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Prevent Chargeback Scams

Chargeback Scams

Innovative Ways to Prevent Chargeback Scams

The public has become hyper-vigilant about identifying scams and preventing fraudsters from taking advantage of people. Unfortunately, one fraud tactic is flourishing in the eCommerce environment and few people seem ready to confront it.

Chargeback scams are stealing hard-earned revenue from business owners.

Friendly Fraud, the Biggest Chargeback Scam

While there are legitimate reasons for a chargeback, the majority of transaction disputes are friendly fraud. Friendly fraud happens after a transaction is completed by an apparently satisfied customer who authorized the sale. Instead of trying to resolve a dispute with the merchant, the customer contacts the bank to initiate a chargeback.

Common Chargeback Scams Perpetrated by Consumers

Consumers who file chargebacks with their banks are asked to provide a reason for their transaction disputes. Some of the common reasons given for friendly fraud chargebacks include:

  • Saying the merchandise wasn’t delivered when it was.
  • Claiming the merchandise was defective upon its arrival when it was actually fine.
  • Disparaging the quality of the products or services.
  • Stating the transaction wasn’t authorized when it was.

While the claim may appear to be valid, the consumer’s motive for initiating a chargeback may, in fact, be completely different.

It's time to fight back against chargeback fraud. We can help.

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Usually, consumers engage in chargeback scams because they want to get something for free or they suffer from buyer’s remorse. Other times, the primary cardholder doesn’t want to pay for a purchase made by an authorized user of the card. Sometimes, a chargeback is filed because the return time limit has expired—many merchants allow 30 days or fewer for returns, while the credit card chargeback time limit is often 120 days after the initial sale or more.

Less likely, but still possible, is accidental friendly fraud. When asked why they were filing a chargeback, almost 50% of survey participants claimed they didn’t intend to file a chargeback. They simply asked the bank to clarify a transaction or cancel a subscription. They supposedly didn’t understand the ramifications of their actions and incorrectly assumed the bank was liaising with the merchant on their behalf.

Reasons Why Scams are Successful

Why do chargebacks continue to be a problem for merchants? A combination of reasons has allowed the chargeback scam to continue unchecked and without much resistance by the banking industry:

  • eCommerce is growing at an astounding rate and is evolving faster than the development of fraud detection technology.
  • The chargeback system was developed before the advent of eCommerce and is not equipped to handle modern fraud threats.
  • The chargeback process is dependent on human interpretation, allowing for easy manipulation and subjective reasoning.
  • Issuing banks with zero-liability incentivize this no-hassle solution.
  • Merchants are busy running their businesses and don’t have time to manage chargebacks.
  • Bank and network regulations vary, leaving merchants without the skills and knowledge necessary to decipher the confusing nomenclature.
  • Merchants rely on the card network’s reason code intelligence, which can disguise the true motive behind a chargeback.

Innovative Ways to Prevent Chargeback Scams

Merchants who haven’t already done so should download our friendly fraud eBook. We list the best DIY strategies to prevent chargeback scams executed by friendly fraudsters. For example:

  • Learn how improved customer service can make a significant difference.
  • Check out the tools and technologies that can be used to deter fraud.
  • Get tips for evaluating business practices that may be inadvertently leading to friendly fraud.

Bold and brazen chargeback scammers are challenging to defeat. Merchants need to be just as innovative as their opponents.

crime  Identify Cyber Shoplifting Attempts

Some consumers set out with the intention to get something for free. Many characteristics of this type of friendly fraud will mimic the indicators of criminal fraud.

Don’t Ship to a Freight Company

A freight company might seem like a legitimate place to send something, but in reality, it is a chargeback scam set-up.

Friendly fraudsters will send their stolen goods to other recipients and then pretend like the original transaction was unauthorized.

To find freight companies, merchants can copy and paste the shipping address into Google. Surround it with quotation marks. For example, search for “1001 S. Myrtle Ave. Clearwater, FL”. See if there is a legitimate reason for the consumer to be sending items there.

Stalk the Shopper Online

These days, nearly everyone has a Facebook account. If not a Facebook account, shoppers are probably listed somewhere else on the internet. Merchants can use this to their advantage.

If a transaction seems suspicious, merchants can do a Google search for the shopper’s name and state. For example, enter “Jon Doe” CA. If you can’t find anything for the person, consider it a potential chargeback scam in the making.

Check Address Variations

Merchants will often come across orders where the “Bill To” address is different than the “Ship To” address.

Maybe Daughter is buying something for Mom. Check the last names. Is Sally Frank shipping to Susie Frank? If so, this could be legit. Maybe the shopper works all day and misses the UPS man every time he tries to make a delivery. Perhaps the order is just being shipped to the shopper’s place of employment.

However, if the addresses are for different states, that would be quite the commute to work! And if Sally Frank is shipping to Javier Sanchez, there might not be a family connection.

Use Available Technology

Use chargeback alerts to identify friendly fraudsters who are pretending to be victims of criminal fraud. Chargebacks911® has the broadest chargeback alerts network on the market. If you’d like to learn more about this product, let us know.

Merchants can also require shoppers to sign in with a social media account to validate their identity.

marketing-strategy  Check Your Marketing Techniques

Even if the customers knew full well what they were getting themselves into, it would be easy to convince the bank that things are not as they seem. Merchants should follow these suggestions:

  • Comply with all FTC regulations. The terms and conditions must be easy to read (the same font size and color as the rest of the information on the payment page). Merchants must be able to validate performance claims (for example, “guaranteed results”) and testimonials. Images and logos that imply endorsement cannot be used unless the merchant has written consent. Clinical trials cannot be conducted by an organization related to the products or services.
  • Write accurate and detailed product and service descriptions. Make sure customers know exactly what they're getting.
  • Don't be misleading about the quality of the products or the services' capabilities.
  • Don't say it's new if it isn't. Don't try to pass off counterfeit merchandise as authentic.
  • Be honest about where the item was manufactured and the materials used.

customer-serv-deli  Provide Outstanding Customer Service

Many friendly fraud chargebacks are filed out of convenience; it is easier to request a chargeback than a refund.

Merchants must provide outstanding customer service. First, get the customer to contact the business instead of the bank. Then, resolve all conflicts in a satisfactory manner:

  • Contact repeat customers when their current order deviates from the norm. If someone orders a 40 pack of diapers every week, be suspicious if  she suddenly orders 500.
  • Publicize contact information on the website, in emails, and on marketing materials.
  • Promptly answer phone calls and reply to emails.
  • Consider providing 24/7 customer service.

learn-mistake  Learn From Your Mistakes

Don't let chargeback mistakes go in vain. Every time a chargeback scam slips through the cracks, merchants should take it as a learning experience:

  • Create a database of potential fraudsters. Track contact information and friendly fraud habits.
  • Analyze what lead to past friendly fraud to deter future friendly fraud. Contact customers who are suspected of friendly fraud through a third party (they won’t be inclined to tell the merchant the real reason for the chargeback). Try to discover the actual motive for the chargeback.

be-competitive  Secure the Competitive Edge

Here’s where the truly innovative prevention techniques come into play, giving merchants an advantage over their competition.

Dispute All Friendly Fraud

Merchants must dispute all friendly fraud chargebacks to improve their reputation with issuing banks.

Banks operate on a blame assigning basis. While merchants often decide that fighting chargebacks isn’t cost effective and simply accept the revenue loss, banks interpret a lack of response as an indicator of the merchant’s fault.

Inactivity on the merchant’s part can actually increase the rate of friendly fraud chargebacks. The bank assumes that if merchants have been at fault in the past, they are probably to blame again. Disputing chargebacks not only notifies the bank that the merchant is not at fault, it serves to fight back against the chargeback scams that consumers engage in.

Get Professional Help

Identifying and defeating friendly fraudsters takes practice and skill, often beyond the capabilities of merchants.

Revenue loss associated with friendly fraud and the prevalence of chargeback scams are increasing at an alarming rate each year. Staying one step ahead of savvy consumers requires skills and resources merchants simply don’t have.

Chargebacks911 specializes in friendly fraud management. We’ve become the gold-standard in the industry because we are able to identify and dispute more chargeback scams than any other solution.

If friendly fraud is stealing revenue and threatening the longevity of your business, contact Chargebacks911 today. We offer a variety of products with both end-to-end accountability and on-demand availability. We guarantee ROI, so you know that whatever customized solution you pick, it will improve your bottom line.


Prevent Chargebacks.

Fight Fraud.

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