Short answer: small businesses, like mine. There are two types of credit card fraud. The first is the classic one that we all think about. Someone has stolen your card, or your identity or both, and goes on a shopping spree buying up everything in sight until the real cardholder contacts their issuing bank. The card is cancelled and the issuing bank investigates. The real cardholder is protected.  But who pays? The shopping spree they went on.. goods were purchased, presumably lawfully. The issuing bank determines fraud and issues charge-backs – grabbing back the money from the retailer. The retailer loses. This can devastate small companies. This happened to me this winter.

The second form of credit card fraud is less known, at least to consumers. The so called “friendly-fraud”. The consumer makes a purchase, often online and then for whatever reason, decides themselves that the product isn’t what they want, or simply changed their mind, or simply want to exploit the issuing bank’s consumer-biased policies with regard to fraud.  They call their issuing bank and request a charge-back stating some fictitious reason. The bank investigates, sort of, and then executes a charge back. The retailer that sold the product loses out, and the consumer gets free stuff!  And somehow this isn’t unlawful?

So, to use the old phrase, ‘the straw that broke the camel’s back’, this is the spoke that broke Zed Wheel Works.  Effective today, Zed Wheel Works as an online retailer is no longer.   I will no longer be an online proprietor.  If you want me to build wheels, send me a quote request, call me, have a dialog with me and we’ll go from there.

Unfortunately, PayPal, or any other quasi or full-on merchant bank won’t help the online retailer. The premise is that the retailer is assumed to be guilty of shady practices or that they should be held accountable for the fraud. Well, in the case of using a merchant account that must be PCI-compliant, this is difficult to achieve, since the retailer has no information pertaining to the credit card being used. We trust that the fraud management of the merchant system is doing the right thing.

In my case, I had no idea whether the name associated with the credit card was in fact the same as the billing and shipping address provided, even though I have a ‘rule’ in my commerce package to match those names, it doesn’t help here.

Essentially, online retailers are sitting ducks on this one.

You can read about this more here:

Want to know more about chargeback fraud and how easy it is to do:

To me, there are two perfect crimes in our age:  murder by automotive “accident”, especially vehicles striking pedestrians or cyclists, and chargeback fraud.


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