When Is Chargeback Fraud a Federal Crime?

 Posted on January 13, 2026 in Fraud

Chargeback fraud has become increasingly common, especially among younger consumers. According to recent data cited by Fortune magazine online, 33 percent of Gen Zers either know someone who has committed chargeback fraud or admit to doing it themselves. Even more say they would be willing to commit chargeback fraud. Many people view chargeback fraud as a victimless crime or a clever way to get free products, but police and federal prosecutors see it very differently.

What may seem like a minor scam can quickly escalate into serious federal criminal charges carrying decades in prison and massive fines. If you are accused of chargeback fraud or first-party fraud in 2026, you need to understand the potential consequences and get a lawyer right away. An experienced Illinois federal first-party fraud attorney can protect your rights and build a defense strategy.

What Is Chargeback Fraud?

Chargeback fraud, also known as friendly fraud or first-party fraud, is when someone buys a product or service and then calls their credit card company to dispute the charge even though the purchase was real. The customer claims they never received the item, that it was unauthorized, or that there was some problem with the transaction. If the credit card company believes the customer and reverses the charge, it is called a chargeback.

In a chargeback fraud scheme, the customer gets to keep the product or service without paying for it. Meanwhile, the merchant loses both the merchandise and the money from the sale. The business may also get hit with a chargeback fee by the credit card company, which typically ranges from $20 to $100.

The difference between fraud and legitimate chargebacks is intent and truthfulness. If you genuinely did not receive your order or there was a real problem with your purchase, filing a chargeback dispute makes sense.

But if you received what you ordered and you lie to your credit card company to avoid paying, that crosses the line into fraud. Common fraud scenarios include:

• Claiming you never received an item you actually got

• Lying about product quality to get a refund while keeping it

• Claiming charges were unauthorized when you made them yourself

When Does Chargeback Fraud Become a Federal Crime?

Chargeback fraud or first-party fraud is not itself listed as a specific federal statute. However, depending on the circumstances of your case, prosecutors can charge chargeback fraud under several different federal criminal laws. The involvement of interstate commerce, financial institutions, and electronic communications means that many chargeback fraud cases fall under federal jurisdiction.

Mail Fraud Charges

If the product you ordered was received through the United States Postal Service or any other mail carrier, federal prosecutors may charge you with mail fraud under 18 U.S.C. Section 1341. Mail fraud is defined as using the mail system as part of a scheme to defraud someone else of money or property.

Mail fraud is a serious federal offense. If the fraud affects a financial institution, you could face up to 30 years in federal prison and a fine of up to $1,000,000. Even if no financial institution is involved, mail fraud still carries up to 20 years in prison and fines of up to $250,000.

Wire Fraud Charges

Wire fraud, codified at 18 U.S.C. Section 1343, is another common charge in chargeback fraud cases. Wire fraud occurs when someone intentionally defrauds another person or business using electronic communications that cross state lines. This includes the internet, phone calls, emails, and electronic payment processing systems.

Since nearly all e-commerce transactions involve electronic communications between multiple states, wire fraud charges are extremely common in chargeback fraud prosecutions. The crime of wire fraud carries a sentence of up to 20 years in federal prison and fines of up to $250,000. If the wire fraud affects a financial institution, the penalties increase to 30 years imprisonment and fines up to $1,000,000.

Bank Fraud Charges

Because chargeback fraud necessarily involves credit card companies, banks, and other financial institutions, federal prosecutors may charge defendants with bank fraud under 18 U.S.C. Section 1344. Bank fraud is defined as knowingly executing or attempting to execute a scheme to defraud a financial institution or to obtain money or property from a financial institution through false pretenses.

When you file a fraudulent chargeback, you are essentially lying to a bank or credit card issuer to obtain money or goods you are not entitled to receive. Conviction for bank fraud carries a maximum sentence of 30 years in federal prison and fines up to $1,000,000.

What Are the Defenses to Federal Chargeback Fraud Charges?

Lack of Intent

To convict you of any federal fraud offense, prosecutors must prove beyond a reasonable doubt that you had the specific intent to defraud someone. Intent is a critical element of every fraud crime. If your attorney can show that you lacked fraudulent intent, it can be a valid and powerful defense.

Merchant Error

Sometimes chargebacks result from legitimate mistakes by the merchant. The merchant may have charged your card twice by accident, shipped you the wrong item, or failed to process a return properly.

Identity Theft

If someone stole your identity and used your information to commit chargeback fraud, you are the victim, not the perpetrator. Your attorney can present evidence that your identity was stolen, such as police reports or credit monitoring alerts.

Insufficient Evidence

The government has the burden of proving every element of the crime beyond a reasonable doubt. If the evidence is weak or circumstantial, your attorney may be able to create reasonable doubt about your guilt.

Contact a Chicago, IL Chargeback Fraud Defense Attorney

Some people make the mistake of looking at chargeback fraud as a type of petty theft that may cost you a small fine if you are caught. However, chargeback fraud can be prosecuted as a serious federal felony with penalties including decades in prison and seven-figure fines.

If you have been accused of chargeback fraud or first-party fraud in 2026, reach out to the Law Offices of Hal M. Garfinkel LLC, Chicago Criminal Defense Attorney right away. We fight aggressively to get the best results for our clients and we are ready to start building your defense as soon as possible. Call 312-629-0669 to schedule a free consultation with our Chicago, IL federal criminal defense lawyer today.