At Chargeback, we occasionally see confused cardholders come to our site looking for help to dispute a charge against a merchant. Over the past few months, we have noticed an increase in what we call "cardholder traffic" coming onto one article in particular. That article is Pursuing Criminal Charges Against Gross Chargeback Fraud. The cardholder traffic is specifically coming from the searched question, "Can I go to jail for disputing a charge?" We thought this was a very interesting finding and that we should dive a little deeper into why cardholders would be searching for this information.
Chargeback Fraud Attempts
The spike in consumer traffic from the searched phrase, "Can I go to jail for disputing a charge?" shows the cardholder is trying to commit chargeback fraud and is looking into the consequences of submitting an invalid dispute. These cardholders are aware that attempting to get their money back in this way may not be an honest or even legal thing to do.
Chargeback fraud is the malicious use of the chargeback process in an attempt to regain the transaction amount while still retaining the product or service. This type of fraud can stem from buyer remorse, failed return attempt, or trying to sell the product for profit.
On the other hand, cardholders who commit friendly fraud are not disputing the charge with malicious intent. They are charging back the purchase because of simple forgetfulness, an unclear merchant descriptor, or a family member making unknown purchases. We can tell that this traffic coming into our site are chargeback fraudsters because friendly fraudsters do not think they are doing anything wrong, let alone be worried about going to jail.
Chargeback fraud accounts for 35% of fraud losses, and obviously, cardholders are searching for information to see if they can get away committing this type of fraud. So, how can merchants prevent chargeback fraud?
How to Prevent Chargeback Fraud
Customer service that is easy to reach and work with. When a customer has a problem, complaint, or question about the product, having great customer service will help resolve the issue before it ever becomes a dispute. When a problem goes unanswered or unresolved, customers may turn to disputing the charge. Having your customer service information accessible and easy to find can help customers contact you before thinking of disputing.
A clear and flexible return policy can prevent chargeback fraud disputes. Let your customer know exactly what your return policy is and how they can go about returning a product that doesn't work for them. By having a more flexible return policy, customers will have more of an incentive to work with you while resolving the product return, which is a much better scenario than customers trying to use disputes as a way to receive a refund.
Utilize Real-time Resolution. Real-time Resolution (RTR) from Chargeback quickly and easily integrates merchants to issuers of both Visa® and Mastercard® credit, debit, and prepaid cards. These integrations allow merchants to provide detailed company, product, customer, order, and fraud scoring information to thousands of card issuers on-demand. The response details are rendered in the issuer's systems so both customer service representatives and even customers themselves can quickly review and discuss. In cases of chargeback fraud, the details shared through RTR can show the customer service representative that the cardholder's claims are invalid and prevent the dispute from being filed.
What to do When Chargeback Fraud Dispute Happens
Chargeback fraud disputes are invalid disputes, meaning the cardholder's claims are not legitimate. To regain the transaction amount lost to chargeback fraud disputes, merchants need to submit compelling evidence in a dispute response. This compelling evidence should be based on the reason code attached to the dispute. Once the merchant compiles the evidence that disproves the dispute claims, they can regain the transaction amount.