What is chargeback abuse or friendly fraud?

Chargeback abuse occurs when a customer receives a product or service, then files a dispute with their credit card company claiming the transaction was unauthorized or the goods were not received. This bypasses the merchant's refund policy and results in automatic fund reversal plus fees.

Can I sue a customer for filing a false chargeback?

Yes. If you have evidence the customer received the product and filed a false dispute, you can pursue claims for breach of contract, unjust enrichment, and potentially intentional misrepresentation. A demand letter is the first step before litigation.

What evidence do I need for a chargeback abuse demand letter?

Key evidence includes delivery confirmation with tracking, IP logs and device fingerprints, signed agreements or checkout terms acceptance, customer communications acknowledging receipt, and proof of usage such as login records or download logs.

How long do I have to send a demand letter after a chargeback?

There is no strict deadline for sending a demand letter, but acting quickly preserves evidence and strengthens your position. Most contract claims have a 2-6 year statute of limitations depending on your state. Send the letter after representment fails or within 30-60 days of the chargeback.

What should I demand in a chargeback abuse letter?

Demand the principal amount charged back, processor fees and penalties, written confirmation the customer will not file future disputes on the transaction, and set a deadline of 7-10 days for response before pursuing legal action.

What happens if the customer ignores my demand letter?

If the customer does not respond, you can escalate to small claims court for amounts below your state limit, pursue arbitration if your terms require it, send the debt to collections, or file a civil lawsuit seeking the disputed amount plus damages and legal fees.

Chargeback Abuse Demand Letters | Friendly Fraud Response Playbook

Chargeback Abuse Explained

Friendly fraud happens when a legitimate customer receives the product or service, bypasses your refund policy, and files a card dispute anyway. The issuer pulls funds immediately, shifts the burden to you, and may penalize your merchant account for excessive chargebacks.

Key Statutes & Rules

Source	Scope	Why It Matters
Truth in Lending Act (Reg. Z)	Credit card billing error procedures	Defines consumer dispute rights and issuer timelines; merchants must respect but can rebut false claims.
Electronic Fund Transfer Act (Reg. E)	Debit and prepaid dispute rights	Applies to cards tied to bank accounts; sets investigation timeline for issuers.
Card network rules	Visa/Mastercard reason codes and evidence standards	Control representment deadlines, compelling evidence categories, and ratio thresholds.
Merchant contracts	Processor agreements, ToS with customer	Give you rights to re-bill, pursue breach claims, and collect fees if disputes are abusive.

When a Demand Letter Helps

After representment fails

You fought the chargeback, supplied evidence, but the issuer still sided with the cardholder. A demand letter reframes the dispute as contract breach or fraud.

When pattern emerges

Customers, agencies, or influencers run serial disputes after consuming your service. Demand letters establish a written record before escalating to suit or collections.

High-value deliveries

Custom builds, coaching packages, or six-month retainers justify legal action when a cardholder attempts a refund bypass.

Marketplace overlap

Buyer abuses both Etsy/Amazon and bank dispute processes. Document the double-dip and seek reimbursement.

Compliance tip: Keep the tone factual. Do not threaten criminal charges or revenge tactics. State the evidence and legal theories, then offer resolution options.

Evidence & Investigation Checklist

Transaction & Platform Data

Transaction IDs, processor logs, AVS/CVV match results, 3-D Secure proof.
IP logs, device fingerprints, and login timestamps tied to the buyer.
Shipping confirmations, delivery scans, signature PDFs, fulfillment partner receipts.
Digital delivery proof: download logs, LMS completion reports, session recordings.

Contracts & Policies

Signed sales agreements or order forms, scope of work, renewal terms.
Refund policy and chargeback clause highlighted from your ToS or checkout.
Emails showing acceptance of deliverables, milestone approvals, "thank you" notes.

Chargeback Documentation

Item	Purpose
Reason code notice	Shows what the customer told the issuer. Quote contradictions.
Representment packet	Reuse exhibits as attachments to the demand letter.
Processor fees statement	Supports request for reimbursement of chargeback and penalty fees.
Chargeback history report	Establishes pattern if multiple transactions from same customer.

Formatting tip: Embed screenshots or snapshots of the customer's admissions inside the letter so they cannot deny awareness of the product or service.

Drafting Strategy

Core Structure

Background and timeline: Date of purchase, product delivered, communication trail.
Contract terms: Cite refund policy, dispute clause, venue, and acceptance triggers.
Facts contradicting dispute: Screenshots of logins, delivery confirmation, invoices the customer acknowledged.
Claims: Breach of contract, unjust enrichment, and in egregious cases, intentional misrepresentation.
Demand: Reimburse chargeback amount, processor fee, and confirm no future disputes on the transaction.
Resolution window: 7-10 days for response before legal escalation.

Tone & Compliance

State that you respect legitimate cardholder rights but this dispute is factually unsupported.
Avoid threats of reporting to law enforcement unless conduct is clearly fraudulent and you intend to report.
Offer a payment plan or partial credit if the relationship is salvageable.
Remind the customer that issuing false statements to their bank is a breach of contract and can result in account termination.

Subscription scenarios: Clarify renewal consent (checkbox, DocuSign, recorded call). Attach screenshots of countdown timers or cancellation options to rebut "I thought it was one-time" claims.

Resolution Paths After the Letter

Voluntary repayment

Customer wires or reprocesses payment via alternate method. Offer to waive late fees if payment posts within a set window.

Settlement agreements

Mutual release covering transaction, confidentiality, liquidation of inventory, or removal from membership.

Collections

Send to commercial collections or pursue small claims for amounts below your state's limit.

Litigation / arbitration

Invoke forum in contract (often your home jurisdiction) and seek damages plus interest.

Escalation Checklist

Confirm that internal payment processor appeals concluded.
Check if the buyer filed multiple disputes across platforms; gather consolidated evidence.
Decide whether to report the conduct to the issuing bank with documentation once civil remedies start.
Preserve all communications for potential arbitration exhibits.

Sample Chargeback Abuse Demand Letter

[Date] [Customer Name] [Customer Address] Re: Chargeback dispute for Invoice #[Number], $[Amount] I represent [Business], the merchant that delivered [Product/Service] you purchased on [Date]. You filed a chargeback with [Card Brand] on [Dispute Date] claiming the transaction was unauthorized/[Reason Code], yet our records show that: • You agreed to the Service Agreement and Refund Policy on [Date/Link]. • The deliverables were provided on [Fulfillment Date] and you confirmed acceptance on [Email or System Log]. • Attached shipping records and logins confirm receipt and active use of the product. Your chargeback resulted in an immediate reversal of $[Principal], plus $[Processor Fee] in network penalties. Under the Agreement, filing a chargeback in contradiction to documented delivery is a breach of contract and constitutes unjust enrichment. If the representations to your card issuer were knowingly false, they may also constitute intentional misrepresentation. Demand is made that within ten (10) days you: 1. Reimburse $[Total Due] via wire, ACH, or cashier's check; or 2. Authorize [Processor] in writing to rescind the chargeback; and 3. Confirm in writing that you will not pursue further disputes regarding this transaction. If payment is not received by [Deadline], I am prepared to file suit in [Venue per Agreement] seeking the amount due, interest, and costs. I would prefer to resolve this efficiently, and I am available to discuss a short payment plan if you contact me promptly. Direct communications to owner@terms.law. Please preserve all related communications and documents. Sincerely, Sergei Tokmakov Attorney for [Business]

Send the letter directly to the customer. You may later share evidence with the processor or issuer if they request it, but the demand letter itself is addressed to the customer as the breaching party.

Ask for a police report or FTC Identity Theft Report. If they cannot provide one and your logs show they used the product, note that in the letter and in any follow-up with the issuer.

Attorney Services & Contact

Merchant-Side Chargeback Enforcement

I represent e-commerce founders, subscription services, and agencies facing abusive chargebacks. Engagements cover evidence reviews, negotiation, settlement drafting, and litigation when the amount justifies suit.

Email owner@terms.law or book a Calendly session below.

Schedule strategy call

Scope of Work

Review processor logs, contracts, and communications.
Draft demand letters and settlement proposals.
Advise on representment packages and post-chargeback negotiations.
Pursue litigation or arbitration when warranted.

Engagement Notes

Demand packages typically start at $2,000 per target, depending on record review scope.
Extended negotiations, arbitration, and litigation are billed hourly with an initial retainer.
No free consultations. Calendly calls focus on viable enforcement strategies.