Small Business Advice for Fighting Friendly Fraud

September 16, 2009
The Better Business Bureau reports that businesses are increasingly victims of “friendly fraud” carried out by customers who want to get items free of charge.
          According to the Wall Street Journal, many companies — Expedia for one — have seen up to a 50 percent spike in friendly fraud since October 2008. The most common types involve customers who falsely claim after placing an order online that they never received the items or received the wrong items. Others claim their credit card was stolen and they were charged for items they never ordered.
          The customer then demands a refund from the business or issues a chargeback on their credit card. Creditors then investigate the situation before deciding whether or not the business is at fault.
          Defending a business against friendly fraud is no easy task, but there are steps to take. Your BBB offers the following 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 find that 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 determine whether or not the customer received the goods.

          Deactivate or deny access to products. For retailers that do not ship tangible items, but rather offer 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 delivery and reimbursement records 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 identify consumers who chargeback items on a regular basis, enabling you to decide whether or not to stop doing business with them.

          Start With Trust. For more advice on defending your small business from fraud, visit or call 970-484-1348 or 800-564-0371.