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4 Areas of Imminent Fraud & Disputes Volumes …

May 6, 2020

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… and How to Handle Them

The COVID-19 pandemic is driving increases in fraud and disputes volumes. You may be forced to make operational and strategic updates to handle the influx.  Improve your readiness now by focusing on the following four areas of disputes where you should expect to see an increase and where you may find/prevent fraud.

Look for the Fraud Hiding in Disputes

These areas seem straightforward, but all need to be watched closely for fraud. Professional fraudsters are hiding among the good customers who only want to remedy their accounts.
4 Fraud and Disputes

1. Travel Related Charges

Travel restrictions were imposed abruptly, forcing merchants and borrowers to quickly cancel air flights, cruises, hotels, VRBO/Airbnb rentals. The economic impacts and the uncertainty of when it will be safe to travel again has left many borrowers requesting refunds.

Fraudsters lurk here to capitalize off the volumes and like many borrowers, they contact the financial institution rather than calling the merchant, which drives call volumes.

2. Recurring Subscription Cancellations

With unemployment rates at record levels and no clear path to reopen the economy, the lack of a steady income and concern on future funds has forced borrowers to reevaluate spending.

One of the first areas many borrowers will trim when trying to save money is recurring charges. These charges include streaming services, gyms, cable TV, and magazines. You will be asked to help cancel subscriptions or intervene when efforts to cancel are unsuccessful because fraud was lurking in unrecognized subscriptions.

3. Billing Changes

Historically, in economic downturns, the volume of disputed transactions increases as borrowers become more conscious about spending levels and start scrutinizing billing statements.

Some customers may not recognize merchant names and default to reaching out to you immediately. Further investigation can uncover actual fraud that has gone unrecognized for months.

4. Friendly Fraud Claims

As your customers struggle to make payments, some will find ways of delaying charges through frivolous disputes or fraud claims. The requirement to investigate all claims, suspend charges and apply credits per REG E and Z allows customers to take advantage of an additional grace period and potentially write-off thresholds. Watch for those who are working the system.

Control Behaviors to Reduce Excessive Losses

With the expected increase fraud and dispute claims, you’ll need to execute the following strategies and operational changes to manage volumes.

Dispute Volume Mix

Evaluate and analyze dispute variances in volumes to gain a comprehensive view of the current environment. Identify trends within an area to inform planning and resourcing decisions. For example, if there is a rise in complex dispute claims, managers may need pitch in on calls. Data-driven decisions allows you to properly address challenges.

Controls

Fraudsters will learn your institution’s policies and rules. For protection, strong preventive and detective controls and practices must be in place. A best practice includes frequently monitoring behaviors of clients. For example, a customer may repeatedly submit claims, therefore, a control around the amount of times that a customer can submit a claim can protect you.

Adjusting Write-off Thresholds

During this time, accommodating and caring for impacted populations is a priority. Adjusting thresholds allows you to best serve customers. A higher threshold limit will allow staff to handle customer requests more efficiently and effectively. If your threshold is $35 and you get hammered, adjust to $45 to gain enough capacity and return to $35 once the pandemic is passed.

Resources and Training

Make sure you’ve sufficiently trained both new and seasoned staff to deflect fraud. Train your team to ask questions related to each of the various fraud scenarios. For example, if a customer is disputing an airline transaction, ask if they’ve talked to the airline, and direct them there or travel agencies to use the robust tools offered through those outlets.

Customer Awareness

The seismic shift in customer behavior right now can improve awareness of existing self-service functionality. You also have the opportunity to reroute billing disputes directly to the merchant. One way to further educate customers is to play hold messages that direct people to contact merchants first for disputes or other procedural actions. If the customer has made the effort to call you, they want their money. You must set expectations effectively, so you don’t get multiple calls.

 

As you evaluate your fraud and disputes programs during the pandemic, please reach out for guidance. We are here to provide our insights for your continued success.

In over 20 years of consulting, we have helped clients assess and identify opportunities in their fraud processes, training, and controls. We have analyzed data and implemented solutions such as VRU rewarding and self-service technology. We can make sure that you are prepared to handle the dispute volumes and uncover fraud.

For information on similar topics to help determine your readiness, select from below:

Fraud in a Changing Disputes Landscape

Synthetic Fraud: How to Identify and Act on Hidden Fraud and Credit Losses

Fraud Prevention