What to do With Fraud
It’s a terrible thing to have happen. You’ve been alerted by your processor that you have a chargeback to fight. Sheesh. “At least”, you think, “I got all the receipts, signatures, etc. and should still get my money back.” And then you discover the cardholder reported their card stolen the day of the transaction. Or didn’t even have a card, although they were expecting one in the mail.
You’ve be defrauded. Not only have you been charged a chargeback fee, and are out the revenue from the sale, but you have no chance of recovering the value of the merchandise either.
Yup. Visa and MasterCard, although they charge all those interchange fees, supposedly to cover expenses which (more supposedly) include “risk” (*snicker*), do not reimburse merchants for the value of goods lost to fraud.
In fact, they usually won’t even mount their own investigations into fraud because, supposedly again, it costs them more to do so than to write off the loss. As they aren’t suffering any financial damages themselves as a result of the fraud, I guess it’s hard to argue that investigating costs more.
So, what can you do? I’ll discuss prevention in a moment, but I assume most of you have already taken at least a few precautions. What can be done once fraud has happened? Unfortunately, you probably won’t get your money and/or product back. However:
First, do call your acquiring bank (the bank your processor uses to give you your money, not your bank) or your processor, if they weren’t the ones who informed you of the fraud. You will want to get the cardholder’s bank’s phone number and inform them of the fraud. They can then inform the cardholder of a stolen card or ID theft, at least protecting the customer.
Secondly, contact law enforcement. However, they may only take a report. They will usually only investigate if there’s a large amount at stake or you’ve been repeatedly defrauded in a manner that indicates a formal operation. Call anyway.
If it appears that you are the repeat victim of a particular scam, a local law enforcement group may ask you to aid in catching the scammers. If this occurs, on behalf of the industry, please do it.
Fortunately, fraud is mostly avoidable. There are many tools to help prevent fraud. E-commerce accounts, for instance, may wish to not capture overseas transactions until they’ve verified the cardholder’s identity and intent to purchase. Many merchants claim they don’t want to bother customers, but a phone call or email stating, “Excuse me, but due to increased levels of fraud, we’d just like to verify your $20,000 purchase of #2 pencils,” will be completely understood by your customers.
If you are an online retailer, there are various extra little tools to help prevent fraud, but some are only worth the investment if you’re in a high-risk environment. Check with your processor to see what’s available.
Otherwise, rather than rehash information already abundant on the web, Visa does a fantastic job of giving basic fraud prevention tips:
Now, if you’re a brick-and-mortar retailer, and an employee believes a fraudulent transaction is going down right now, MasterCard does a great job of giving some tips here:
MC—in the middle of the transaction
The acquirer mentioned on this page can be found here.
If you have any additional suggestions to make, or stories to tell, you may wish to leave them in the comments or talkback for other merchants to benefit from. Thank you.
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