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How friendly is friendly fraud?

I happened to be researching proof of how high the instance of friendly fraud is

That’s when I came across an article that didn’t do the subject justice. Here is the article & my response to it below, because once I got writing I decided to just post it here..

    1. I’d be surprised if an online company didn’t use fraud protection (checking the address & CVV code) in their gateway, so that’s standard.
    2. What still amazes me is that the fraud protection system from the banks still doesn’t check the name of the card holder.I could write Donald Duck in there & it would approve.
    3. Same with the address. Today a fraudulent customer ordered & she omitted her house number. It approved.
    4. If there is no signed credit card slip, it doesn’t matter how much proof you have that the customer was real & did authorize the charge, in the end the company loses. That is based on my experience.
    5. The chargeback department did recommend getting a signed purchase order which of course isn’t logical. If I was a fraudster, I would have no problem signing a slip saying I authorized the charge.What does it matter? The person is already committing fraud. It’s not like you can compare signatures.
    6. I wish more online companies would require all of this because sometimes my customers give me a hard time saying, “no one else makes me do this.” or, “This is too difficult, just give me a refund.”
    7. And if they don’t have a printer & scanner to deal with the purchase order, now you have to pay for a digital signature service which puts off the customer because most don’t know what that is. Others may be scared because they think something fishy is going on.
    8. Even if your processing bank’s chargeback department rules in your favor, all the fraudulent customer has to do is continue to fight it & they win.In fact, if you try to fight it a second time, you then have to pay Visa $500 to fight it on your behalf. I was told that in the end you will lose anyway because you don’t have a signed credit card slip.
    9. Obviously if your product is worth less than $500 it makes no sense to fight it, so again, the fraudulent customer gets away with fraud.
    10. I recommend you go to your local police department with all your proof & force them to investigate it & hopefully they will press charges or at the very least create a record of what happened in case they commit fraud on another company.It is a crime to knowingly order something & then deny you did to get the money back.Companies HAVE to start taking a stand.
Several years ago I remember talking to one company that sells vitamins, supplements, etc. The owner lost over $3,000 from a customer who committed fraud. When he got the chargeback he called up the customer’s house & happened to speak to his wife. He innocently asked her how he was enjoying the vitamins & she said, “oh he loves them & takes them EVERY day!”
    1. I’ve been told for years that Visa makes it impossible to win these cases unless you are a retailer offline. If you are a retailer online, you will probably have proof that something was delivered, but again, you don’t have a signed credit card slip.

What amazes me is that the online business community hasn’t gathered together more to fight this. Visa basically holds all the cards, does nothing to protect companies (it affects small businesses more) & we have to take the loss.

  1. The article doesn’t mention all the following fees:
    • your chargeback fee & if the customer ordered several different things separately, that chargeback fee is per order, not even per batch.
    • if you are a very small company & not doing well, the chargeback is large & you don’t have the money in your bank account to cover it, you now get charged:
      • NSF charges
      • ACH reject charges by way of your processing bank when they go to take the money out of your account.
      • if you have other transactions going through the account at the same time & those decline, then you are charged more NSF charges or that vendor may have their own NSF charge.Obviously you are docked points from your bank when you start accumulating NSFs.
  2. It could take a long time to clear things up when a company gets a chargeback. This hurts not only the company, but their customers too, because the flow of business is disrupted which directly affects productivity & customer service.

 

Michelle
Rapid Financial Solutions

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