A customer filed a false dispute and the bank approved it. What can I do?

If the bank approved the claim because your business failed to comply with EMV rules, you’re out of luck


False credit card claims are hard to dispute if your business can be held responsible for not complying with EMV liability rules. But if you think a customer has committed card fraud, contact your bank.

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Dear Your Business Credit,

We have a retail store. A customer walked in on April 25 of this year to make a purchase. He was told of the price change, since he had previously paid less. He was given the total due and accepted the transaction.

First, two [of his] credit cards were declined, then a third card approved. On June 30, we received an email from Square stating that there was a dispute and the claim was processed in his favor, the reason being EMV. The chip reader was not used.

After finding out about this, my husband realized that he had used the incorrect reader at that time. We now know about the EMV rule. We lost $208 plus the merchandise.

After finding out who the customer was, we confronted him through text, via Facebook. He admitted that he filed the claim because he was upset about the price difference, in which case the bank should have filed a dispute with a reason code of “price difference.”

We went back-and-forth and asked him why he did not come back and request a refund? Why did he not bring the merchandise back? This made us realize that he was committing a fraud, and falsely putting a claim through the bank.

I’m sure the bank saw the opportunity of being able to dispute and credit the customer back, because we didn’t use the chip reader. However, this was not the real reason why the customer disputed in the first place.

Can a customer do that – and a bank file a false claim? – Paula

Dear Paula,

I can understand how frustrated you are with this customer. It may not seem fair, but it looks like this is going to be a costly and unwanted lesson.

Here is why: The EMV rule establishes who is liable when a chip reader is and isn’t used. If you did not use the chip reader, and there is a fraud, you may face liability as the merchant in certain circumstances.

Check out all the answers from our credit card experts.

Ask Elaine a question.

See related: 8 steps to fighting chargeback fraud

Who’s responsible for ‘card-present’ fraud

The liability has shifted to whoever is least compliant with “card-present” fraud that takes place in a store. For more information on how the rule works, see our story “8 FAQs about EMV credit cards.”

Many merchants are still not as familiar with the EMV rule as they need to be. Unfortunately, they learn how it works when they are in a situation like yours.

I’m not aware of any law or rule that says this rule no longer applies if the bank discovers a merchant’s failure to use the chip card reader from someone with suspicious motives. Once the bank knows a chip reader was not used, it is allowed to respond accordingly.

There is nothing in your letter that tells me if you definitely proved to the bank that the customer’s actions were fraudulent, so it is hard to tell if the bank knowingly disregarded that information. The bank very likely has processes for documenting a false claim.

Contact your bank if you suspect fraud

If you want to challenge the customer, contact the bank to find out how to report one. Presumably, you still have the chat transcript from Facebook to prove what you are saying.

However, I would do a cost-benefit analysis here. You will have to put time and effort into pursuing a complaint. That could be worth more of your time than the $208 and the value of your merchandise. As a small-business owner, your time is your most important currency.

What could be a better investment of your time is spending a few hours reading up on how to protect your business when you suspect credit card fraud and making sure you have the right systems in place.

It’s not a fun topic, but consider it an act of self-defense. Many of us have gotten burned by fraudsters, but there are things you can do to prevent that from happening again.

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The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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