Have you ever questioned: "What are the latest credit card scams?"
Here are some protection priorities for merchants that are face- to-face with their customers to completely protect themselves from FRAUD and charge backs.
1. The CARD needs to be present during each transaction.
2. An imprint of the card needs to be obtained. Most all imprints today are electronic (swiped through a card reader). If this is not an option, then the old fashion “Knuckle Buster” manual imprinter is needed to physically get an imprint of that card.
3. You need to get the correct signature that is on that particular card.
4. Goods and Services need to be exchanged as promised. An example would be taking a broken down vehicle to a mechanic shop. The shop telling the customer it should take no more than 1 or 2 days and should cost around $600 for the repairs. If the mechanic shop takes a week without notification or the charge for repairs grows to $1,500 for the job without consent from the customer, the probability of the customer getting their funds returned to them by way of disputing the charge is very great.
For the protection of our merchants, we felt it necessary to keep you up to date on some of the latest scams. We have listed below several scams we have seen in hopes of protecting our valued merchants.
A mechanic shop opened for only 3 months has a young man in his late teens that brings his car in that needs a complete engine overhaul. He is told the job will run about $2,500 and will take about 3 days to complete. The young man asks the owner if has accepts credit cards. “Yes”, the owner says glad to get the big job that just might keep his new business afloat. 4 days later the young man comes to pick up the car. He tells the owner that he is going to pay with his grandmother’s credit card and has the card # and expiration date written down on a piece of paper. The skeptical owner says “I am going to need to speak with your grandmother”. The young customer says “Sure, this is her phone number she figured you would want to speak with her, she is home now, please call her.” The owner calls and confirms with the old lady that this young man is in fact her grandson and she has given him permission to pay for the repairs. The owner “KEYES IN” the transaction and sure enough, it is approved. The owner is really happy because he is out of pocket over $1,500 himself in parts and needs to pay his mechanic. The young man signs the receipt and drives off with his repaired car. It was less than a week later the owner of the mechanic shop gets a charge back letter from his credit card company, the old lady is disputing the transaction. She says she never was there and didn’ t authorize any transaction at that business. The owner was told by HIS credit card processor that “Nobody told me I couldn’t key in a transaction!” The processing company had already pulled the $2,500 back out of his account along with a $25 charge back fee. Unfortunately, this put this man out of business.
A merchant that owns a chain of cell phone accessory stores across central Texas with about 30 locations, mostly in malls and are kiosks, notices that one location had $4,500 from her credit card processing company. She called her rep and together with the risk department put the pieces together of an elaborate scheme. It seems one of her employees purchased a “PRE PAID” visa debit card. The employee made a purchase of $1.47 the previous month. Then this employee at the end of his shift , with no supervisor, did a refund of $1,500 on that same prepaid debit card, then did another $1,500 refund 2 minutes later. About 3 minutes later, the employee did ANOTHER refund of $1,500 totaling $ 4,500. The funds were credited to that prepaid debit card in approximately 2 business days. The employee then was able to go to an ATM and withdraw all the cash off that card. Ultimately the owner was able to have that employee charged with theft. If there would have been multiple employees there with no camera or clerk # used for the refund, the merchant would have never known who committed this crime.
The following is a story taken directly from a merchant.
Some banks are changing the game for merchants who accept credit cards. With the economy in a slump many credit card processors are requiring merchants to keep funds in reserve to cover future processing fees or potential charge backs. We'd heard of this in the past but never really had an issue with it. Until Now! We recently had some fraud out of Canada to the tune of $4700 over a few months. Yea we were pissed, but it was a loss we could deal with. That is until we noticed just after Memorial Day that we realized we weren't getting our settlements, at first we thought .. OK it's just after a holiday so there's a delay, but after a week of no money- I mean NO money coming in we got very concerned and called Chase Paymentech to see what was going on. Of course we get transferred all over the place and no one gives us real answers and then are finally sent over to someone at a totally different company First Data. Huh? After about 10 phone calls later we finally get an answer as to what the heck is going on. Basically because of the fraud and that we actually give credits to customers that make returns, and because we were doing more business than last year they have decided to hold back over $15,000 for an undetermined period of months. WHAT?!?!? Apparently this is not so new news... First Data has apparently been doing a lot of this lately. FirstData is apparently the processor for Chase Paymentech. At any time, at the sole discretion of the bank, the bank has the right to place funds on hold in a non-interest barring reserve account. Reserve account is to protect the bank from future losses due to fines, charge backs, etc that may come through your merchant account. Hold time-frame will be determined by the bank and is usually for long enough time period to cover future customer charge backs.
Scam 4 – This is the most common scam we have run across.
The Importance of Knowing Your Credit Card Processor’s Name
April 6th, 2011
This post is about callers impersonating a merchant’s current credit card processor. The most popular scam using this technique has been around for a long time, but each year we still see some merchants fall for it. It works like this: Someone calls the merchant, pretending to be from the merchant’s credit card processor and asks if they need supplies for the credit card terminal. They target merchants that have a large number of transactions and hope that they will speak to someone who is not familiar with the real processor. If the merchant does need supplies, the impersonator asks for the type of terminal and the address of where they should send the supplies. Within a few days, the merchant receives the supplies, accompanied by an invoice for an inflated price, sometimes 10 times what the supplies are worth.
Another version of this scam is where someone calls pretending to be the merchant’s credit card processor and informs the merchant that they need to do an update to the terminal. What they are really doing is reprogramming the terminal and results in the merchant processing through a different credit processing company. The merchant does not see any difference in processing the daily credit cards but when they get their monthly statement, it is from a different processor with higher fees.
Both of these scams rely on the merchant not being familiar with the current processor and the terms of their agreement. These scams can easily be avoided with a few procedures in place. First, employees should be aware of the name of the current credit card processing company and the name of the representative. Next, only certain people should be authorized by the owner to order supplies or make any changes to the credit card system. The merchant should also be familiar with the terms of their current agreement. For example, our company does not charge for supplies and never randomly calls merchants asking about supplies so we tell our merchants to call us if they get any communications by phone, or mail regarding the credit card system.
The following is a common scam being seen by risk management. A "Customer" enters a business and makes a purchase using a credit card. The proprietor attempts to process the transaction, but every authorization attempt is declined. The card-holder tells the merchant he will contact the card-issuer, via cell phone. The individual allegedly makes the call into his bank, but in reality, dials the number of an accomplice. The card-holder hands the phone over to the merchant so the person on the other line can provide a false authorization number. The merchant then unknowingly forces the sale through the terminal. Using an illicit code, due to an invalid authorization being used, such a transaction will almost certainly be disputed, causing the merchant to take a total loss on the sale. In order to avoid being victimized in this manner, merchants should only input codes obtained directly from the voice authorization center.