Our store has encountered post-delivery chargeback fraud from customers who has received their order but files chargeback to us, We have tried contacted the customers but they never replied and submitted dispute letter that contained all the evidences indicated they are trying to fraud us to the bank but the results we are still lost the chargebacks and that was dissapointing and frustrating. Did the bank really read our dispute letter or just skimming and side with the customers? Can we contact or call the bank asking why we lost the chargebacks? if we decided to persue the legal way such as arbitration will it worth it?
Topic summary
Core Issue:
Merchants are experiencing “friendly fraud” where customers file chargebacks claiming non-delivery despite receiving orders. Banks consistently rule in favor of customers even when merchants provide tracking confirmations and delivery receipts.
Key Frustrations:
- Banks appear to ignore submitted evidence during dispute processes
- No direct communication channel exists between merchants and issuing banks
- One merchant reports a customer received a 25% goodwill refund, then filed a second chargeback for that same refund—resulting in double payment to the fraudulent buyer
Shopify Protect Limitations:
Multiple merchants report that Shopify Protect denies coverage for non-delivery claims despite meeting requirements. The protection has strict eligibility criteria:
- Must use supported carriers (USPS, UPS, FedEx, etc.)
- All items must be fulfilled within 7 days with tracking
- Cannot change shipping address post-checkout
- US-based stores only
Potential Recourse:
Suggestions include filing police reports against fraudulent customers or pursuing legal action when hard evidence exists. However, arbitration against customers isn’t viable unless pre-existing agreements exist. The discussion remains unresolved, with merchants seeking better protection mechanisms and accountability from payment processors.
Hi,
First off, sorry to hear that you’re experiencing friendly fraud, it’s a growing trend that’s happening across the entire eCommerce industry unfortunately.
Besides records of written communications with the customer, you’ll also need evidence that refutes their claim. Based off of your post, it sounds like the customer is claiming the good was never received.
Did you reply include hard evidence from the carrier that the shipment was fulfilled? That would be the hardest possible evidence you could provide to refute that.
If the bank still rules in favor of the customer, but you have hard evidence that says otherwise, then you probably have a strong case to open a suit against the customer or in the very least file a police report against the customer.
Arbitration is an extra-judicial process, it’s something you agreed to when signing up for your payment gateway service. The entire chargeback dispute process is arbitration outside of the normal small claims court process. You cannot force another arbitration process against the customer, they would have to be in a existing arbitration agreement before purchase with you directly.
Hope this helps,
I’ve been also complaining about this for a couple years now here and nothing improves. The issue is that we cannot communicate directly with the “bank” that makes blanket approvals for their customers with no regard to proof contradicting the claims. I have not tried calling police local to the thief who filed the dispute, afraid I’ll just get laughed at as they are being defunded and prevented from doing their jobs in this present environment. Even Shopify “Shop Protect” or whatever it’s called that I pay for doesn’t help because they deny protection if “non-delivery” is claimed despite providing indisputable evidence including tracking and delivery receipts. It’s frustrating beyond words.
@AeroForceTodd agreed, that’s highly frustrating. This is essentially digital shoplifting and there need to be reprocussions. But in the meantime, Shopify Protect eligibility does have some caveats they specify:
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You must be located in the United States and have a United States Shopify Payments account.
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Shopify Protect only protects orders that have all non-refunded line items in a Fulfilled status.
3. Changing the shipping address on an order after checkout voids the Shopify Protect coverage for that order.
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Orders must be fulfilled with valid tracking within 7 days of the order being placed and in transit to the customer within 10 days to be protected. Orders that have tracking added after the fulfillment deadline are not eligible for protection.
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To be protected, an order must be fulfilled with a valid tracking number from a supported carrier, either directly or through Shopify Shipping. All items in the order must be fulfilled by supported carriers. If an order contains items that are fulfilled by an unsupported carrier, then the order can’t be protected. The following carriers are supported by Shopify Protect:
- Shopify Fulfillment Network (SFN)
- USPS
- UPS
- Canada Post
- DHL Express
- FedEx
- TForce Final Mile
- Lone Star Overnight
- United Delivery Service
- CDL Last Mile
- Lasership
- GLS
- Ontrac
The changing of address and all line items must be shipped within 10 days and marked as fulfilled seem like easy ways to get tripped up. Or if you use a carrier that’s not on the list of approved carriers for even one line item in the order.
For a full list of exceptions see here: https://help.shopify.com/en/manual/payments/shop-pay/shopify-protect/considerations
Our last shipment then qualifies. I’m in discussions with Shopify customer service about this and hopefully it will be resolved properly. It’s currently like a judge throwing out a case because the defendant simply says he didn’t do the crime and all evidence is ignored:
I just got a response from your “investigation” which I’m sure lasted all of 1 second. Of course Shopify Protect has reneged on it’s promise to protect against fraud by saying that the customer said he didn’t receive it. Guess what Shopify, that’s called “friendly fraud” and it is fraud. I have prior conversations with your representatives where I was told to use Shop Pay to get Shopify Protect to protect my business. My recent representative, Kevin, agreed and said this ruling was mistake but now he’s disappeared and I have a new rep that tows the company line, deny any support to the customer. I have the tracking info, this customer received his item. He’s clearly lying. I’d be glad to post this for anyone interested. You should be ashamed of yourself mistreating your customers like this.
I just had the same thing happen, Delivered with tracking verified delivered by USPS, chargeback lost despite submitting tons of evidence. Friendly Fraud. I gave the customer a 25% refund as a good will at the time they contacted me about it not received (mistake on my part & lesson learned) and they later submitted a separate 2nd chargeback just for the refund, 2 months after my refund to them was issued, so not a timing issue done on same day as many talk about. Despite submitting evidence of the refund, including the Aquirer Reference Number (ARN) for the dispute. Lost the chargeback. Double Refund. How on earth can VISA do this? It’s theft! And fraudulent on the part of the buyer to submit the dispute knowing they already received the money. And Shopify denies any help. Says the bank has final say. Talked to VISA and they told me my merchant bank should help me in this situation. Our merchant bank is Shopify (and which ever merchant bank they use that we can’t see) so that’s a dead end.