First-Party Fraud

TL;DR

• First-party fraud = Your customer is the fraudster, using their own real identity
• Includes friendly fraud (chargeback abuse), refund fraud, and promo abuse
• No stolen identity—the person is who they claim to be
• Hardest to detect because the customer looks legitimate
• Prevention: Clear policies, evidence collection, behavioral patterns

When your customer is the fraudster.

Definition

First-party fraud occurs when a customer uses their own real identity to defraud your business. There's no stolen card, no fake identity—just a real customer with bad intentions.

Key Distinction

Unlike third-party fraud, there's no victim cardholder. The fraudster IS the cardholder. This makes it harder to detect and harder to fight.

Types of First-Party Fraud

Friendly Fraud (Chargeback Abuse)

The most common type. Customer makes a legitimate purchase, then disputes it.

Pattern	Description
"I didn't order this"	Claims they never made the purchase
"It never arrived"	Claims non-delivery despite proof
"It wasn't as described"	Exaggerates quality issues
Family fraud	Claims family member used card without permission

See Friendly Fraud for detailed coverage.

Refund Fraud

Customer exploits your return and refund policies.

Pattern	Description
Wardrobing	Wear/use item, then return it
Empty box returns	Return empty or wrong item
Receipt manipulation	Use old receipts for new "returns"
Double-dipping	Get refund AND chargeback

See Refund Fraud for detailed coverage.

Promotion Abuse

Customer exploits discounts, coupons, and referral programs.

Pattern	Description
Multi-accounting	Create fake accounts for new-customer discounts
Referral fraud	Self-refer with multiple accounts
Coupon stacking	Combine offers in unintended ways
Free trial abuse	Cycle through trials with new accounts

See Promo Abuse for detailed coverage.

Detection Signals

First-party fraudsters look like legitimate customers, but patterns emerge:

Behavioral Red Flags

Signal	Why It Matters
High dispute rate on account	Pattern of chargeback abuse
Returns >30% of purchases	Excessive return behavior
Multiple accounts same device	Multi-accounting for promos
Claims "not received" despite signature	Delivery fraud pattern
Disputes only high-value orders	Strategic abuse

Velocity Indicators

Pattern	Description
Disputes within days of delivery	Didn't even try the product
Surge in refund requests	Testing return policy
Multiple promos same payment method	Promo stacking attempt

Prevention Strategies

Clear Policies

1. Explicit return policy – No surprises, clear timeframes
2. Documented terms – Screenshot at checkout
3. Refund caps – Limit total refunds per customer
4. Promo rules – One per customer, verification required

Evidence Collection

For every order, collect:

• IP address and device fingerprint
• Delivery confirmation with photo/signature
• Customer communication history
• Account creation and login timestamps

Behavioral Monitoring

What to Track	Why
Dispute history	Flag repeat offenders
Refund rate by customer	Catch serial returners
Account age vs. dispute rate	New accounts disputing quickly
Promo usage patterns	Multi-account abuse

Fighting First-Party Fraud Chargebacks

Unlike third-party fraud, you CAN fight these:

Evidence Type	What It Proves
Delivery confirmation	Item was received
Device fingerprint match	Same device as prior orders
Customer communication	They acknowledged receipt
Return history	Pattern of abuse
CE 3.0 match	Prior undisputed transactions

Win rates for first-party fraud are higher than third-party because you can prove the customer received and used the goods.

Response Playbook

When first-party fraud is confirmed:

1. Block the customer – No more orders from this account
2. Blacklist identifiers – Email, phone, device, address
3. Document everything – For future representment
4. Review policies – Close any loopholes exploited
5. Report to consortium – Share with fraud networks if available

Next Steps

Preventing first-party fraud?

1. Implement device fingerprinting – Track across accounts
2. Set up velocity rules – Catch patterns
3. Strengthen return policies – Close loopholes

Fighting chargeback abuse?

1. Review compelling evidence – CE 3.0 requirements
2. Check friendly fraud tactics – Specific strategies
3. Collect proper evidence – Before you need it

Stopping promo abuse?

1. Review promo abuse patterns – Detection tactics
2. Implement account linking – Same device = same person
3. Set redemption limits – Cap per customer

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Related Topics

• Friendly Fraud – Chargeback abuse in detail
• Refund Fraud – Return and refund exploitation
• Promo Abuse – Promotion and coupon fraud
• Device Fingerprinting – Tracking fraudsters across accounts
• Velocity Rules – Pattern detection
• Compelling Evidence – Fighting chargebacks
• Third-Party Fraud – Stolen card fraud (different problem)
• Risk Scoring – Combining fraud signals