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Northwest Florida
BBB tips to help businesses fight friendly fraud
September 29, 2009
Businesses are increasingly becoming victims of “friendly fraud” - fraud carried out by customers to get items free of charge. Your BBB warns small business owners to be on the lookout for friendly fraud and offers advice to protect against this growing online threat.
According to the Wall Street Journal, many companies, including the travel site Expedia, are currently seeing up to a 50 percent spike in friendly fraud since October 2008. The most common types of friendly fraud involve cases in which a customer falsely claims they:
  • Never received an item ordered online;
  • Received the wrong item ordered online; or
  • Had their credit card stolen and were charged for items they didn’t order
The customer then demands a refund or issues a chargeback on their credit card.
“There is nothing friendly about friendly fraud. The impact on businesses is doubly painful; not only do businesses lose the merchandise, but they also lose what they should’ve made on the sale,” said Norman Wright, president/CEO of your BBB serving northwest Florida.
When “friendly” fraudsters are unable to coax reimbursements from a business directly, many then issue chargebacks to their credit card companies. Creditors will investigate the situation, asking for the business owner’s side of the story before deciding whether or not the business is at fault.
Defending a business against friendly fraud is no easy task, but BBB offers this advice:
  • Verify the buyer’s billing address before sending merchandise. Some retailers require that the billing and shipping address match before fulfilling an order. However, some businesses have found that simply paying for an Address Verification Service, which confirms that the billing address matches the address associated with the credit card, is sufficient.
  • Use a shipper that tracks delivery. Some shipping firms provide tracking information and signature confirmation. Such information can help shed light on whether or not the customer really didn’t receive the goods.
  • Deactivate or deny access to products. For retailers that do not ship tangible items, but rather items such as downloads or access to sites, a plan for denying access is both prudent and practical.
  • Clearly state your return policy on your Web site. This includes any product guarantees, time restrictions, condition requirements or fees—such as for restocking.
  • Be prepared to make your case to the credit card company. Staying organized and presenting a solid case—including records of delivery or reimbursement and your return policy—in the face of a chargeback will assist the credit card company, and increase your chances for a favorable resolution.
  • Analyze sales records. This can help you identify consumers who regularly charge back items, enabling you to decide whether or not to stop doing business with them.
For additional information and advice you can trust on defending your business from fraud, start with www.bbb.org.

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