First party Fraud

First-party fraud occurs when a legitimate customer (not an impersonator) abuses services e.g., lying on applications, friendly chargebacks, refund abuse, or intentional credit defaults. It blurs lines with credit risk because identity is real but intent is deceptive. Controls include application fraud scoring, income/asset verification, device/behavior analytics, and post- transaction dispute monitoring Dispute teams coordinate with fraud ops to classify cases accurately and avoid mislabeling genuine customer issues. Regulators expect fair treatment, explainability, and clear disclosures, especially for credit decisions. Programs balance friction and prevention with step-up checks on risky behaviors, and use segmentation to distinguish error, opportunism, and organized abuse. Accurate labeling improves model training and loss forecasting.