The Sentinel: Fraud

Business |
Restaurants, retailers face growing number of "friendly fraud" transactions

Friendly fraud presents a real and persistent challenge for modern businesses. Here's how businesses can protect themselves against this new deceptive practice.

by Ben Robertson
The Sentinel

In an increasingly digital economy, one type of fraud is becoming a growing concern for businesses of all sizes—"friendly" fraud. Though the name suggests harmless intent, the impact can be anything but. For merchants, chargebacks can lead to lost revenue, extra fees, and strained relationships with payment processors. Fortunately, there are practical steps businesses can take to protect themselves.

Friendly fraud was first observed back in 2010. Before then, chargebacks categorized under fraud reason codes were generally rare and almost always indicative of genuine card fraud. Mastercard says: "Friendly fraud costs merchants over $132 billion a year – and that amount does not include the additional losses merchants absorb, like the loss of goods or services they ultimately refund."

Understanding Friendly Fraud

Friendly fraud occurs when a customer makes a purchase using their credit or debit card and later disputes the transaction with their bank. The reasons for these chargebacks vary—some claim they never received the product, others say they didn’t authorize the transaction, and some simply don’t recognize the charge.

Sometimes these disputes are the result of misunderstandings. A child may have made the purchase, or the buyer might not recognize the business name on their bank statement. But in many cases, the customer did receive the goods or services and is intentionally abusing the chargeback system.

According to WAND-TV, restaurants in particular have seen a noticeable spike in friendly fraud over the past three months. This is especially costly in an industry where margins are already thin.

"When this occurs, the restaurant is responsible for the original charge, and a chargeback fee,” WAND-TV reported. “Additionally, if there are enough chargebacks, businesses’ credit card processing fees increase for every order.”

Rick Carbaugh, General Manager of Sun Singer Restaurant in Champaign, told WAND-TV that his business has been hit hard in early 2025.

For merchants, the financial damage from friendly fraud extends beyond the lost sale.

“Ever since January, Sun Singer Restaurant has lost about $1,100 in chargebacks,” Carbaugh said. “We've had 11 chargebacks since January, which for comparison's sake, between 2021 and 2024, we had four chargebacks total.”

Carbaugh noted that most of the recent disputes stemmed from deliveries to student housing. Customers would often provide inaccurate phone numbers or email addresses, preventing the restaurant from contacting them. As a result, Sun Singer was forced to stop offering online payment and delivery altogether.

The Cost to Businesses

For merchants, the financial damage from friendly fraud extends beyond the lost sale. Businesses are often required to pay a chargeback fee, which can range from $20 to $100 per transaction. Too many chargebacks can raise red flags with credit card processors, potentially leading to higher processing fees—or even termination of merchant services.

According to industry data, friendly fraud accounts for a significant portion of all chargebacks. As e-commerce grows, the opportunities for this type of abuse increase.

Prevention Starts with Clarity

One of the most effective ways to reduce friendly fraud is to ensure that the customer clearly understands what they’re buying and who they’re buying from. Here’s how businesses can improve transparency:

Use recognizable billing descriptors.
Many chargebacks result from customers not recognizing a company name on their credit card statement. Businesses should make sure their billing descriptor matches their brand or website name as closely as possible.
Clearly outline refund and return policies.
Policies should be easy to find and written in plain language. Businesses that offer refunds or exchanges reduce the customer’s incentive to file a chargeback out of frustration.
Provide order confirmation and shipping details.
Sending automatic confirmation emails and tracking information can help prove that a purchase was authorized and fulfilled.

Strengthen Internal Documentation

If a chargeback is initiated, having proper documentation on hand gives merchants a better chance of successfully disputing it. Key documents include:

Signed receipts or order confirmations
Proof of delivery, such as tracking numbers or delivery confirmation
Screenshots of product descriptions and terms at the time of sale
Communication logs with the customer

For digital goods and services, which are harder to prove as “delivered,” businesses should log IP addresses, account access, download timestamps, or user activity when possible.

Use Payment and Fraud Protection Tools

Technology can also play a vital role in preventing friendly fraud. Most payment processors offer tools for flagging suspicious transactions or verifying cardholder identity. Some of these include:

Address Verification System (AVS)
CVV verification
3D Secure authentication (e.g., Verified by Visa)

While these measures don’t prevent all chargebacks, they demonstrate due diligence on the part of the merchant and may be considered favorably during a dispute.

Stay Proactive and Respond Quickly

When a chargeback is filed, time is critical. Businesses should respond promptly and provide clear, concise evidence to support their case. It’s also helpful to monitor chargeback patterns. If a particular product, region, or customer profile seems to generate more disputes, it may be worth adjusting how those transactions are handled.

Friendly fraud presents a real and persistent challenge for modern businesses. While no system is foolproof, a layered approach that combines transparency, documentation, and technology can significantly reduce the risk.

How to avoid fraudsters when you are in financial distress

Photo: RDNE Stock/PEXELS

StatePoint - Although fraudsters will prey on anyone, many tactics specifically target those facing financial hardship in the wake of a natural disaster.

To help you avoid becoming a victim when you’re most vulnerable, Freddie Mac is providing these tips and insights:

Watch Out for Common Disaster-Related Scams

As the intensity of severe weather events increases, understanding common disaster-related scams can help you avoid them. These include:

High-Interest Loans for Repairs: In this scam, someone may offer to loan you money for home repairs, often at a high interest rate, while you wait for your insurance money. In return, they ask for a post-dated check, your auto title or your tax refund. Although this may provide short-term relief, it’s an example of predatory lending because the high interest rates could end up costing you more in the long term. Read any contract before signing it, and make sure you understand the total cost of the loan, including its terms and fees.

Repair Contractor Prepayment: In this scam, your home repair contractor may ask you to sign a “direction to pay form” that allows your insurance company to pay the contractor directly, even before the repair work is completed. This can leave you vulnerable to incomplete or poor quality work. To avoid this scam, read your contract carefully and do not authorize the full payment amount until you are satisfied with the final product.

Requests for Financial Information: In this scam, a person claiming to be a government employee or disaster relief professional may request financial information, saying they need it to help you recover from a crisis. Protect yourself by never giving anyone your personally identifiable information by phone, email, text or in person without confirming their identity. For example, ask for identification and independently call the entity the person claims to work for.

If You’re Struggling to Pay Your Mortgage, Beware of Fraudsters

If you’re struggling to pay your mortgage after a natural disaster or due to other circumstances and you are facing foreclosure, be on the lookout for two common types of fraud.

Foreclosure Rescue Fraud: In such a scheme, someone may falsely promise to be able to save your home from foreclosure. The fraudster will commonly:

Require you to sign the title to your home over to them.
Ask you to sign unfamiliar documents.
Ask you to share personal information.
Charge you rent to stay in your home.
Offer to pay your delinquent mortgage by purchasing your home.
Promise that you can repurchase your home when your financial situation improves.

Fraudsters orchestrating these schemes pose as professionals and promise to stop foreclosure, often at a high price. However, they don’t deliver on their promises. As a result, you could lose the title to your home and be at risk of foreclosure.

Loan Modification Scams: Loan modification scams may operate similarly to foreclosure rescue fraud. In these scams, fraudsters collect an upfront fee and promise to work with your loan servicer on your behalf. They claim that they can obtain a loan modification that reduces your payments.

If someone other than your loan servicer (the company listed on your mortgage statement) offers you mortgage assistance, don’t provide your information.

If you are struggling with your mortgage payment, contact your lender, a certified HUD housing counselor or a housing finance agency. These trustworthy resources can present you with real options to help avoid foreclosure.

Unfortunately, fraudsters have made it their business to prey on pain. With the right knowledge, you can help ensure that no one takes advantage of you when you’re down on your luck.

Living nightmare; moving scams are the worst

Photo: StatePoint

During initial contact with the landlord or a rental company, ask questions about the leasing process. Before signing that new lease, you should read it thoroughly. If something seems off, clarify it beforehand or walkaway from the rental.

StatePoint Media - In difficult economic times, fraudulent housing schemes become more prevalent, impacting homeowners and renters alike. To help you avoid becoming a victim of fraud, Freddie Mac is sharing the following insights and tips about the most common tactics and scams.

Predatory Lending

Previous financial disasters have led to more robust consumer protection laws. Nevertheless, you should remain vigilant about predatory lending. Look for warning signs, such as pressure tactics, incomplete, confusing or contradictory loan terms, and high rates and fees, including penalties for paying your loan off early. Additionally, lenders should not suggest you take out more credit than you need or suggest a monthly loan payment that does not cover the interest due on your loan. It’s important to work with someone you trust. If you’re hesitant to move forward with a lender, consult a HUD-certified housing counselor or lawyer to gain a better understanding of the loan terms.

Foreclosure Rescue Fraud

Fraudsters often target those in distress. During times of financial hardship, be especially aware of foreclosure rescue fraud, where someone falsely promises to be able to save your home from foreclosure. Common elements of this scheme include the fraudster requiring you to sign over the title to your home, asking you to sign unfamiliar documents or share personal information, and charging you rent to stay in your home. They may also offer to pay your delinquent mortgage by purchasing your home with the promise that you can repurchase it when your financial situation improves. If you’re struggling with mortgage payments, don’t deal with unknown entities. Directly contact your loan servicer, a HUD-certified housing counselor or a Housing Finance Agency for legitimate options to help avoid foreclosure.

Fraudulent Leases and Units

Millions of Americans have lost money due to fraudulent rental listings. You can avoid becoming a victim of this scam by always seeing a unit in person or over video conference before renting it, and by never paying a security deposit until you have signed a lease. Be sure to read your lease thoroughly before you sign it, asking questions about any concerning details early in the process. When rental unit hunting, be wary of red flags such as prices that are too good to be true, listings riddled with grammatical errors and property managers asking for personal information before you’ve seen a unit.

Moving Fraud

Typically, moving fraud occurs when scammers who act like legitimate movers provide a low estimate and, once you move, demand a higher price and withhold your belongings until you pay. To avoid this scam, research the company to ensure it is legitimate, insured and has good reviews. You should also know that reputable moving companies never require advance payments or use high-pressure sales tactics.

Report Scams Immediately

If you believe you’ve been a victim of a scam, take the following actions:

• If a criminal has your identification information, call your creditors to cancel your credit cards. Review your transactions to make sure you recognize them. You can also request that creditors receive your written consent before changing your mailing address or sending a replacement credit card. Your creditors may advise additional precautions.

• Contact the credit bureaus to freeze your credit reports so that there’s no activity on your reports unless you approve it.

• Report the scam to one or more of the following entities: the Federal Trade Commission, the Consumer Financial Protection Bureau, HUD’s Office of the Inspector General Hotline, and the U.S. Department of Justice.

To access Freddie Mac’s collection of fraud prevention resources, visit myhome.freddiemac.com.

Whether you’re a prospective homebuyer or seasoned renter, a scam could potentially impact you. Familiarizing yourself with common tactics can help you identify a scam before it’s too late.

• • • •

Protect yourself and family from holiday season scams

Jonathan Hammond /Pixabay

Statepoint Media - In today’s hyper-connected digital universe, cyber criminals have more information than ever before, with the ability to reach you through unsecure public Wi-Fi, your email inbox, via text message, and more.

According to a Scam and Robocall Report from T-Mobile, Americans lost an estimated $39.5 billion to phone scams in 2022. Lucky for you, there are several ways to protect and safeguard your personal information to help prevent scammers from scammin’ this holiday season.

1. Avoid Public USB Ports: Traveling by plane this holiday season? The FCC warns that cyber criminals can download malware to public USB charging ports to gain access to your information. Prevent this by using an AC power outlet instead.

2. Beware of Charity Scams: It’s the season of giving, but the FCC warns many cyber criminals take advantage by creating fake charities staged as real nonprofit organizations to gain access to your payment information. Woof. To prevent this, don’t click on suspicious email or text links and verify the organization is registered at the National Association of State Charity Officials or Better Business Bureau’s Wise Giving Alliance before donating this holiday season.

3. Screen Your Calls: Scammers are continuously upping their game, with total robocall attempts up 75% from 2021 to 2022. Detecting whether an incoming call is a potential scam isn’t always easy, but T-Mobile’s Scam Shield app makes it simple. Free to all T-Mobile customers, Scam Shield enhances your scam-blocking protections so you can say goodbye to scam calls. In 2022 alone, Scam Shield identified or blocked 41.5 billion scam calls in the T-Mobile network. That’s a whopping 1,317 calls identified or blocked every second. With Scam Shield, when the network detects a potential scam call, it is flagged and displayed as “Scam Likely” on your device. Customers who want even more protection can download the Scam Shield app or dial #662# from their T-Mobile smartphone to enable Scam Block, which automatically blocks any calls that match the database of scam calls. Take that, tricksters. To learn more, visit t-mobile.com/scamshield.

4. Shop Smarter Online: According to Statista, 57% of holiday shoppers plan to use their smartphone to make holiday purchases this year, and scammers are onto them, ramping up activity during the two weeks before Christmas. To minimize any cyber Grinches trying to steal your personal info, monitor your financial accounts regularly for suspicious charges and sign up for your bank or credit card company’s text or email notifications to stay on top of fraudulent activity.

5. Use Secure Tools: Safeguard your online accounts with Multi-Factor Authentication, which requires users to enter two different kinds of information to log in, like a password and one-time PIN code. It’s like having a digital bouncer to make sure only you get into your accounts. Another protection is a password manager, giving you the ability to securely store passwords across multiple platforms and websites. The tool also provides an autofill password function and a new password generator.

To learn more about the industry’s top fraud trends and how to stay protected from scammers year-round, check out T-Mobile’s Scam Shield Report found at t-mobile.com/news.

While cyber threats are on the rise, you can sleigh scams by staying vigilant and incorporating these best practices into your life this holiday season.