Chargeback Abuse Demand Letters

Friendly fraud, serial disputants, and recovering losses from customers who abuse the chargeback system.

Chargebacks were designed to protect consumers from fraud. But when customers receive goods or services, then dispute the charge to get a refund while keeping the product, that's theft - and you can pursue legal remedies.

Common names: Friendly fraud, chargeback fraud, first-party fraud, cyber-shoplifting. The customer isn't "friendly" - the term refers to the fact that the fraud comes from the actual cardholder, not an identity thief.

Types of Chargeback Abuse

Type Description Common Scenarios
Service Received, Dispute Filed Customer receives full service then claims they didn't authorize the charge Consulting, coaching, digital services, memberships
Product Received, "Item Not Received" Customer has delivery confirmation but claims non-delivery E-commerce, dropshipping, high-value items
Buyer's Remorse Fraud Customer changes mind after return window, files chargeback Custom orders, final sale items, event tickets
Serial Disputants Customer repeatedly files chargebacks across multiple merchants Digital goods, subscriptions, high-value purchases
Family Fraud Cardholder's family member made purchase, cardholder disputes Gaming, in-app purchases, online subscriptions

Why Merchants Lose Chargebacks

Legal Framework

Civil Claims Available

California Penal Code § 484

Obtaining goods, services, or money by false pretenses is theft. A chargeback filed with knowledge that the goods/services were received can constitute criminal fraud.

Wire Fraud (18 U.S.C. § 1343)

For larger amounts or patterns of abuse, federal wire fraud may apply when electronic communications (online orders, chargeback filings) are used to perpetrate the scheme.

Practical reality: Criminal prosecution is rare for individual chargebacks. Your primary remedy is civil collection - demand letter, small claims, or regular court depending on the amount.

Card Network Rules

While you can't sue Visa or Mastercard, understanding their rules helps:

Evidence Checklist

Order confirmation with customer details (IP address, device info)

Payment confirmation and transaction records

Signed contract or terms of service acceptance

Delivery confirmation (signature, photo, GPS)

Communication history (emails, chats, support tickets)

Service delivery records (login history, download records, session logs)

Customer's prior purchase history with you

Chargeback notification from processor

Your representment documents and outcome

Customer's stated dispute reason vs. actual facts

Strategic Considerations

When to Pursue

When to Walk Away

Prevention First

Before sending demand letters, improve your prevention:

Demand Letter Templates

Service Received - Chargeback Filed

"On [date], you purchased [describe service - e.g., a 6-week coaching program / website development services / a consulting engagement] from [Company] for $[amount]. Payment was processed through [processor] using your credit card ending in [last 4 digits]. You received the full value of this service, including: - [Specific deliverable 1 - e.g., 6 weekly coaching calls on dates X, Y, Z] - [Specific deliverable 2 - e.g., completion of website delivered on date] - [Specific deliverable 3 - e.g., all project files and source code] On [date], you filed a chargeback with your credit card company claiming [state their reason - e.g., "unauthorized transaction" / "services not rendered"]. This claim is false. Our records show [evidence - e.g., you participated in all coaching calls / you approved the final website design / you downloaded the files on date]. This constitutes fraud under California Penal Code § 484 and civil theft of services. You obtained $[amount] in services while reclaiming your payment through false pretenses. I demand payment of $[amount] within 14 days. If payment is not received, I will: 1. File a civil lawsuit for fraud, breach of contract, and theft of services 2. Report the fraud to local law enforcement 3. Report your conduct to credit bureaus as appropriate 4. Seek recovery of attorneys' fees and court costs Please remit payment to [payment method] by [date]."

Product Received - "Item Not Received" Claim

"On [date], you ordered [product description] from [Company] for $[amount]. The order was shipped via [carrier] with tracking number [tracking number]. According to [carrier] tracking records, the package was delivered to your address at [address] on [date] at [time]. [If applicable: Delivery was confirmed by signature / GPS-verified photo showing delivery to your door.] On [date], you filed a chargeback claiming the item was not received. This claim is demonstrably false based on the delivery confirmation records. Your actions constitute: - Fraud (obtaining goods by false pretenses) - Conversion (wrongful retention of property) - Breach of our Terms of Service I demand that you either: 1. Return the product to [return address] within 7 days in unused condition, OR 2. Pay $[amount] within 14 days If neither option is completed, I will pursue all available legal remedies including small claims court, civil litigation, and criminal fraud reporting. You will be liable for the product value plus attorneys' fees, court costs, and any collection expenses. Please confirm your choice by [date]."

Serial Disputant / Pattern of Abuse

"Our records indicate you have filed multiple chargebacks against [Company] while receiving the goods or services in each case: Transaction 1: [Date] - $[amount] - [Product/Service] - Chargeback filed [date] Transaction 2: [Date] - $[amount] - [Product/Service] - Chargeback filed [date] Transaction 3: [Date] - $[amount] - [Product/Service] - Chargeback filed [date] Total disputed while retaining value: $[total amount] This pattern of conduct demonstrates intentional fraud rather than isolated billing confusion. Each transaction included delivery confirmation and/or service completion records. You are hereby notified that: 1. Your account has been permanently suspended 2. You are banned from future purchases 3. Your conduct has been documented for potential law enforcement referral 4. You owe $[total amount] plus $[fees/costs] for a total of $[amount] Demand is hereby made for payment of $[total amount] within 14 days. Failure to pay will result in civil litigation and referral to law enforcement for investigation of organized chargeback fraud. Given the pattern of conduct, I will also report this matter to [industry fraud databases, e.g., MATCH list] as appropriate."

Family Member / "Unauthorized" Transaction

"On [date], a purchase of $[amount] was made from [Company] using your credit card. You subsequently filed a chargeback claiming the transaction was "unauthorized." However, our records indicate: - The purchase was made from IP address [address] associated with your household - The shipping address matched your billing address - [If applicable: The account was created using your email address / The purchaser identified themselves as your [relationship]] - The product was delivered and retained If a family member made this purchase without your explicit permission, you have a civil claim against that family member - not against [Company]. The goods were delivered in good faith to a purchaser who had apparent authority to use your card. You remain liable for $[amount]. Please either: 1. Pay $[amount] within 14 days, or 2. Provide a sworn statement identifying the unauthorized user (for our records and potential law enforcement referral) If you fail to respond, I will pursue civil remedies against you as the cardholder of record."
Before sending: Verify you have bulletproof documentation. If there's any legitimate service failure on your end, offering a partial refund may be smarter than threatening litigation you might lose.

Dealing with Chargeback Fraud?

I help merchants recover losses from fraudulent chargebacks and implement prevention strategies. Let's review your situation.

Email: owner@terms.law

What is Chargeback Abuse?

Chargeback abuse, also called "friendly fraud," occurs when a customer disputes a legitimate charge with their bank instead of seeking a refund from the merchant. This shifts the burden to the business, which loses the sale, pays chargeback fees, and risks merchant account termination. A demand letter can recover losses and deter repeat abuse.

Common Chargeback Abuse Scenarios

Your Legal Remedies

Chargeback abuse can constitute theft by deception, credit card fraud, or breach of contract. You may be entitled to the original amount, chargeback fees, collection costs, and potentially statutory damages. A demand letter puts the abuser on notice and often results in voluntary repayment to avoid legal consequences.

Evidence to Gather