Public Mediation

Merchants fighting "friendly" chargeback fraud

Merchants against chargeback fraud

PeopleClaim.com vs. Mastercard International
2000 Purchase Street, Purchase, New York, 10577-2405, United States
Amount Involved: $220.97
Complaint(s): Bad business practices
    • Status: In Negotiation
      This claim has posted for public comment and negotiation. It will remain posted until resolved to the claimant's satisfaction. Suggest a resolution to help these parties reach a settlement.
       (seeking public comment)
    • Claimant Seeks: 4 non-monetary items.
    • Claim #: 1065901
    • Amount Involved: 220.97
    • Filed On: Oct 18, 2016
    • Posted On: Oct 29, 2016
    • Complaint(s):
      • Bad business practices
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Statement of Claim
Complaint Involved (1) - View
Claimant says:
"BACKGROUND:

Fraud is projected to cost e-commerce alone some $7 billion in 2016. The bulk will be chargeback fraud, which is reportedly increasing rapidly for CNP transactions post-EMV. And every dollar that consumers fraudulently charge back costs business an estimated $3.16 because the costs of disputing chargebacks plus associated fees add considerably to the expense of losing goods or services provided in good faith.

If a consumer steals from a physical store, he or she is arrested. If a consumer steals goods or services via a chargeback, the police shrug it off because that is what MasterCard, Visa, American Express, Discover etc. are supposed to handle. Card networks and issuers are aware of the problem and call it “friendly fraud,” as opposed to fraud perpetrated by identity or card theft. There is nothing friendly about it. It is simple theft.

Online businesses pay substantial fees to card networks like MasterCard and to merchant services providers. However, most businesses must simply write off chargeback theft. Some MSPs and honest merchants have even reported that if a chargeback is filed as ‘fraud,’ the card issuer will almost automatically side with its customer.

The merchant then has no recourse other than disproportionately costly arbitration or disproportionately costly court proceedings. Furthermore, e-commerce businesses that are wrongly accused of fraud may lose service with merchant services providers or may be required to pay higher fees.

Chargeback fraud is a learned behavior. Consumers who profit by getting their money back, while keeping the goods or services provided to them by in good faith, learn quickly what works and may advise others about it. If a consumer can save a few moments by hitting the 'dispute this charge' button while paying their credit card statement online instead of contacting a merchant directly, he or she will continue to do so. After all, what are the consequences?

When online merchants and service providers can’t afford to stand up to the practice, the costs of goods and services must rise, and honest customers and businesses must bear the cost. The problem is a huge topic of conversation among small businesses and at conferences.

We certainly understand the need to offer protection to consumers. We see fraud on a daily basis; few things are worse than breaking it to a consumer that the company they gave big bucks to is not real. However, honest businesses and consumers also deserve better protection from the cost of fraudulent chargebacks.

OUR DISPUTE - THE TIP OF AN ENORMOUS ICEBERG

Recently we were very surprised to lose a chargeback dispute. The customer had used our service to file an online complaint against her landlord. She instructed us to mail it to him by USPS Certified Mail.

1) Her details were cross-checked by our merchant services provider. The name and address she gave matched that of the cardholder and are also readily verifiable in any address checker.

2) The certified letter was mailed out within one business day, delivered, and signed for by the correct party.

3) The landlord recognized the name, details, and complaints of his tenant and responded. He gave very specific details of how his tenant had failed to adhere to the contract between them and why she had not received a full refund of her security deposit. He attached photos of the rental property as she had left it.

4) The claimant then filed a chargeback claiming “fraud.”

For this transaction to have been fraudulent, one of two possible scenarios happened:

a) We hacked into her rental history, wrote a plausible complaint, stole her credit card, paid out the costs of printing and sending the complaint by certified mail, and profited by – what, a dollar, after all that work? OR:

b) A criminal mastermind stole a credit card owned by someone with exactly the same name and address so that the landlord would recognize the complaint.

Obviously we disputed the chargeback. We provided MasterCard with the certified mail tracking number; the customer’s email, mailing and IP addresses; all complaint details as written by the claimant; and even the landlord’s response verifying that this was the correct party. (We will put all this into the private message area.)

We were astounded when our MSP informed us that we had “lost” the dispute.

The amount we have lost to this particular fraudulent chargeback is insignificant. However, other merchants have lost, and continue to lose, considerably more to chargeback fraud. The statistics are alarming and the costs affect everyone. We think this needs to change.

We are asking MasterCard to not only review and reverse this particular case, but also to put into place a review process and sanctions when a credit card company makes a decision that very clearly allows its customer to defraud a merchant.

"
...
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What Claimant Wants Hide
Non-Cash
What By When How Much
1. Change of policy: Provide clearer standards for card issuers regarding chargeback fraud Nov 02, 2016 N/A
2. Change of policy: Provide a better appeals process for merchants victimized by chargeback fraud Nov 02, 2016 N/A
3. Change of policy: Make it harder for customers to commit chargeback fraud Nov 02, 2016 N/A
4. Change of policy: Make it clear to consumers that chargeback fraud is theft Nov 02, 2016 N/A
Cash
1. Compensation: Cost of service unfairly refunded to customer Nov 02, 2016 $20.97
2. Recovery of Losses: Time and money spent defending this allegation of fraud Nov 02, 2016 $200.00
Cash total : $220.97
Non-cash: 4 items
  • 0
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Respondent's Counteroffer

There has been no response to this claim from MasterCard International. This claim will remain posted until resolved
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