Recognizing Fraudulent Behavior when Conducting Business Face to Face with Your Customer
Certain customer behavior could point to bankcard fraud, but remember, it does not necessarily indicate criminal activity. In particular, watch for customers who:
- Purchase several of the same items or purchase very expensive items and do not ask any questions about the items.
- Purchase a lot of merchandise without regard to size, color or price.
- Try to distract or rush you during the sale.
- Make purchase, leave the store and return to make additional purchases.
- Make purchases right at opening or at the last minute when the store is closing.
Recognizing Fraudulent Behavior when Conducting Business via Phone Orders, Mail Orders or Over the Internet
All mail, phone and e-Commerce transactions are high risk because the credit card and cardholder are not present and you, the merchant, often take the loss from a bad transaction. There are people that intend to obtain products and services by deceptive practices. By using lost or stolen cards, or card numbers generated by fraud schemes, they order goods and have them shipped to an address to be picked up by themselves or someone they call a "runner". When the charge appears on the true cardholder's statement, they will request a copy of the draft or it will be charged back right away. If this is an order made over the telelphone, through the mail or via the Internet, these chargebacks are very hard to fight because there is no imprint or signature.
There are characteristics that may indicate that the transaction may not be legitimate. Individually, these characteristics are seldom cause for alarm; rather, it is when several of these factors characterize a transaction that there may be a problem. In particular, watch for customers who:
- Place orders that are larger than normal when you are not familiar with the customer.
- Purchase several of the same item or very expensive items.
- Want orders shipped "rush" or "overnight."
- Have orders shipped to an international address, as they cannot be verified by an Address Verification Service.
- Have orders shipped to the same address that were purchased on different cards.
- Place orders from Internet addresses using free email services.
- Charge transactions to account numbers that are sequential.
- Provide multiple card numbers from a single Internet address.
- Charge multiple transactions to one card over a very short period of time.
Avoiding Chargebacks and Dealing with Retrieval Requests
A chargeback is the reversal of a sales transacton previously processed by your business. Your customer or your customer's bank can initiate a chargeback and the amount of the transaction is deducted from your account. Whether it is for tax purposes, fraud or any variety of reasons, if you receive a "retrieval request" from a cardholder or the cardholder's bank requesting a copy of a sales draft or mail order form, DO NOT ignore these requests. Failure to comply promptly could result in a non-recourse chargeback.
There are some basic steps you can take to prevent some of the most common errors that may result in unnecessary chargebacks:
Receipts and Documentation
- Check readibility of all sales drafts daily.
- Always provide documentation in original-size format. Reduced images result in illegible/blurred documents.
- Handle thermal paper carefully, as excessive heat or any pressure during the handling/storage process causes black bloches, making copies illegible.
- Change printer paper when colored streak indicates the end of the roll. The streak diminishes the legibility of transaction information.
- Return policies must be disclosed on the sales draft in close proximity to the customer signature.
- Save all sales drafts for 18 months and store the sales draft in a secure place by transaction date, not by cardholder name. We are not able to give you the customer's name, because cardholder names are not provided to us.
What You Can Do to Prevent Fraud and Chargebacks when Conducting Business Face-to-Face
The following tips are intended to keep you from being the victim of fraud and will help you avoid chargebacks when conducting in-store transactions.
- Never accept an expired credit card.
- Always inspect the card. Keep the card throughout the transaction. Never accept a card that has been altered.
- Whenever possible, obtain a swipe of the card through the terminal and verify that the card number on the terminal matches the card number on the card.
- When the card will not swipe and you must manually key in the card number to your terminal, you MUST also get an imprint of the card using an imprinter with your merchant plate and have the customer sign the imprinted sales draft.
- In addition, if you are handwriting a sales draft, you need to fill out the draft completely with the transaction date and items purchased.
- Compare the name printed on the electronic sales receipt to the name embossed on the card.
- The embossing on the card should be clear and straight and the hologram should be smooth with the card and three-dimensional.
- Make sure the signature panel has not been tampered with.
- Compare the signature on the sales draft and the back of the card. The card must be signed. If the card is not signed, have the customer sign the card in front of you, and then check the signature on a picture ID. If the signature on the back of the card does not match the signature on the sales draft, do not continue with the sale.
- Use account number-verifying terminals or visually compare the last four digits of the embossed account number to the four digits printed on the sales receipt to determine they are the same numbers in the same sequence.
- Also compare the four digits printed on the card with the first four numbers embossed on the card. The first four numbers should always match. If they do not, do not complete the transaction and notify the authorization center.
- Obtain an authorization for the full amount of the sale (hotels may authorize within 15% of the total).
- If you receive a "call center" or "pick up card" message through your terminal, call the authorization center and follow their instructions.
- If you receive a "do not honor" or "decline" message through your terminal, do not proceed with the transaction. DO NOT try again for an authorization; there is no protection for a transaction after you have received a "decline" or "do not honor" message, even if you receive an approval code on a second attempt.
If you are suspicious of a sale, as for a Code 10 Authorization. A separate phone call to your authorization center asking for a Code 10 Authorization lets the center know you have concerns about a transaction. A Code 10 is a universal code that provides merchants with a way to alert the authorization center that a suspicious transaction is occuring. The Code 10 operator asks a series of questions that can be answered with yes or no responses; just follow the operator's instructions; and NEVER put your life in danger.
REMINDER: Although an authorization code is required on all transactions, it does not guarantee that it is a valid sale made by the legitimate cardholder! An authorization code means that the account is open and has the available credit at that time, but it is not a guarantee of payment.
What You Can Do to Prevent Fraud and Chargebacks when Conducting Business via Phone Orders and Mail Orders
The following tips are intended to keep you from being the victim of fraud and will help you avoid chargebacks when conducting Card-Not-Present business. However, Merchant Services is not always able to prevent chargebacks affiliated with doing business in mail, phone or e-Commerce environments.
- Use an Address Verification Service (AVS) during authorization to verify the cardholder's billing address. Address Verification compares the billing address with their issuing bank. If the addresses do not match, do not ship the merchandise. You are putting yourself at risk of taking a loss.
- To verify the card's authenticity, ask for the CVV 2 code on the back of the card if it is a Visa, the CVC 2 code if it is a MasterCard, or the CID code if it is a Discover Network card. This information is frequently missing on fraudulent payment cards, and it would be unavailable in the case of compromised card numbers or generated account number schemes. This three-digit number is found on the back of the card on the signature panel after the card number. While this code does not provide protection against fraud, it does allow the merchant an additional level of security in processing the transaction.
- Ask the customer for addtional information. For example, ask for a day and evening phone number, and call the number back later.
- Ask for the bank name on the front of the card, and the bank's customer service number from the back of the card.
- Separately confirm the order with the customer. If you do not use an AVS, send a note via the billing address, rather than the "ship to" address, before shipping the order.
- When you ship the merchandise, ship only to the cardholder's billing address; NEVER ship to any other address that the customer may request.
- You may want a certified signature as proof that the merchandise was delivered.
- Merchants who ship merchandise outside the United States have a greater risk of credit card fraud because the AVS service will only verify addresses within the United States.
- Ask Merchant Services to include your customer service telephone number in the billing name that appears on your customer's credit card statement. This allows your customers the ability to contact you directly if they have questions regarding the sale.
- Provide cardholder name and merchant contact details in the sales transaction data.
- Clearly link credits and refunds you have issued with the original sale information. Include invoice number and settlement information.
- If you have a VERY unusual mail, phone or Internet transaction to be shipped, and are uneasy about the transaction, you can call Merchant Services Support. We will try to assist you in verifying the transaction with the issuing bank BEFORE you ship the merchandise.
Now that you've read these helpful tips, we recommend reading them again and having any company employees who will be handling bankcard transactions study them carefully as well. Following these precautions can help to greatly reduce chargebacks and lower your risk of fraudulent charges. If you have questions regarding this information, please contact us.