I-Team: Friendly Fraud

CHICAGO (WLS) -- It's easier than ever now to get fraudulent charges reversed from your credit or debit card, especially in a new world of data breaches at stores including Target and Jewel. But the ABC7 I-Team found that people are taking advantage of the system, and it could cost you.

One advantage to using a credit or debit card is you can get questionable or fraudulent transactions reversed. But one expert is telling the I-Team that many of those reversals are suspicious and the crime is known as "friendly fraud."

Carrie Londe owns the Londo Mondo boutique in Lincoln Park, affected by a new trend known as friendly fraud, where consumers dispute a charge with their bank, on their credit or debit card, even if they bought the merchandise.

"People basically buy whatever they want and they basically think they don't have to pay for it and they reverse the charges through their credit card company and we are stuck paying the bill," said Londe.

She says most of the time, those phony "chargebacks" are from her online shoppers but it has happened with in-store shoppers.

"It's pretty brazen," said Londe.

Monica Eaton-Cardone runs Chargebacks 911, a company that works with some of the largest retailers in the country to challenge those illegitimate chargebacks.

"It increases cost for merchants and that means they are going to increase their prices to compensate for lower profits it also increases costs for banks because banks have to spend more money to resolve these disputes," said Eaton-Cardone.

Cardone says her company's studies show that "friendly fraud" has recently increased by 41 percent, and that 86 percent of all chargebacks are actually consumer fraud, not because of data breaches or an identity thieves.

ABC7's Jason Knowles: "So is there really a victim in all of this?"

Cardone: "Yes, at the end of the day the biggest victim is the consumer."

Besides stores raising prices, she says credit card companies can raise interest rates for repeat offenders who have a track record of suspicious reversals.

"Too much friendly fraud can end with destroying your reputation, blocking you from purchasing online, and it can damage your credit," said Cardone.

Even worse- if you are someone who is known to cry wolf, you could end up not getting the assistance if you really are a victim of identity theft.

Another reason for the increase in "friendly fraud" - many state and local law enforcement authorities don't have the resources to track down every suspicious chargeback. The Chicago FBI office telling the I-Team there are a variety of factors that go into whether it's investigators take on cases, with FBI agents usually busting complex , high-dollar amount frauds.

"If we have to continue to eat the merchandise and the eat the charges we have to raise our prices," said Londe.

Londe says she sometimes calls customers directly and confronts them about a reversal, and they reverse their own claim. Stores can also match signatures to prove a charge or track online shipments to the address of the cardholder who made the purchase.

"Friendly fraud is really online shoplifting," said Cardone.

It's estimated that friendly fraud cost retailers and credit card companies $11.8 billion in 2012.

The Chicago Police Department says it doesn't receive many reports of this crime, but that when it does, it will investigate.

Consumers should also remember they have the right to file a legitimate reversal if they want to challenge a merchant error.