Practical Fraud Prevention

Chapter 10. First-Party Fraud (aka Friendly Fraud) and Refund Fraud

You’ve got a friend in me…

Randy Newman¹

As we mentioned in Chapter 2, friendly fraud is distinctively different from the other types of fraud discussed in this book. Notably, friendly fraud is carried out by someone who uses their own identity, credit card, and other identifying details to buy an item and then submits a friendly fraud chargeback—they received the item, but file a fraudulent chargeback for it anyway—rather than honestly paying for it. Alternatively, the customer admits to making the purchase but fraudulently claims they never received the item and demands a refund, thus effectively getting the item for free.

In contrast, the other kinds of fraud we explore in this book involve the fraudster hiding their own identity and obfuscating all signs that ought to point to it. They usually try to create a fake or synthetic identity to hide behind, or try to steal someone else’s to use as a mask. With friendly fraud, it’s a completely different scenario. It is the real customer, acting fraudulently, without impersonating anyone else.

Friendly fraud is sometimes also called first-party fraud or first-party misuse, and these terms and variants of them are catching on. Certainly, there’s something uncomfortable about the term friendly in this context since what’s really happening is that people are trying to steal from a merchant by lying about their actions. Especially considering the potential ...