Categories
Credit Card Processing Security

4 Tips on How to Avoid Friendly Credit Card Fraud

Let’s face it, fraud sucks.

Can we say that out loud?

Fraudsters everywhere are making money hand over fist scamming business owners just like you. It’s a game to them. It’s fun. To them, you’re just another faceless small business owner with a fat bank account that can afford it. They don’t care or know if that’s actually true and they don’t give a rat’s nether region either.

Fraud sucks and the worse kind of fraud is friendly fraud.

Friendly Fraud?

Yep. Friendly fraud.

I know the term includes two words you never thought you’d hear in the same sentence, but it’s real. Friendly fraud is when a customer makes a claim that on it’s face seems like a viable claim to the credit card company. And, since the perpetrator of the fraud is a customer of the credit card company, the credit card company does everything in their power to defend the customer.

What’s Friendly Credit Card Fraud?

The easiest way to explain it is to give you an example:

John wants a new G.I. Joe with the kung fu grip. He heads over to your online store where you sell vintage toys and buys one for $125.00. GREAT! You knew someone would want it and they did. It’s off your shelf and the 10 bucks you paid for it at the garage sale was well worth it.

Until it’s not.

You see John had a plan.

He was going to order the G.I. Joe with the kung fu grip and when he received it his plan was to call his credit card company and dispute the charge. You just happened to be the first person he found and now you’re left holding the bag. You see, the credit card company just took back the $125.00 directly from your bank account and charged you a $65 charge back fee that you couldn’t cover so the bank just charged another $29.00 insufficient fund fee.

Yay! Lucky you.

That’s friendly fraud.

Why is it Called Friendly Fraud?

It’s called friendly because any real and loyal customer may have a viable reason to get their money back. Maybe it’s a returned item. Maybe the item never made it. Maybe it was damaged. Maybe the order was canceled and not caught in time. There are any number of reasons.

The point being, it’s hard to determine what a real claim and a fraudulent claim is. After all, there are millions of transactions every year where something goes wrong, and the customer is entitled to a refund.

What Are Common Friendly Fraud Claims?

Some of the claims fraudsters may use when contacting their credit card company include the following:

  • The item wasn’t delivered
  • The item doesn’t match the online description
  • The item was returned but the refund was never processed
  • They canceled the order but the item was sent anyway
  • They don’t remember buying the item so the card must be compromised.

Great. Now that you know what some of the common fraudulent claims are, you probably want to know how to protect yourself. We’re getting to that, but I want to first reiterate that most of the times these claims are valid and that’s what makes this a very difficult type of fraud to combat especially for large merchants.

How Can I Help Prevent Friendly Credit Card Fraud?

Glad you asked!

Here are 4 tips you can use to avoid friendly fraud:

  • Require a signature upon delivery to verify the customer received the order. Having a paper trail that shows the product was ordered and delivered will help when working with the credit card company and hopefully give pause to the fraudsters.
  • Your refund policy should be clearly displayed on your website and be easily available to the customer. Make sure your refund policy states that a refund is issued when the item is returned and specify a period of time for return.
  • For returns, be sure to issue return labels with tracking information so there is a paper trail documenting the return. Providing a paper trail that confirms the customer did or did not return the item is important. You can also include an email and online account order history that clearly shows all transactions.
  • Collect as much customer information as you can. Having a customer database that includes order history, delivery dates, and call logs with your customer service representatives is a great way to deter fraudsters. If they know you’re being vigilant they will look elsewhere for a victim.

Yes. Friendly Credit Card Fraud is a thing and you can help prevent it from happening to you. Follow these simple steps and keep your house in order – fraudsters go after the easy targets.
Now please send me the link to the G.I. Joe with the kung fu grip because my husband is a 55 year old child and would love it.

Categories
Security

How Criminals Are Using Your Website To Verify Stolen Credit Cards

Over our twenty-year history of helping merchants with their payment processing and POS needs, we have found that criminals attempting to verify stolen credit cards has increased as the number of websites accepting credit cards has increased.  While this a serious matter we have found that it’s relatively simple to fix and prevent.

In recent years there were 28 million unauthorized transactions on credit, debit, and pre-paid cards totaling $4 billion in fraudulent charges. We all have a role in preventing this kind of fraud and the damages it inflicts on its victims.

Why criminals use your website to verify stolen cards

Criminals use poorly protected shopping carts on websites to test whether or not the stolen credit card numbers they purchased or are getting ready to sell are valid.
They do this using bots that can create thousands of transactions over several websites within minutes. They use small transactions generally less than $1.00 to avoid suspicion.

This generally happens to merchants because they’re not paying attention to their monthly statements and in an effort to lower as many barriers as possible for customers to easily purchase from them they are in turn decreasing the amount of security measures in place.

This is bad for you because even though it is a fraudulent charge it still counts as a transaction and you have to pay the fees. This may not seem like a big deal on a $1.00 charge but if you multiply that by eight, fifteen, or even 20,000 charges it becomes expensive.

This will cause your merchant account to be suspended and not allow any transactions at all on your website. You may not even know that this has happened for days or sometimes weeks. The loss of revenue could be catastrophic for a small business or an e-commerce store.

To avoid the problem there are some very simple things you can do.

  • Use human verification. This type of application is necessary to avoid bots from being able to make transactions on your shopping cart. You can go to Google reCAPTCHA to get a free human verification app. Be sure to have the human verification located at time of payment.
  • Enable Velocity Filters. With a Velocity Filter, you can prevent thieves from rapidly testing multiple credit card numbers against your business’s merchant account. This tool will reject transactions made based on specific filters you set. Some filter parameters are credit limit, sale amount or transaction count.

Preventing this kind of fraud on your website is not difficult. Simply make sure you’re checking your statements on a regular basis, limiting the number of transactions, and use human verification at checkout.

If you need some help or some free advice please feel free to give me a call at (540) 446-0826 or email me at [email protected]