not it is likely the merchant will win the case).

3. Prepare an intelligent response that best serves the case requirements— to not only help the merchant win the case, but also improve the reputation of the merchant in the eyes of the credit card company, and further deter the consumer from a repeat scenario.

 

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