Facebook is facing uproar over contested in-app game purchases by minors, which led to an uptick in friendly fraud claims. Loss prevention specialist Chargebacks911 says game sites and cardholders both share responsibility and a role in the solution.
(Tampa Bay, FL) February 11, 2019 – A recent investigative report by Reveal alleges that Facebook knowingly allowed children to accumulate charges for in-app purchases on games. The story featured unsealed court documents showing minors spent $3.6 million from October 2010 to January 2011; of that amount, 9% was returned to cardholders who filed chargeback claims.(1) , a leading dispute mitigation and loss prevention firm, suggests that many of these claims may be a form of “accidental” friendly fraud—and asserts that merchants, cardholders and issuers have the power to end it.
Monica Eaton-Cardone, co-founder and Chief Operating Officer (COO) of Chargebacks911, differentiates between two types of chargeback fraud, also known as “friendly fraud”. Intentional friendly fraud occurs when consumers falsely claim an order was never received or not as described in order to obtain an unwarranted refund. Unintentional or “accidental” friendly fraud happens when cardholders attempt to reverse charges made by another family member or friend who had access to their account. Eaton-Cardone says recent case studies of digital goods merchants show that 57.6% of all friendly fraud chargebacks are of the accidental variety—a statistic that has increased 20% in the last 12 months.
“While Facebook Games has been painted as the villain in this , industry statistics show that friendly fraud is a symptom affecting all merchants—especially those who sell digital goods. Inconsistently applied policies and poor cardholder education is partially to blame,” she explained. “Though parents believe their children didn’t realize they were spending real money on in-app purchases, the fact remains that cardholders approved the initial transaction but subsequently failed to protect their accounts with parental controls and regular oversight.”
Eaton-Cardone acknowledges that both parties hold a share of the responsibility. Merchants can implement measures to ensure that any in-app purchase requires an additional approval, while parents can be more vigilant monitoring their accounts for their children’s spending. She also believes credit card issuers should play a more active role in educating consumers on the proper use of chargebacks and ways to control minors’ purchase activity.
As of 2016, Facebook agreed to update its terms and provide dedicated resources for refund requests related to purchases made by minors.(1) The company’s “” Help Center page explains how to cancel a game or app subscription, remove a payment method, and contact Facebook about games or unauthorized charges.(2) Eaton-Cardone believes the recent Facebook controversary has important takeaways for digital-goods merchants, cardholders and issuers, and she encourages them to embrace these best practices:
- Merchants should confirm approval for each purchase made on minors’ accounts, such as requiring users to enter the credit card verification code and/or click on a popup acknowledging the amount to be charged to the payment method on file.
- Merchants should also provide parental controls and an easy method for cardholders to contact them about disputed charges.
- Cardholders should use parental controls and set up automated alerts to be notified of new charges. They should also review how game and in-app purchases work (one-time vs. ongoing) before saving a payment method to their child’s account.
- Alternately, parents can provide children with prepaid credit cards or a specified amount of game credit (such as a Prepaid Game Card) to limit spending.
- Issuers should educate cardholders on their responsibility for minors’ charges and proactively contact them when a merchant applies multiple charges in a short period.
Chargebacks have costly implications for both merchants and consumers. Eaton-Cardone notes that if a merchant’s policies are contributing to a high level of chargebacks, a proactive strategy is the best defense. Meanwhile, consumers who resort to abuse the chargeback system could find their accounts blacklisted due to friendly fraud.
“The Facebook Games case offers some valuable lessons. Parents would be wise to take this opportunity to safeguard their accounts and teach their children about responsible credit card use. And by taking steps to minimize chargeback losses, merchants can ultimately help to ensure the long-term sustainability of their business,” Eaton-Cardone concluded.
Chargebacks911 is dedicated to educating and supporting eCommerce merchants with services designed to improve profitability, decrease chargebacks and fight fraud. To that end, Monica Eaton-Cardone and her team will be participating in a number of upcoming industry events, including the 2019 Merchant Payments Ecosystem conference in Berlin and the Merchant Advisory Group (MAG) Mid-Year Conference in Fort Lauderdale. For details on Chargebacks911’s comprehensive risk management solutions, informative articles and other merchant resources, visit .
About Chargebacks911/The Chargebacks Company
Chargebacks911 empowers businesses to combat constantly evolving fraud tactics and mounting customer disputes that directly threaten profitability. Operating as The Chargeback Company in Europe, Chargebacks911 has pioneered effective, industry-leading solutions designed to reduce chargeback fraud, alleviate processing costs, mitigate risk and recover revenues.
The company’s unparalleled expertise and proprietary technology have earned three consecutive CNP Customer Choice Awards for Best Chargeback Management Solution, three successive AI Lions’ Den Awards for Best Airline Industry Solution, and Gold and Silver Stevie Awards from the American Business Awards (ABA). With innovative and highly scalable services ranging from Intelligent Source Detection™ (ISD) to Tactical Representment, Chargebacks911 uncovers the true source of chargebacks, battles unjustified disputes, rescues lost revenue, safeguards reputations, and defends against relentless, ever-changing cyberthreats.
- Halverson, Nathan. “Facebook Knowingly Duped Game-Playing Kids and Their Parents Out of Money”; Reveal; January 24, 2019.
- Facebook. “Game Payments”; Facebook Help Center; undated; accessed February 6, 2019.
Originally Appeared on PRWeb