Businesses across the UK have reported a rise in so-called “friendly fraud”, or chargeback scams, where customers tell their credit card companies they haven’t made the purchase listed on their statement, but in fact, they have.

The customer receives a refund, and the seller is charged the same amount – plus an additional fee for the process.

One business owner in London said he was so frustrated by the impact it was having, that he started investigating the fraudulent claims himself.

A spokesperson for UK Finance, which represents the banking industry, said: “Chargebacks are an important consumer protection. Unfortunately, there are cases where consumers make false claims.”

Rusty Nart owns Green Monkey London, a cafe in Tooting, south London, and Fingers Kebab shop, in New Addington, also in south London.

He told the BBC that he noticed an increase in friendly fraud scams at both businesses, and became so frustrated that he started investigating himself.

“People will come in and spend a certain amount of money, and then within a three month period, they’ve got a window where they can chargeback a payment,” Mr Nart explained.

The restaurant owner said it often happened after taking credit card payments over the phone. Payments would be fraudulently charged back to the business, with customers denying they made the original purchase.

The scam was having a negative impact on business, he said.

“Not only do you have to pay back the money that they spent, but the card provider makes a chargeback fee of £28 plus VAT.

“You’ve provided that customer with the product or the service so you lose out on all ends.”

He has started to keep every paper receipt, in an effort to investigate each chargeback.

“I took it into my own hands and started keeping every food order receipt within a three month period,” he said.

“This way I could go back to that date and time through my physical paper tickets and locate the customer’s address, drive to their house and ask them why they’d done this.”

Although he recovered the funds each time, he said he didn’t recommend others should do the same.

“I don’t advise other business owners to do this as it could be a little dangerous, but this was the route I took since the card machine providers and banks don’t seem to be doing anything.”

According to financial technology firm Worldpay, all types of credit card fraud, including friendly fraud cost UK businesses £551.3m in 2023.

But, the friendly fraud chargeback card scam isn’t just a problem in the UK, it’s a global issue.

The LexisNexis Risk Solutions Cybercrime Report in 2025 found that so-called “friendly fraud”, or “first-party fraud”, increased from 15% in 2023 to 36% in 2024 around the world, and was the “number one” reported fraud category.

Analysts predict the problem will continue to grow into 2026.

The report attributes this to increasingly challenging economic environments which provide “temptation” for consumers to act fraudulently.

“As economic pressures build, so does the incidence of first-party fraud,” the report notes.

Across the finance industry, companies are popping up to try and take on the issue of friendly fraud, and to sell solutions to businesses.

Ariel Chen, CEO of Chargeflow, explains how he became involved in fighting fraud: “We built a fast-growing global beauty brand with a subscription box loved by hundreds of thousands of customers. And then the chargebacks hit.”

He described how these chargebacks were “not the criminal kind”, but “the sneaky kind”, with a simple click of “I didn’t receive”, costing his former business greatly.

He turned his skills to developing a defence for businesses, which he now sells.

A cardholder caught trying to commit this type of fraud could find their account closed and their credit-rating record affected.

According to Payment technology firm SOTPay: “Whilst the individual cardholder might think that filing the odd friendly fraud is ‘no big deal’ or victimless, it is essentially stealing, a crime.”

Some UK legal experts say the penalties for committing friendly fraud can be severe.

According to Stuart-Miller Solicitors, credit card fraud is prosecuted under the Fraud Act 2006 as fraud by false representation. Its website states the crime “is punishable by up to 10 years in prison, if tried in the Crown Court”.

Adam Scarrot of UK Finance told BBC Radio London, “It’s what we call friendly fraud, but it’s still a fraud, and every fraud has a victim.”

However, he added chargebacks were “a really important protection” for “genuine customers”.

“If something goes wrong with the payment, or if something goes wrong with what you’ve purchased, you can go to your bank who will raise a chargeback.

“That goes into the relevant card scheme, like Visa or Mastercard, they will contact the shop’s merchant enquirer,” Mr Scarrot added.

“The enquirer will then look at that, and then they will have to pass that onto the merchant, and get the money back from them, if it’s a valid charge back.”

He said the system was designed to try and create an “even balance” between protecting “genuine consumers and genuine merchants”.

He advised businesses to develop a prevention strategy.

“When you’re taking orders by phone or email – text them to confirm – and do not give over the goods until they’ve texted back,” he said.

• Keep meticulous records so that any claim can be properly defended
• Use couriers with proof of delivery to provide evidence in case of disputes
• Invest in fraud prevention tools and follow standard guidelines
• Adopt customer friendly terms and return policies to encourage refunds or exchanges outside of the chargeback process.
• Prioritise good customer service
• Make refund processes clear and easy: the more seamless and positive the experience, the fewer chargebacks will be raised, reducing both genuine and fraudulent claims

UK Finance Advice

Chargeback scams target all types of business, but are particularly harming smaller firms, according to UK Finance.

It said work was ongoing to try and “root out” the problem to ensure disputes were handled fairly and consistently.