Friendly Business Fraud and Preventing Chargebacks

Suzanne Bowen : Monetizing IP Communications
Suzanne Bowen
32 yrs in telecom, teaching, blog & grant writing, biz development, marketing, & PR. Favorite moments in life involve time w/ family & friends, networking, IP communications industry verticals & horizontals, running, traveling, foreign languages
| 1. "Focusing your life solely on making a buck shows a certain poverty of ambition..." Barack Obama ..... 2. "One of the sad signs of our times is that we have demonized those who produce, subsidized those who refuse to produce, and canonized those who complain." By Thomas Sowell

Friendly Business Fraud and Preventing Chargebacks

"Better Business Bureau"

Image by Cody Simms via Flickr

One annual expense our company gladly pays for is our Better Better Business Bureau membership. The organization holds us accountable to certain objective criteria that points to ... what else? Integrity, honesty, quality and other such professional characteristics and ideals.

But sometimes, it is one's customers who are being well, a bit dishonest. In the IP communications industry, this is a real problem especially since most of us do not even send a physical product to someone's doorstep. Most of what we sell is services.

Once per week, I get a newsletter and today's is on a topic I think is very important, but we don't talk about it much: friendly business fraud.

Better Business Bureau says, "Businesses are increasingly becoming victims of "friendly fraud" - fraud carried out by customers to get items free of charge. The most common types of friendly fraud are when a customer falsely claims they:

1. Never received an item ordered online;
2. Received the wrong item ordered online; or
3. Had their credit card stolen and were charged for items they didn't order

The customer then demands a refund from the business or issues a chargeback on their credit card. If that doesn't work, many then issue chargebacks to their credit card companies.

Creditors will investigate, asking for the business owner's side of the story before deciding whether or not the business is at fault."

Comment by Suzanne: Often a business is just too busy serving customers to even respond to 'chargebacks' and can end up losing a lot of money. Another thing ... I learned early in my eBay selling hobby not to offer refunds and to state this clearly. Why? Twice I had customers buy something from me, then email me that it was broken when they received it. They returned 'the item,' but I knew the broken item they sent me was not the item they sold me.

They had intended all along in this manner. They had an item like the one I sold them, but it was broken. They planned to keep the item I sent them and then they sent me their old, broken one.

How to deal with this? Don't offer refunds, or if you think you should offer refunds, at least take a picture of the serial number, etc., on the item and add it to the public pictures of the item.

"Defending against friendly fraud isn't easy, but BBB offers the following advice:

1. Verify the buyer's billing address before sending merchandise. Some retailers require that the billing and shipping address match before fulfilling an order. Others pay for an Address Verification Service, which confirms that the billing address matches the address associated with the credit card.

2. Use a shipper that tracks delivery. 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.

3. Clearly state your return policy on your Web site. This includes any product guarantees, time restrictions, condition requirements or fees—such as for restocking.

4. Stay organized and so you can present a solid case—including records of delivery or reimbursement and your return policy—to the credit card company.

5. Analyze sales records. This can help you identify consumers who charge back items on a regular basis, enabling you to decide whether or not to stop doing business with them.

6. For additional information and advice you can trust as a business owner, start with bbb.org."

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