April 19th, 2014
eConsumerServices Says Shifting Tide Could Cost Consumers
by Karla Jo Helms, eConsumerServices
Chargebacks were created as a means of protection for consumers, but are now being abused by the very people they were meant to protect. As the industry catches on to the activities of dishonest consumers, eConsumerServices warns that those who engage in friendly fraud could be labeled "online shoplifters" and eventually face fines and penalties currently being incurred by merchants.
(Clearwater, FL) April 15, 2014-"Friendly fraud," a seemingly conflicting term coined by those within the banking and eCommerce industries, has grown along with eCommerce, and cost retailers an estimated $11.8 billion in 2012
(1). eConsumerServices (http://www.econsumerservices.com/), a transaction dispute practice (http://www.econsumerservices.com/), says that while some incidents of friendly fraud are purely accidental on the consumer's part-such as when a consumer forgets having made a purchase and reports it as fraudulent-many friendly fraud chargebacks are acts of intentional theft made easy by the fraud protection guarantees of most banks. But eConsumerServices maintains that the trend is now shifting as merchants begin to fight back, and consumers who engage in friendly fraud are running the risk of soon being labeled "online shoplifters," who will eventually incur the penalties associated with filing falsified chargebacks.
Chargebacks were originally put in place to protect consumers from online retail fraud and unethical merchants, but have quickly become the power tool of consumerism as what was originally the last resort weapon has morphed into friendly fraud. Friendly fraud occurs when a customer fraudulently reports to their financial institution that a charge on their credit card isn't legitimate, leaving the customer with an immediate refund and the merchant on the hook for the cash. For online merchants who never physically swiped the card, it can be difficult to prove that a charge was legitimate, making chargebacks a game of "he said, she said," where the customer usually wins. What's more, if a merchant has more than 1 percent of their charges reversed as chargebacks, they can find themselves shut down by Visa and MasterCard-which can mean going out of business entirely
(2). As a result, merchants have historically adopted a position of fear with regard to chargebacks and have failed to exercise their right to dispute. But now, Gary Cardone, CEO of eConsumerServices, says that merchants have abandoned that stance of fear in favor of fighting back against what some deem to be an unjust imbalance in the industry-nearly one-third of merchants are contesting all chargeback claims filed, and are winning a reported 40 percent of the time
(3).The chargeback system is currently stacked against merchants. They are automatically fined when a chargeback is filed; consumers are given a temporary refund, which is forcibly removed from the merchant's account; and then the burden of proof falls on the merchant, who must verify that they did fulfill their end of the transaction. But Cardone predicts that in the not-too-distant future, the tide will change and consumers will be charged the fines that have historically been levied on merchants when chargebacks are filed. The reason for this is that chargebacks are becoming a cost center for credit card issuers, where they once were a profit center, leading them to fine merchants up to 200 percent of the cost to recoup the lost funds of the chargeback.
"As the industry becomes more balanced and online shoplifting is looked at as a possible reason for filing a chargeback, issuers are going to charge the people responsible for those chargebacks with the costs associated with filing them-and those people are the consumers".
Cardone says that by eliminating the passive-aggressive label "friendly fraud," which theoretically weakens the true nature and consequences of the crime, the industry should adopt a harsher label for the crime, such as "online shoplifting" or "online theft"-two terms which accurately depict what many consumers are resorting to, per Cardone.
Cardone says that the chargeback dispute process is often difficult to navigate, especially for consumers who see the ease by which they can contact their bank for resolution. But for consumers with legitimate transaction issues, Cardone maintains that the appropriate avenue is the assistance of an impartial mediator with sufficient experience to resolve the problem quickly, saving both time and money for every party involved.
eConsumerServices acts much like a "third-party clearinghouse" among consumers, merchants and their banks. With multiple levels and tools, the company resolves transaction inquiries and reduces the threat of frivolous disputes quickly and with finality. This methodology results in a significant cost savings for issuers and acquirers alike, making it less risky for merchants and their consumers, while helping to streamline a very intricate, aging and complex process. For more information, visit www.econsumerservices.com.
eConsumerServices was initially formed in 2009, but was focused overseas in the European market. However, over the last 12 months, eConsumerServices has developed a market in the USA, and is picking up speed. eConsumerServices specializes in promptly resolving consumer problems as they relate to ecommerce purchases. The company was formed after its sister company, Chargebacks911 (http://www.chargebacks911.com/), surveyed 2,100 consumers who had filed chargebacks, discovering that an overwhelming number of merchants' customers who filed chargeback disputes went to their banks because the merchants didn't offer a fast and efficient support option. Customers were looking for a place that would resolve their inquiry. eConsumerServices was created to serve such customers. Co-founder Monica Eaton-Cardone established eConsumerServices because she felt that it was important to have one company for merchants and one company for consumers. With this, the issuers would be kept out of the dispute-issuer involvement in disputes leads to higher costs, which eventually affect consumers. eConsumerServices is an online service that acts as a mediator between merchants and consumers in helping to resolve transaction disputes. To learn more about eConsumerServices and its services, visit www.econsumerservices.com
1. "Friendly Fraud? Yes It Exists." Csmonitor.com. The Christian Science Monitor, 11 Mar. 2014. Web. 03 Apr. 2014. csmonitor.com/Business/Saving-Money/2014/0311/Friendly-fraud-Yes-it-exists.
2. "'I Didn't Buy That': Friendly Fraud Costs Retailers $11.8 Billion a Year." DailyFinance.com. N.p., 20 Mar. 2014. Web. 03 Apr. 2014. dailyfinance.com/2014/03/20/friendly-fraud-costs-retailers-billions/.
3. brandongaille.com/credit-card-chargeback-process-guide-for-visa-mastercard-and-amex/. July 20, 2013. Web. Feb. 6, 2014.