Businesses throughout the UK have noted an uptick in “friendly fraud,” also known as chargeback scams. This occurs when customers mislead their credit card companies by claiming they did not authorize a transaction, despite having made the purchase.

As a result, the customer gets reimbursed, while the seller incurs the loss of the sold amount along with an extra fee for the chargeback process.

One London-based entrepreneur expressed his exasperation with the situation to the point of launching his own investigation into these fraudulent claims.

A representative from UK Finance, which advocates for the banking sector, remarked: “Chargebacks serve as a vital consumer safeguard, but there are unfortunate instances where consumers file dishonest claims.”

Rusty Nart, who operates Green Monkey London café in Tooting and Fingers Kebab Shop in New Addington, has observed a rise in friendly fraud at both establishments.

He shared with the BBC that customers would make purchases and then exploit a three-month window to initiate a chargeback.

Mr. Nart noted that these incidents frequently occurred after transactions processed over the phone, with patrons later denying the original payment.

He emphasized the damaging effect of this scam on his business.

“Not only do you have to reimburse the money spent, but the card provider also charges a fee of £28 plus VAT for the chargeback.

“You provide a product or service to the customer, and you end up losing on all fronts.”

In light of this issue, he has begun retaining all paper receipts to track every chargeback.

“I decided to take action myself and started keeping records of all orders for three months,” he explained.

“This allows me to refer back to specific dates and times using physical receipts to trace the customer’s address, drive there, and inquire about their actions.”

Though he has managed to reclaim the funds in each case, he cautioned against others taking similar measures.

“I wouldn’t recommend this approach to fellow business owners as it could be unsafe, but it was my choice since card processors and banks appear to be unresponsive.”

As per financial technology company Worldpay, various forms of credit card fraud, including friendly fraud, cost UK enterprises £551.3 million in 2023.

However, the chargeback scam isn’t confined to the UK; it’s a global concern.

The LexisNexis Risk Solutions Cybercrime Report from 2025 indicated that instances of “friendly fraud” or “first-party fraud” surged from 15% in 2023 to 36% in 2024 internationally, making it the most reported type of fraud.

Experts forecast further growth of this issue into 2026.

The report suggests that rising economic hardships are incentivizing consumers to commit fraudulent acts.

“As economic strains increase, so too does the rate of first-party fraud,” the report observes.

In response to this challenge, numerous firms are emerging within the finance sector to address friendly fraud and offer solutions to affected businesses.

Ariel Chen, CEO of Chargeflow, shared his journey into combatting fraud: “We built a rapidly expanding beauty brand with a subscription box beloved by hundreds of thousands of customers, only to then face the chargeback fallout.”

He characterized these chargebacks as “the sneaky kind,” where a simple click of “I didn’t receive” inflicted substantial financial damage on his previous business.

He redirected his efforts to create protective measures that he now markets to other businesses.

Cardholders attempting to engage in this type of fraud risk having their accounts closed and their credit scores affected.

According to SOTPay, a payment technology company: “While individual cardholders may regard filing occasional friendly fraud claims as trivial or victimless, it is fundamentally theft, which is a criminal act.”

Some legal experts in the UK underline that penalties for committing friendly fraud can be harsh.

Stuart-Miller Solicitors notes that credit card fraud falls under the Fraud Act 2006, specifically as fraud committed through false representation. Their website states that such crimes “can lead to a prison sentence of up to 10 years if prosecuted in Crown Court.”

Adam Scarrot from UK Finance conveyed on BBC Radio London, “We label it friendly fraud, but it remains fraud, and every fraud has a victim.”

Nonetheless, he acknowledged that chargebacks serve as an “essential protection” for “genuine customers.”

“If a payment issue arises or the purchased item has problems, customers can approach their bank to initiate a chargeback.”

This process involves the relevant card network, like Visa or Mastercard, reaching out to the merchant’s inquiry, who will assess the situation and may request a refund from the seller if the chargeback is legitimate.

He emphasized that the system aims to strike a balance between safeguarding “genuine consumers and authentic merchants.”

He advised businesses to implement prevention strategies.

“When processing orders by phone or email, confirm them via text, and hold off on releasing goods until you receive a confirmation reply,” he recommended.

UK Finance’s Insights

Chargeback scams affect all kinds of businesses, with smaller firms particularly vulnerable, according to UK Finance.

It highlighted ongoing efforts to tackle this issue to ensure that disputes are resolved in a fair and consistent manner.