Friendly Fraud at 86%: Some Card Issuers Allowing Fraudulent Claims

Updated on November 22, 2021


Charging back money to a consumers account is a concept many buyers find comforting. No one wants to pay for something they didn’t authorize, but what about something they did authorize? It was far too easy to get money back in the account for something that was truly Fraud, and it stays far too easy to get money back for something a buyer actually authorized.The Reason Why Merchants Are Put on TMF. This deceptive form of charge-back is known as Friendly Fraud and has been found to be the case in 86% of charge backs. This truly unfriendly claim to merchant services is a friendly service to customers of card-issuing banks. Card-issuing banks make it a painless process to get a charge back on the buyers account without even going directly to the source of the so-called Fraud. After seeing how easy the process is, customers usually go back with an incorrect charge complaint and is issued Friendly Fraud charge back. A study from GRT, Global Risk Technologies, states “that when consumers are able to have an effortless charge back experience, a majority of consumers become serial offenders, filing new complaints in fewer than 90 days after their first successful charge back”. This fraud hurts merchants because they are unable to deal with the problem effectively and it adds liabilities to the business. To tackle this problem, merchants are on the rise to challenge charge backs when confident of a correct charge. One of the biggest problems is even if a merchant wins the dispute, the charge back still remains on their merchant account making it harder to stay in business.

E-commerce Nightmare

With consumer friendly fraud at an all-time high, E-commerce merchants are facing a difficult situation. Visa will not allow more than 1% charge back rate for merchants, meaning if you’ve done all the work to put together a site that generates money and have a charge back rate higher or in some cases close to 1% then the merchant will be shut off and put on TMF, Terminated Merchant File. Once that happens the only option for a merchant is to go overseas and pay substantially higher rates and typically only get funded once per week after a grace period where they hold all of your money.

Card issuers also want to bring fraudulent transactions down as well as the charge back rate but unless there is a new regulation or a class action lawsuit to nip friendly fraud in the bud, merchants will continue to pay the price.

What Can You Do?

While you’re waiting for a policy change, get help with an organization that knows how to deal with friendly fraud and charge backs. We invite you to work with some of the best Merchant Service Providers in the high risk industry. To learn more, visit:


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