First party misuse fraud occurs when:

• A. A merchant disputes a payment on behalf of a customer.
• B. The legitimate cardholder makes a payment and then disputes it at a later date.
• C. A card number is stolen and used for unauthorized purchases.
• D. A payment is refunded to a different method than the original.

Answer: (B)

First-party misuse fraud is when the person who owns the card initiates a chargeback after making a legitimate purchase, effectively abusing the dispute process to reverse a payment. The option describing a legitimate cardholder paying and then disputing later fits this pattern exactly, since the dispute comes from the cardholder who originally authorized the transaction. The other scenarios involve disputes or fraud not initiated by the cardholder who made the purchase (for example, a merchant disputing for a customer, a stolen-card scenario by someone else, or refunds issued to a different method), which do not illustrate first-party misuse.