Retailers are fighting back against "friendly fraud."

Already faced with one of the toughest economic climate in a long time, retailers are not leaving any stone unturned in their quest to stay afloat. They are doing a thorough review of all aspects of the way they do business and are implementing measures they think will allow them to whether the storm. In that context, chargebacks, one area that has drawn little scrutiny in the past, is getting a second look.
Chargeback is the practice in which customers call their credit card companies to contest a charge on various grounds like: they never placed the order, the item was never delivered, or the wrong item was delivered etc. What happens next, is that the customers get their credit cards refunded for the amount of the order and the merchant get fined $100 for the incident. A you may imagine, a lot of those claims were bogus ones from some dishonest shoppers and in almost all of those instances, the merchant was left holding the bag. In good economic times, maybe a lot of merchants would have found it not worth their time or their resources to try to go after those authors of chargebacks. But in today economic environment, nothing is to small when it comes to cutting costs.
One way retailers are fighting back against chargebacks, is by using the services of companies like BadCustomer.com who has created a database of customers who have practiced chargeback in the past.
After signing up with BadCustomer.com, retailers can enter credit card numbers of potential customers in the database and get an instant response. If it is a positive, they can inform the potential customer about their findings, and deny the transaction, saving themselves from future losses. The customer whose card is rejected under those premises, has the option of calling BadCustomer.com and ask why they were on the list in the first place and maybe have a chance to have their name removed they have a good reason. Or, if they choose so, they still can pay using other methods like cash, checks or debit cards.
Another source of past abuses, is merchandise returns which has seen merchants suffer agreat deal of losses due to unscrupulous customers who would order a product, use it and then put it back in the box and sent it back and ask for a refund.
To combat that practice, some merchants are using methods such as shipping merchandises sealed with a security tape. Whenever the seal is broken in the hands of the customer, it is assumed that the product was used, therefore, if sent back for refund, the merchant will have the option to charge a restocking fees, or a prorated refund based on the condition of the returned product.
Another way for merchants to fight " friendly fraud", is to impose shorter return windows, or to only offer store credits etc.
Overall, in the next few weeks when shoppers will be in a buying frenzy, it doesn't hurt to take a second and inquire about the return policies of the merchants they plan to do business with, as most of them are clamming down on "friendly fraud."

For more, see WSJ.com