First-Party Misuse

Credit card fraud and merchant error are not the only causes of chargebacks. Many, if not most chargebacks, are actually instigated by normal customers who are—intentionally or not—taking improper advantage of their dispute rights. These kinds of chargebacks are described as “first-party misuse,” and they can pose a serious and costly problem for merchants.

First-party misuse can be difficult to anticipate and prevent, and not even the most sophisticated automated anti-fraud tools can do anything to stop it. How and why does first-party misuse happen, and how should merchants deal with it?

  1. What is First-Party Misuse?
  2. How Can First-Party Misuse Happen Unintentionally?
  3. Is First-Party Misuse the Same as Friendly Fraud?
  4. How Can Merchants Prevent First-Party Misuse?
  5. What Can Merchants Do After First-Party Misuse Has Occurred?
  6. Conclusion

Merchants lose a distressingly large amount of revenue to first-party misuse. Recent reporting shows that first-party misuse is now the most prevalent form of e-commerce fraud, affecting nearly 40% of all merchants, which is consistent with Chargeback Gurus’ internal data showing first-party misuse to be the leading cause of chargebacks.

When you get hit with first-party misuse, you lose the merchandise that was purchased, all of the costs involved in making it available for sale, and the purchase amount. You also get charged fees for the chargeback, and your chargeback ratio goes up, which can get you in trouble with your acquirer. Adding insult to injury, first-party misuse is, by definition, an illegitimate chargeback that never should have been allowed.

Merchants can fight back against first-party misuse by understanding what it is, how it works, and what their options are—both before and after the chargeback gets filed.

What is First-Party Misuse?

First-party misuse refers to chargebacks that are based on false or erroneous claims. Issuing banks are supposed to evaluate disputes carefully and ensure that only legitimate claims turn into chargebacks, but they don’t always do this.

Nothing immediately identifies a chargeback as being the result of first-party misuse. These chargebacks will show up under reason codes that will, on first glance, appear legitimate. Only by researching the disputed transaction and examining the true facts of the situation can you tell whether a chargeback is legitimate or not.

First-party misuse can happen for many different reasons. Sometimes, cardholders perpetrate first-party misuse unintentionally, but it is all too common for fraudsters and cyber-shoplifters to engage in it with deliberate intent.

How Can First-Party Misuse Happen Unintentionally?

When cardholders review their monthly statements and see a charge they don’t recognize, they will often assume it’s fraud, even if it really was an authorized purchase. Mistakes like these often lead to unintentional first-party misuse.

Misleading merchant descriptors are a frequent cause of illegitimate chargebacks.

Merchants will often register with an acquirer under their official business name, then use a different name for their storefront. When cardholders see an unfamiliar merchant name on their statement, they leap to erroneous conclusions.

Recurring billing charges are also a common culprit, especially if they’re yearly or otherwise infrequent. Cardholders simply forget about the things they signed up for. First-party misuse can also happen when customers make a return and the merchant takes too long to process the refund.

Is First-Party Misuse the Same as Friendly Fraud?

“Friendly fraud” is a term for first-party misuse that has been around for a while, but it can be a little misleading. First-party misuse does not require fraudulent intent, and when it does, it’s far from friendly.

Buyer’s remorse is often the motivating factor, and it’s especially prevalent during tough economic times. Customers splurge on a big purchase, realize they can’t really afford it or don’t actually want it, and if it’s not easily returnable they simply make up a reason to file a chargeback.

BNPL E-Guide

A variant of friendly fraud known as “family fraud” refers to cardholders disputing purchases made by their children or other individuals known to them who were given access to the card. The classic example is when a parent lets their child play with their smartphone for a few minutes, then finds out later that the child made multiple in-app purchases in their favorite mobile game. These transactions are not considered fraudulent and are not a valid basis for a chargeback.

Intentional first-party misuse is very common, and is what is usually meant by the term “cyber-shoplifting.” In these cases, the cardholder makes a purchase with premeditated intent to dispute it later and get their money back.

How Can Merchants Prevent First-Party Misuse?

There are two things merchants can do to reduce their exposure to first-party misuse. The first is to make sure their merchant descriptors are clearly recognizable, and the second is to provide the best 24/7 customer service they possibly can.

Updating your merchant descriptor is an easy step that can prevent first-party misuse resulting from forgetfulness or confusion. Make sure the name in the descriptor matches the one your customers know you by, and include as much contact information as you can, including a phone number and a shortened URL that leads to your homepage.

When customers are experiencing buyer’s remorse or are otherwise dissatisfied with their purchase, work with them to make things right.

Be generous with your refund policy and answer all communications promptly. If the customer feels like they can get a happy resolution by dealing with you directly, they’re much less likely to make up fake dispute claims.

What Can Merchants Do After First-Party Misuse Has Occurred?

When you research a chargeback and realize that it’s a case of first-party misuse, don’t despair. You can still fight the chargeback through the representment process, and with the right evidence, you can convince the issuing bank to reverse the chargeback.

Learn How To Fight Them The Smart Way

By keeping meticulous transaction records and saving copies of your communications with customers, you can submit compelling evidence to contest first-party misuse chargebacks. The card networks’ reason codes usually spell out what sort of evidence is needed for a successful representment.

It’s also very important to identify customers who engage in first-party misuse and prevent them from becoming repeat offenders. When a fraudster realizes they can get away with stealing from a merchant through this process, they will do so again and again until the merchant blocks them.


Researching chargebacks, identifying first-party misuse, and compiling evidence can be a lot for busy merchants to add to their plates. When fraudulent chargebacks are taking big bites out of your revenue, it makes sense to enlist help in developing a comprehensive plan for defending against chargebacks. There will always be unscrupulous individuals who exploit protections like the chargeback process to take advantage of merchants, but with the right strategy you can fight back and keep your money.

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