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Businesses The Almighty Buck

Popular LA Restaurant Closes After High-Tech 'Dine and Dash' Scheme (cbsnews.com) 195

quonset writes: "The Korean Fusion Cafe 'Spoon by H' had the ingredients to become an L.A. success story but is the epitome of a small business, with owner and chef Yoonjin Hwang working 15-hour days to run the restaurant with her mother and brother," reports CBS News. "'We have no staff. We have no cooks. I have to do everything by myself,' said Hwang. 'Like so many other small businesses we were hit hard by the pandemic. All we could do was just like take it day by day and do whatever we could to stay afloat.'" One day she received an order for $700. The person came in and picked up the order. A week later the same person disputed the charge. Hwang had to pay back the money, and this same situation kept occurring time and again. Hwang was the victim of "friendly fraud" or "chargebacks."

"In the scam, a customer orders food, often through a delivery service, then receives their meal, but disputes the charge with their credit card company to get a refund," reports CBS News. "According to the Los Angeles Times, a growing number of the city's restaurants have struggled as scammers take advantage of internet ordering to use fraudulent credit cards or request refunds, claiming they never received part or all of an order."
"I just felt so incredibly helpless and frustrated. We just couldn't keep running our business like this," Hwang said. As a result, she decided to close the restaurant for good.

Patrons helped raise more than $60,000 on a GoFundMe page, which Hwang plans to use to pay off her debt. She says she may consider opening a new business someday with the earnings, but she doesn't know when, or what type of business.
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Popular LA Restaurant Closes After High-Tech 'Dine and Dash' Scheme

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  • by saloomy ( 2817221 ) on Monday March 01, 2021 @07:51PM (#61113972)
    I get them occasionally for my business. I usually provide signature receipts, digital info (IP Addresses and account info) as well as documentation of delivery. Once there was a fraudulent credit card transaction, but we stuck it to the payment processor, as they authorized the charge. Had to fight that one. Not sure what this restaurant did, but it shouldnâ(TM)t be that hard to fight. Maybe they turned off address verification or donâ(TM)t take CVV codes.
    • by Moryath ( 553296 ) on Monday March 01, 2021 @08:05PM (#61114028)
      Multiple problems with suggesting this for a family restaurant.
      - It eats up a fucking TON of time, time that a small family restaurant may not have.
      - After a while, the credit card companies simply threaten to blacklist the restaurant.
      - Margins for restaurants are razor-thin as it is.
      You get them "occasionally", so I'm guessing your industry isn't food service?
    • I get them occasionally for my business. I usually provide signature receipts, digital info (IP Addresses and account info) as well as documentation of delivery. Once there was a fraudulent credit card transaction, but we stuck it to the payment processor, as they authorized the charge. Had to fight that one. Not sure what this restaurant did, but it shouldnâ(TM)t be that hard to fight. Maybe they turned off address verification or donâ(TM)t take CVV codes.

      You must have missed the part where the summary says the order was placed through a delivery service. Your business must not be a restaurant.

      • Honestly it doesnt matter if there is a delivery service in the middle or not.

        The restaurant will not be able to show any evidence at all that the products charged for were actually delivered.

        Thats the end of it.

        I, the customer, am saying I did not receive what I paid for, and therefore Mr Credit Card Company, your legal obligation at this moment is to remove the charge from my bill. Not joking about this being a legal obligation.

        Now, perhaps Mr Credit Card Company decided to eat the cost, for insta
        • Most delivery companies offer some proof of delivery; photos, signatures less often, GPS tracking. MOST interesting to me, the card holder disputed days later. For me, if I'm the card issuer, that delay speaks volumes. It's not non-delivery, no immediate complaint or re-order. If it's dissatisfaction, well, the long knives come out by everyone. Judgement call usually.

          But if I were opening a restaurant, I would look for a processor that has much experience in this, NEVER rely on the delivery 'partners', they

    • Time spent this way for a small business is _very_ expensive. It also makes it very difficult to cook the books, which is startlingly common place for small restaurants with loans and family income struggles.

      • by Cederic ( 9623 )

        Now then, behave. There is no need to be suggesting accounting fraud by the restauranteur.

    • by AmiMoJo ( 196126 )

      How would this help in the case of them saying that the order was incomplete? They probably can't prove that the Uber Eats delivery driver didn't swipe some for himself, or that they didn't forget to put mushrooms in the soup.

      It's a problem specific to online food delivery services, particularly where the delivery driver is not working for the restaurant.

    • The customer -> doordash -> restaurant The restaurant is getting paid by doordash, not the customer's cc. Therefore it would be up to doordash to dispute the CC charges.
    • by scamper_22 ( 1073470 ) on Tuesday March 02, 2021 @09:58AM (#61115806)

      Fraud is not a new thing, but a lot of platforms taking advantage of the internet need a lot of work to handle fraud.

      This is just anecdotally. I recently started doing online grocery pickup.
      - I select the items online
      - I pay online
      - I go to the store to pickup
      - There is no process in place. I literally just go to a special section. Open doors without any codes or anything and pickup my 10 bags of groceries.

      So far, there hasn't been a problem. Yet, if there is fraud or theft, I don't know what they'd do. I could take my groceries then come back for a second pickup and play stupid, and get another set of groceries for free. Or a thief could just grab items.

      Another thing just happened this weekend where I had to take my kid to get a haircut. We use Great Clips, and we tend to use online checkin and normally there's like a 30 minute wait or something. This time EVERY single local Great Clips had like a 2-3 hour wait. I thought maybe it's a pandemic haircut rush, but it still seemed weird.

      Anyways, went shopping and just decided to pop in to a Great Clips to see if we could sneak in walk-in. We got an appointment right away. Apparently most of the online checkin's weren't showing up for their appointments. To me, that suggests fraud, possibly by a competitor, fake checking in people cause you don't get that kind of mass appointment missing booking on mass.

      Things just aren't secured properly and yeah we can count on the big firms to just eat the fraud loss. But it's showing cracks especially when things are often so disjoint and anonymous.

      I'm not too familiar with ubereats backend, but if what I read here is true, it's kind of insane that they handle everything, but the restaurant is on the hook even though they have no insight. We're a pretty regulated society and the government might want to step in here. Once UberEats does the pickup, it should be off the restaurant's hands. Or mandate 2FA to reduce 'fraud'. I don't know.

      Don't get me wrong, the restaurant still has some responsibility. I've had to make one claim when my order was missing some items. They were super quick about the adjustment to my account.

  • by Fly Swatter ( 30498 ) on Monday March 01, 2021 @07:51PM (#61113974) Homepage
    Fool me once shame on you...

    -Cash is king.
    • I have $1000 here for you. Do you want me to fax it to you or email you a picture of it? And will either case help you any further?

  • by account_deleted ( 4530225 ) on Monday March 01, 2021 @07:52PM (#61113976)
    Comment removed based on user account deletion
    • If only there was a cash that was compatible with the online world. China has irreversible payments in yuan so I would think that Visa/MC could come up with a flavor or payment like that.
    • LOL you're implying that cash fraud isn't a thing? Sorry kiddo but the dishonesty wasn't invented with the credit card.

      There's nothing dishonest here for the vendor. If they can provide proof of purchase and pickup then their liability ends. The problem isn't cash vs digital, the problem is a fraudster exploiting a loophole of blame.

      Fix the loophole, and ban the fraudster.

      And on the flip side maybe Americans should stop fetishising the credit card and just use debit instead. In the past year I've probably u

      • by aitikin ( 909209 ) on Tuesday March 02, 2021 @09:52AM (#61115772)

        And on the flip side maybe Americans should stop fetishising the credit card and just use debit instead. In the past year I've probably used cash twice, and my credit card once.

        Why would I, as a consumer, use a debit card that's directly linked to my bank account? If I do that, then a fraudster can use as much money as is in said account, and then I have to wait for days or weeks even for that money to be put back, when with a credit card, when fraud is found, I'm not liable for paying for it period and can go back to using that card within a couple days max.

        I believe you're trying to say Americans need to live more within their means, in which case a credit card is not a bad thing at all, as long as you pay it off in full every month (like I've been doing for...15 years?). Additionally, I get rewards for using the credit card (depending on which card, cash back/credit on statement, miles for flying, etc) whereas a debit I get nothing.

  • by arosenfield ( 998621 ) on Monday March 01, 2021 @08:08PM (#61114040)

    It's fraud, plain and simple. I don't know where the name "friendly fraud" came from but there's nothing friendly about it. Unfortunately, there's probably nothing the restaurant will be able to do about it, as the police are not going to waste their time on this.

    • It's fraud, plain and simple. I don't know where the name "friendly fraud" came from but there's nothing friendly about it. Unfortunately, there's probably nothing the restaurant will be able to do about it, as the police are not going to waste their time on this.

      If I recall correctly, Los Angeles will not prosecute theft crimes of $500 or less. Theft of $950 or less is a misdemeanor thanks to Prop 47.

      I doubt the Police in L.A. have time for misdemeanors...

    • by MeNeXT ( 200840 )

      If you run a business read the contracts you sign. If you can't afford loosing the payment don't take the risk. Most CC contracts guarantee payment provided the card is swiped and the signature verified or a PIN is entered.

    • "Friendly Fraud" (Score:5, Insightful)

      by rsilvergun ( 571051 ) on Monday March 01, 2021 @10:19PM (#61114408)
      means somebody used the card who was authorized to use it but did so for an unauthorized purpose. e.g. your kid snuck your visa from your wallet.

      Something is ridiculously wrong here. Maybe their payment processor just threw them under the bus due to incompetence but restaurants don't normally get put out of business by chargebacks. For one thing you can't just keep filing chargebacks on your card. They cost your credit card company a lot of money to process and adjudicate. Do more than a few a month and unless you're Bill Gates they're canceling your card. Online fraud can be a problem if you ship goods, but there are ways around that too.

      I suspect there's more than is being let on here.
      • by AmiMoJo ( 196126 )

        A few a month? Seems like if you were doing that many you were extremely unlucky in your choice of vendors... Or scamming them.

        A few a month could easily be thousands of dollars of stuff over a year, all for free.

        • Wouldn't it actually be a ratio of chargeback value to total charges?

          If I'm running $20k a month through my credit card, how likely are they to gripe about chargebacks totaling $200 per month? That's only 1% of my total transaction volume.

          My guess is that if you stay at or below 1-3% of your transaction total in chargebacks they won't flinch, especially if your monthly transaction total is over $2k.

      • by eth1 ( 94901 )

        Something is ridiculously wrong here. Maybe their payment processor just threw them under the bus due to incompetence but restaurants don't normally get put out of business by chargebacks. For one thing you can't just keep filing chargebacks on your card. They cost your credit card company a lot of money to process and adjudicate. Do more than a few a month and unless you're Bill Gates they're canceling your card. Online fraud can be a problem if you ship goods, but there are ways around that too.

        I suspect there's more than is being let on here.

        Yeah, doesn't really add up... most of the time if you're perpetrating CC fraud, you want to come away with an item you can easily sell to actually get cash out of it. Ordering food makes no sense unless you're actually going to eat $700 worth of food in the next few days.

        The only thing I can think of is someone intentionally trying to drive them out of business.

    • "Friendly fraud" isn't supposed to diminish the damage of the fraud, it's supposed to indicate the type. See also "affinity fraud" or the many other subcategories.

  • Wouldn't door dash be the ones on the hook for the charge back? I've never used any of the food delivery services but don't you pay the service who then pays the restaurant?
    • Once upon a time DoorDash' TOS offloaded much of the risk to the restaurant. And there are websites dedicate to not paying Door Dash: https://donotpay.com/learn/doo... [donotpay.com]

      • by stikves ( 127823 )

        From the do not pay page:

        Things to Know About DoorDash Refund Exploit
        Reddit users have reported that every once in a while, they will be unsatisfied with their DoorDash food delivery. When they let the app know about that, they are usually able to get a quick refund, no questions asked. But what happens if a customer starts exploiting DoorDash’s goodwill in order to keep receiving free meals?

        There is no such thing as a free lunch, quite literally, at least not indefinitely. DoorDash will deactivate th

      • by MeNeXT ( 200840 )

        And that is why as a restaurant owner you don't accept door dash.

    • Ah, but that conflicts with Door Dash's business plan of "money in, no money out".

    • by Todd Knarr ( 15451 ) on Monday March 01, 2021 @09:28PM (#61114278) Homepage

      Nobody pays the restaurant. DoorDash and the like deliberately arrange it so the restaurant is responsible for any chargebacks, while the restaurant has no control over the delivery. The sensible thing for any restaurant to do would be to insist on contract terms making the delivery service responsible for any refunds after their driver picked up the order, but if you ask that of DoorDash or UberEats or GrubHub they'll laugh in your face.

      Just one of many reasons it's a bad idea to do business with a company whose business model is to be the middleman who collects the money but isn't responsible for the service.

      • by Actually, I do RTFA ( 1058596 ) on Tuesday March 02, 2021 @01:14AM (#61114750)

        GrubHub actively uses their SEO optimization to make their proxy numbers hit before the restaurants' in Google, and then charges a huge fee or they won't connect them through. I don't know how it is legal.

      • by eth1 ( 94901 )

        Actually, if this sort of behavior is putting local businesses out of business, the sensible thing to do might be to push for a city ordnance that forbids the door dash type of businesses from operating in the city limits unless they DO take on the liability if the restaurant has evidence the food was picked up. Seems like that would be a relatively easy thing to get through, since you have a big national company preying on the city's economy.

  • by khchung ( 462899 ) on Monday March 01, 2021 @08:34PM (#61114124) Journal

    Why didn't she file a report to the police? Since all transactions were credit card charge backs, it will be trivial to find out all the people who did this and put them in a file. If enough of them do this multiple times, it would be possible for the police to prosecute them for fraud.

    Small crimes like these create a low trust society. When people cannot trust each other when doing business, it increases the overhead of doing business and that hurts small businesses and poor people the most as they have the least ability to cover the overhead.

    • Re: (Score:2, Insightful)

      by JDAustin ( 468180 )

      You really think the uber-progressive LA DA is interested in helping a asian-american business?

      • by khchung ( 462899 ) on Tuesday March 02, 2021 @12:55AM (#61114712) Journal

        You really think the uber-progressive LA DA is interested in helping a asian-american business?

        Just pointing out the elephant in the room, i.e., the US is a low trust society, people had to waste resources to protect themselves from each other. While state power, funded by tax dollars, went to protect those who had the most resources and already most able to afford protection.

        In a more civilized country, the restaurant owner could have filed a report to the police, and the charge back would very likely be reversed after the police investigated, a few of these people might even be caught redhanded. Then the restaurant would still be in business, and good samaritans could use those $60k to help some other people.

        • There are probably 5000 chargebacks a day originating in the greater LA area alone.

          Here, you think a civilized society will have the resources to investigate them. Dare I suggest that any society with the spare police resources to investigate chargebacks, either has way too much police, or a itty bitty little economy pretending to be "civilized" but actually living off the scraps of others.
          • by khchung ( 462899 ) on Tuesday March 02, 2021 @04:37AM (#61115104) Journal

            There are probably 5000 chargebacks a day originating in the greater LA area alone.

            Here, you think a civilized society will have the resources to investigate them. Dare I suggest that any society with the spare police resources to investigate chargebacks, either has way too much police, or a itty bitty little economy pretending to be "civilized" but actually living off the scraps of others.

            So are you saying all 5000 of them were fraud of the "Dine and Dash" nature? If so, then yes, ALL of them should be investigated. If the police don't have the manpower to do so, then either hire more police, or simply stop allow credit card charge back.

            You are living in a broken windows neighborhood, where all windows were broken and you think that no society can afford to have all windows whole. When the fact is having broken windows unprosecuted is an invitation for more vandals to come to break even more windows. The situation became so bad because no one acted while the problem was small.

            In this case, the "Dine and dash"ers eventually caused the restaurant out of business because police won't go and investigate when the first few cases happened and put a stop to it.

            You may think the law of the jungle, where everyone have to fend for themselves, is universal. Fortunately, civilized countries do have police that actually investigate crimes and keep order in society. Too bad yours isn't one of those.

        • To clarify, US is not low trust in the normal sense in which that term is used. Asian countries are traditionally considered low trust and this is manifested by the slow deliberate pace in which contracts are established. The US is not the highest trust country but is otherwise considered high trust. No need to bash a country on the valence of trustworthiness since it has less to do with the likelihood of corruption (which is VERY low in the US compared to much of the world) and much more to do with how
        • Oh! Boy!! USA is a low trust society? Man, you have not stepped out USA.

          Compared to earlier times USA is becoming a lower trust society. Compared to 1980s, or 1960s ...

          But for real examples of low trust societies you need to step out and see rest of the world. I can only speak of first hand experience from India. But situation is similar in most other countries of that level of development and law enforcement.

          In India, "goods once sold can not be returned". No bank, or govt service is possible without

        • the US is a low trust society ...In a more civilized country, the restaurant owner could have filed a report to the police, and the charge back would very likely be reversed after the police investigated, a few of these people might even be caught redhanded.

          You consider that an example of a "high trust" society? In a high trust society you don't need police.

  • First off, this kind of shit is one of the reasons credit reporting agencies sprang into existence and continue to exist. They offer some tools to help people/businesses figure out whether they should offer goods or services to a potential buyer based on their past performance.

    As fucked up as all the credit reporting agencies are, ia credit rating is at least some metric. If some enterprising entity wanted to improve the rate of positive outcomes by providing tools to predict people's propensity for fra
    • by khchung ( 462899 )

      First off, this kind of shit is one of the reasons credit reporting agencies sprang into existence and continue to exist. They offer some tools to help people/businesses figure out whether they should offer goods or services to a potential buyer based on their past performance.

      So, are you suggesting that a family business should look up someone's credit history every time they receive a takeout order?

    • My guess is that the reality is that there are just so many "credit" transactions that even with credit scoring and other algorithms there's a huge grey area where it's difficult to evaluate any one single transaction as good or bad or even make much of a decision about a specific creditor unless they are *totally* good or *totally bad*.

      Commerce depends on the broad grey middle to conduct business and the signal to noise ratio makes it hard to understand who's cheating and who's not. In many ways the credi

    • Not sure how this works in the US, but in the UK, the credit card companies have it stacked against you (and this in a country with a lot more protections than the US).

      First up, you can't take credit card details yourself unless you're PCI/DSS or whatever, so that means you're using some sort of middleman. The middleman won't let you see any of the credit card details, or even the address used for payment details. All you get is the order, the delivery address and a "yes or no" from the middleman. If they s

  • by NynexNinja ( 379583 ) on Monday March 01, 2021 @10:48PM (#61114466)

    The issue here is that anyone can request and obtain a refund on Visa/Mastercard/Amex/Discover card networks for a full four months after placing their order, no questions asked. The merchant eats the stolen money, the $35 chargeback fee, and the merchant network fees. I run several businesses and we stopped accepting credit cards, and moved to 100% ACH for domestic US customers, and then we only accept credit cards for non-US customers. The huge difference with ACH is that most banks consider an ACH payment the same as writing a check, which has a three day window of cancellation. After that, there is no chargeback, generally. But in all situations, get as much data as you can from the customer -- signed order receipt, emailed confirmation, IP address, even picture of drivers license. Our chargeback rates have dropped about 10x less since we have implemented these changes, and no loss in revenue.

    • Reading about the US banking systems with checks and signatures makes me feel like I've stepped back into the dark ages.
      We've had digital transactions for years, no more cash, no signatures, no checks. 90% plus transactions are either a chip and pin card payment, or use your phone (GPay/Apple Pay etc).
    • by djinn6 ( 1868030 )

      But in all situations, get as much data as you can from the customer -- signed order receipt, emailed confirmation, IP address, even picture of drivers license.

      Unless you're a very reputable business, I will be giving you as little of my data as possible. Who's to say you won't open a couple of new credit lines under my name? And even if you were trustworthy, are 100% of your current and future employees trustworthy? I'm sure there are other places selling whatever it is you're selling that also takes credit cards or Paypal.

    • Not so much a credit card process but rather systematically the financial system in the USA is FUBAR. Fraudulent chargebacks don't happen very often in much of the rest of the world because there are actual negative consequences of doing them along with a burden of proof for doing a chargeback. Mind you the rest of the world also doesn't rely on credit cards where simple bank transfer works. Many people in Europe simply don't even have credit cards, and if they do, they find they aren't accepted anywhere.

      He

    • I don't want to initiate a wire transfer so I can have lunch.
  • Maybe crypto could have avoided this. Rather than using "money", Uber or whoever has you agree to purchase some intermediate token in their user agreement (ripple, doge whatever) and then sends that to the restaurants wallet. Feels more like a final sale and you can't exactly defraud the block chain as easily.
    • Crypto doesn’t add anything that existing payment systems don’t already have, in this case. Debit card payments can’t be reversed, at least over here they can’t; it’s as good as cash. When people here still used checks (30-40 years ago) they wouldn’t bounce either, at least to amounts of around $500 in today’s money the bank would guarantee checks, and they were as good as cash as well. Maybe what you need is better rules.
      • Here in Canada many debit cards now carry mastercard/debitcard logos, and with contactless payment, are also quite easy to dispute (which worked to my benefit when someone stole my wife's debit card and was tapping it all over the place for purchases under $100). That's why I think crypto or taking prepaid giftcards only might be better, since it would be up to uber eats or whoever to fight the payment processor instead of the restaurant
  • I've done the chargebacks a few times, but its always justified. I add as a standard note on all orders that if the order can't be fullfilled, either cancel it or contact me to confirm what the substitution is. But I still get vendors just straight up delivering the wrong items with a note saying something. like "We where out of coffee so heres a coke instead". Or worse not even sending the meal, but just the extras (ie no burger, but still the chips and drink). So I dispute the fee. If you cant deliver the

    • by gweihir ( 88907 )

      Well, everybody is a victim these days. It often it hard to sort out what really happened. If the situation you describe is what happened here, then the problem was on the side of the merchant. But it may not be and it may even be a mix of things.

    • I've done the chargebacks a few times, but its always justified. I add as a standard note on all orders that if the order can't be fullfilled, either cancel it or contact me to confirm what the substitution is. But I still get vendors just straight up delivering the wrong items with a note saying something. like "We where out of coffee so heres a coke instead". Or worse not even sending the meal, but just the extras (ie no burger, but still the chips and drink). So I dispute the fee. If you cant deliver the product dont accept the money.

      Thats not "scamming", thatss insisting on your consumers rights. If vendors find it hard to deal with it, then don't advertise a product you can't deliver.

      So if you do dispute the charge on the entire order, what do you do with it? Hint: If you eat it, you're scamming scum, too.

  • good thing credit card companies make it their business insert themselves into every transaction!
    • Due to legal agreements (that merchants must agree with or they can't accept cards) credit card transaction fees can not be a separate billing item on a receipt, so instead the cost is priced into everything. The result is even cash payers are funding the credit card companies (seems to me this should be illegal, but here we are).
      • by mad7777 ( 946676 )
        yep, I know about that practice. only once, in Belgium, I was offered a cash discount on a small 5 euro purchase, but, as you say, I think this is forbidden by the credit card companies in the US.
  • Ain't nothing "friendly" about that fraud.

  • I missed these nuggets:

    "One day she received an order for $700. The person came in and picked up the order."

    So it isn't non-delivery.

    "A week later the same person disputed the charge."

    A week later? Not obvious dissatisfaction, I think. I agree with TFA assessment, scam on the face of it, not knowing other details.

    Sad, the merchant deserved somewhat better.

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