Friendly fraud, commonly referred to as chargeback fraud, occurs when customers, either unintentionally or intentionally, initiate a chargeback for a valid transaction without first seeking a refund from the merchant. Friendly fraud mostly occurs due to these reasons:
- Cardholders encounter confusion when reviewing their banking statements, leading them to dispute a charge they don’t recognize. Mistakenly perceiving the transaction as fraudulent, they initiate a chargeback. This confusion may arise due to discrepancies in billing descriptors or a lack of familiarity with the purchase details.
- One of the cardholder’s family members used their card to buy something without their knowledge. Cardholder can contact the bank to dispute the charge when they see it on their statement. This latter situation is also known as family fraud. It is usually easy to resolve these issues directly with the merchant, but it is still considered friendly fraud if it leads to a chargeback for the merchant.
- Sometimes, customers who think that they’ve been wronged by a merchant also ask for chargebacks without asking the merchant to fix the problem. They assume that the merchant has deceived them on purpose and go straight to their bank instead of trying to resolve the matter. This can also happen because the customer isn’t entirely sure of the terms and conditions of their purchase. In such a case, they may be expecting to get something that is not part of their purchase, and, therefore, they feel tricked later on.
These false claims are usually known as friendly fraud. This is not a friendly move, despite what it may sound like. At times, it is done with hostile intentions in an attempt to make money, and at others, it is done without knowing if one’s claim is actually valid.
Written by Andrii Vovk