So-Called 'Friendly Fraud' On The Rise

from the what's-so-friendly-about-it? dept

Wed, May 27th 2009 12:30am — Carlo Longino

Credit-card companies are looking to new technology to help them cut down on fraudulent purchases, but online retailers are looking at a slightly different problem. They say that "friendly fraud" -- when a customer purchases an item, then later disputes the purchase -- is on the rise. It's not clear exactly what's "friendly" about this kind of fraud, but it usually entails a customer ordering an item, then saying they never received it, or claiming they were sent the wrong item. Travel site Expedia says it runs into the same problem, with people purchasing travel services, then claiming -- after they've taken the trip -- that they never made the purchases. The companies are getting a bit wiser, doing things like taking photos of shipments before they're sent out, and it sounds like most people back off their claims once they're presented with some evidence of just how easy they are to debunk. The retailers cited by the WSJ seem to be saying that this is a manifestation of buyer's remorse, with people looking for a way out from credit-card purchases they've made, but that seems pretty generous. It's a little odd, since it sounds like they try to handle this stuff pretty gingerly and not upset the customers by accusing them of fraud and theft, and then using the "friendly" moniker. Friendly or not, fraud's a growing problem for online retailers and credit-card companies.

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Filed Under: fraud, friendly fraud

26 Comments

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ebola, 27 May 2009 @ 2:07am

registered post
signature required on collection... 'for your safety' (and ours).
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- R. Miles (profile), 27 May 2009 @ 3:54am
  
  Re: registered post
  signature required on collection... 'for your safety' (and ours).
  Not true. My wife, who sells stuff on ebay every so often, was bitten by this tactic. Paypal, which accepts CCs, did nothing to correct the situation despite all the information proving the buyer did make the purchase.
  
  According to Paypal, the buyer stated the CC used in the transaction was done so without authorization, so they had no choice but to retract the funds.
  
  For a seller, there is absolutely no protection against this.
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btrussell, 27 May 2009 @ 2:21am

"The companies are getting a bit wiser, doing things like taking photos of shipments before they're sent out, and it sounds like most people back off their claims once they're presented with some evidence of just how easy they are to debunk."

A pic of my empty mailbox would be a good counter claim then?
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- Chronno S. Trigger (profile), 27 May 2009 @ 6:18am
  
  Re:
  I think he was referencing the "incorrect item" scam not the "did not arrive" scam. The second is solved thanks to UPS/FedEx/USPS tracking numbers.
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  - Anonymous Coward, 27 May 2009 @ 7:14am
    
    Re: Re:
    Not really - you can intercept a UPS guy on the way into an apartment and actually sign for stuff that isn't yours. You can use a signature that isn't yours. There are many simple ways to defraud the system. The real issue is people's willingness to abuse the system because it is just petty theft, just a minor infringement, not a real crime or anything.
    
    Yup, the Anderson Effect at work.
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  - Anonymous Coward, 27 May 2009 @ 7:22am
    
    Re: Re:
    The problem with debunking the "did not arrive" scan is that it does happen even with tracking numbers and a required signature.
    
    Stuff often gets dropped off without a signature. Once I had an expensive package delivered that was "dropped off", but wasn't there when I got home. As I recall though it was the delivery service that got charged for that one.
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Xuan, 27 May 2009 @ 4:35am

Ebay Kingdom is a land of thiefs.
Buy anything on Ebay, if its send via standard Royal Mail raise a disputed that you never recieved the item and even if the seller has irreputable evidance of proof of postage, tracking number or pictures EBAY allways forces the seller into and automatic refund process that can never be reversed or stopped.

Thats how to buy anything for free on Ebay.

Make an account buy anything, pay for it, wait two weeks or more, obviously, report the item as not recieved and you'll get your money back in a week or two.

As an Ebay seller this happens to me all the time, I am in theory funding Paypals Buyers protection scheme as its my money that they use to 'protect the client money with' and it is I who takes the losses, they dont loose a penny, making Paypal/Ebay the mafia Godfather of their kingdom of thiefs.
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- Richard Graaf van Egneem, 27 May 2009 @ 2:44pm
  
  Re: Ebay Kingdom is a land of thiefs.
  Absolutely right.The same has happened to me on a number of occasions with paypal refunding the money(from my account) to whoever claim an item was not received even if the seller provide proof of item being despatched.There is not such a thing a s Paypal buyers insurance.It is the sellers money that is used for that purpose.,I always said that if Al Capone was alive he will be running Paypal.Its nothing but a bunch of gangsters.
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- Gurk, 2 Apr 2010 @ 9:03pm
  
  Re: Ebay Kingdom is a land of thiefs.
  Ive lost over 2 grand this past year and half based on same buyer protection bullsht. You can add tracking numbers that prove shipment was made and still get screwed. 100% working scam for buyers..........
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NullOp, 27 May 2009 @ 5:21am

Friendly?
And compaanies are still more than willing to do a bait-and-switch, upsell you, lie, cheat, overbill, yada-yada-sis-boom-bah!
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Anonymous Coward, 27 May 2009 @ 5:59am

Another outshoot of the "FREE!" mentality - it isn't just good enough to infringe on stuff off of torrent sites, people are now going one step further and screwing with everything.

The general public is more and more feeling that everything should be free, that with such success in turning the music business on it's ear, let's move along to airlines, hotels, and whatever we buy online. After all, the airline can't undo the flight, the hotel can't undo the stay, and online sellers for the most part can't prove you received anything.

Perhaps we could call this the "Anderson Effect".
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- Derek Kerton (profile), 27 May 2009 @ 9:50am
  
  Re:
  um. No. We call it fraud.
  
  Real property is taken, and payment is retracted. The seller is deprived of the property and is not compensated. There is deliberate deception. This is a crime with an immediate victim who is out of pocket by virtue of the crime.
  
  I know some, like you, may think that's the same as one friend lending another a CD to rip to MP3, but it is not. In the copyright case, nobody loses the use of a resource or real property by virtue of the friend ripping the disk.
  
  The Anderson book, Free, is not referring to cases where real, scarce property is taken, and anybody who interprets it as such is either deliberately obfuscating his arguments, or dumb. I'd guess you are the former.
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  - Anonymous Coward, 27 May 2009 @ 5:42pm
    
    Re: Re:
    No, but Anderson's mentality is teaching people that everything can be free. If you don't like the price, come up with some way to "steal it". More and more, an entire generation is being brought up as little scammers and cheaters.
    
    Scamming someone on ebay isn't much different from jacking the lastest movie or hacking palin's email account, is it? Doubly so if the value of the goods is only a few hundred dollars coming from out of state, it's almost not worth the effort to try to get justice. Perfect scam.
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Anonymous Coward, 27 May 2009 @ 6:12am

I have personally been the "victim" of "friendly fraud" where a company has suddenly begun MONTHLY BILLING of a service/product that I never agreed to. This occurred over a year or more after I had made the first purchase. I've disputed the charges with my bank and changed my card.

I'm willing to bet this is on the rise more than consumer fraud because this can be pretty profitable if only temporarily.
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Ed, 27 May 2009 @ 7:19am

The problem is, sometimes the company is wrong.
The real problem is, there is no easy way to prove innocence on either side. I have had packages not arrive, incorrect items, items listed on the packing list, but not in the box. So far, the companies have made good. Even the guy on ebay, who sent me the wrong parts, then said he could not find the stuff I actually ordered. Eventually it turned out ok, but it is tough to prove. Wrong items can be sent back, but missing items??? How would you prove it.

Actually the best one I had was done by ups (I assume). I ordered a 1200 baud "Volksmodem" (yes a long time ago). A beautiful box arrived. Upon opening the shipping box, the modem inside looked like it had been run over, literally. It was half the height it should have been. When I examined the shipping label, I found it had been peeled off, and taped on a new box. UPS made good, but I had no real proof of my innocence (except my complaint call coming in 1 hour after receipt). This kind of crime really hurts everybody, not just the shipper.
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Anonymous Coward, 27 May 2009 @ 8:11am

Re:
I work as a debt collector for credit cards with large balances. In some rare cases I hear debtors say that the card isn't theirs, despite the fact that I can see that the address to which the bill is going is the same address/phone number that I'm calling the debtor at right now, and the card was paid on for a number of years. I can verify social security numbers and payment dates and whatnot all day long, they'll still insist it isn't their card.

Unfortunately I think it's more of a sign of our times than cases of buyer remorse. There has been a decline in moral standards, and people will attempt to say and do anything to steal goods or services or cash from other people if they think that they can get away with it.
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- Agonizing Fury, 27 May 2009 @ 6:29pm
  
  Re: Re:
  Perhaps this has something to do with declining corporate moral standards. The mentality isn't "I'm going to screw over this corporation because I think it's OK". The mentality is "This corporation screwed over (me/my friend/stranger I met on the internet/etc) so why not screw them back?".
  
  Granted neither is the correct way of going about things, but I can still understand where many of these people are coming from. 2 years ago my company severely cut our health benefits, without cutting the amount we have to pay them to get those helth benefits (it actually went up) costing me between $5,000 - $10,000 more per year in health related expenses. Although I would never steal anything beyond a few pens accidentally taken home, how many people would feel bad about ripping off the company for $1,000? $2,000? You can see where some people could justify this in their heads.
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Anonymous Coward, 27 May 2009 @ 12:53pm

Who're the Real Fraudsters?
It's interesting to read the complaints of eBay sellers here. I've found that items from sellers on eBay are NOT as described at least 80% of the time. 80%. Think about that. And that doesn't include items that never arrive. So who are the real fraudsters? Give me a break, Carlo. Why don't you cover that aspect as well?
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anniyan, 27 May 2009 @ 1:02pm

All shipments should be tracked shipments. What else does it take. Seller collects tracking info for records.
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John (profile), 31 May 2009 @ 1:43pm

This is not "friendly" in any way- it's pure fraud, plain and simple. And I don't think it's "buyer's remorse" as much as the buyer thinking "these are hard economic times, how can I make a little easy money".

This "friendly fraud" happened to me:
I sell digital goods online, using PayPal. The customer orders from my website, is given a download link, downloads the item, and everyone's happy. In the rare cases when the customer does not receive a download link, they contact me and I work with them to make it right. In the very rare cases when I can't please a customer, I'll issue a refund.

However, a few months after ordering a product, a customer filed a chargeback at PayPal, even skipping PayPal's own rules about how a customer should work with a seller before filing a chargeback. PayPal never told me the reason- all I saw was a line saying "Reason: Code 120". The customer never talked to me about any issues he had with the product.
PayPal, almost as expected, gave the money back to the customer since it was a digital product without any "proof of shipping": I couldn't prove the customer received the product and he couldn't prove he didn't receive it.

The only conclusion is that this customer wanted some free money by filing a chargeback.
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JOhn, 1 Jun 2009 @ 1:32pm

EXPEDIA is a scam
EXPEDIA have been scamming people. Whatever they they say , they cannot be trusted. Source: http://www.expedianews.com
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Shame on you, 18 Jun 2009 @ 9:01am

So true
I work for a company where this happens periodically. It gets so tiring dealing with people trying to get something for nothing. We correct our mistakes however the people scamming us never contact us directly to complain about a mistake. They go directly to the credit card company and file a dispute. People should stop making purchases that they cannot afford. That's why half of this country is in the trouble they are in right now...
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burnt, 18 Jun 2009 @ 2:32pm

credit card Companies are in on it
The credit card companies and processors are making it easier and easier for the friendly fraud to occur. Why? Because they make $10 to 25 every time there is a charge back. They are the real bandits.They should not process a charge back unless the person first contacts the vendor either by email ( which is easy to prove ) or by phone which is on the credit card.
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Fred, 26 Oct 2011 @ 8:53pm

Friendly Fraud Prevention and Deterrence
I found a company that has a great product for helping to deter friendly fraud incidences. They're called www.docverify.com
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nina, 2 Dec 2011 @ 8:48pm

friendly fraud
I lost 3 merchant accounts for friendly fraud" the first shoplifters are BANKS because they are hungry for chargebacks, We have provided signature confirmation on cardholder address and lost the case! banks ignores their own rules. Customers doing friendly fraud should have removed their credit cards but this will not happen because the banks loss. the only way i reduced friendly fraud is by advising on terms and conditions page that we collect unfair chargebacks trhu a collection agency, and we do. friendly fraud have dropped immediately. I am shocked to see how consumers call us after the collection notice, trying to fix the problem or remembering the transaction.
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john, 21 Feb 2012 @ 10:13pm

Friendly Fraud
I've spent hours on end searching for information about friendly fraud and what I can do to either reduce it or prevent it because it's a really bad problem. Check out www.friendlyfraudprevent.com it's got tons of info.
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