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Holiday Season Reminders: Prevent Fraudulent Transactions and Chargebacks

With the holiday shopping season upon us, it’s a good time to review some good practices in helping prevent your business from incurring losses from fraudulent transactions and chargebacks.

Face-to-Face Transactions
If the card presented for payment is not a chip card, always swipe the card. In the event of a Chargeback, this provides proof the card was present at the time of the transaction.

• If presented with a chip card and you have an EMV terminal, have your customer insert the card into the terminal and leave it there until the transaction is complete.  (If you have not yet upgraded to an EMV Terminal, please contact your Relationship Manager at 800-704-7253.)

• Obtain an authorization number for the full amount of the transaction.

• If an authorization is declined, do not accept it, attempt to split it into smaller amounts, attempt to obtain authorization at a later time, or try to force it through. Any of these attempts may leave your business vulnerable to a chargeback loss. Instead, ask the customer for another payment method.

• Have your refund policy printed on the receipt directly above or below the cardholder signature line in letters ¼” high.

Internet or Phone Transactions (Card Not Present)

• Obtain an authorization number for the full amount of the transaction.

• If an authorization is declined, do not accept it, attempt to split it into smaller amounts, attempt to obtain authorization at a later time, or try to force it through. Any of these attempts may leave your business vulnerable to a chargeback loss. Instead, ask the customer for another payment method.

• Verify the cardholder’s address via Address Verification Service (AVS). The best AVS response is ”Y” for Yes or “Match”. This means the cardholder has given you the same address as the billing address for the card. If you are still uncertain about the transaction (e.g., large transaction, first time customer, splitting sale amount between cards, etc), you can call the issuing bank or the Voice Authorization Center.

• Ask the customer for the CVV/CVC Code on the back of their card (front for Amex). This is a 3 or 4-digit number that is now commonly used to help verify that the customer possesses the physical card. Most terminals prompt you for this information and will return a negative response if the number provided is not correct.

• Ship the merchandise to the AVS address and obtain signed proof of delivery or other method available from your shipper.

• Charge the cardholder’s account at the time the merchandise is shipped.

• Have your checkout page designed such that a customer must acknowledge your cancellation or refund policy. Be able to produce the acknowledgement in the event of a chargeback resulting from a refund dispute. Have a clear and concise refund policy.

NOTE: If a card is not present at the time of sale, a merchant cannot verify that the legitimate cardholder authorized the sale. The steps noted above may help minimize disputes and fraud, but they cannot guarantee avoidance of chargebacks. Card not present transactions are inherently more risky than those in which the card is present.

I hope this is a good reminder and something you might wish to review with your staff.  If we can help or you have a concern you can always call Client Care at 800-704-7253 or email us at info@WindRiverFinancial.com.  Here is my contact information as well.

Wishing you a very Happy Holiday season.

 

 

Do You Know Who’s On the Other End of That Line?

A certain type of scam has resurfaced recently – one that has been around for a long time in different iterations. We’ve blogged about this before, but perhaps it’s time for a reminder. What I refer to is a “fake authorization scam” and it works like this.

The fraud suspect is attempting to purchase a big ticket item or conduct a credit card cash advance in a financial institution. The card is declined and they have an excuse such as “it must be a transaction amount limit” or “a daily limit.”  They pretend to call the number on the back of their credit card or they have you call it. However, unbeknownst to you, the phone number has been changed on the back of this counterfeit card, and it rings to the cell phone of an accomplice of theirs.

Their accomplice is skilled at sounding like they work for the credit card issuer. They use common terms and professional sounding language. They indicate a reason that the transaction was declined, but that funds are available and they will walk you through a manual authorization.

They have you press certain keys on your credit card terminal and, unbeknownst to you once again, they have taken your terminal offline or into training mode. In this mode, any number entered as an approval code will appear as an approval even though the terminal is not communicating with the card issuer to obtain authorization.

The happy “customer” then goes on their way never to be heard from again. Then you receive a chargeback from the credit card issuer for “no valid authorization.” You call your credit card processor and insist that you spoke with the card issuer and they gave you an authorization code that approved on your terminal. Your credit card processor can only see that the card issuer has reported that the authorization code was not valid. Unless a valid code is provided, you’re going to lose the chargeback as the real cardholder wants their money back from this fraudulent transaction on their account.

You thought you were going to have a big sale and instead you’re sitting with a loss. The chargeback process does not seem fair. You did your best to “do it right” and you still got scammed. There are many frustrating things about this type of scam.

There are a few things you can do to help protect your business from this. First, never (and I mean NEVER), accept a customer’s cell phone if they say they’ve contacted their card issuer. Joint with this, do not call the number on the back of their card since it may have been modified. The phone number on the back of a card is for the cardholder only.

In the very rare event that a cardholder needs to contact their card issuer to get special permission to run a larger transaction, they can do so on their own while you, as the merchant, run the transaction the way it was intended. That is to insert (if it’s a chip card) or swipe the magnetic strip and get an approval.

If the card declines, it’s a sign that something is wrong. Are there other signs present that this customer may not be who they pertain to be? Was the sale too easy? Are they “buying” rather than “shopping?” Is the merchandise something they can easily resell on ebay?

We recommend asking for another form of payment at this point. If, at your discretion, you choose to attempt to run the card again, you’re increasing the chances of not getting paid for the transaction. We do not want this to happen which is why we recommend stopping at a first decline and asking for that second form of payment.

Better safe than sorry…