If you accept credit cards and especially if you do business by mail order or Internet, I would advise you to adopt some merchant fraud fighting priorities to lessen your exposure losses.
The vast majority of US consumers have credit and debit cards. Plastic is an easy way for retailers to accept payment since cash transactions may not be possible. You also will usually not want to risk billing an unknown customer.
As online shopping has increased it has also become more appealing to criminals who steal credit and debit card accounts of legitimate consumers. Criminals can not only steal a credit card number, they can also take control of the account, change information in various way that makes it easy for them to steal valuable merchandise online.
It is reported that about 44% of fraudulent account takeovers include changing the card holders address. This makes it possible for the criminal to have the merchandise sent to what is seemingly a legitimate address and may not raise a red flag to the merchant when the card holder billing address and shipping address appear to match.
Checking for fraud transactions is not an easy task. Phone verification seldom works because so many people now use mobile cell phones.
Credit card thieves sometimes use scanners that can read the magnetic strips and decode a credit card number. This is only one way to steal a credit card. Frequently, many fraud credit account takeovers begin with the criminal stealing the cardholders credit card statement from their mailboxes. Once a criminal has a stolen credit card, they often will find a foreclosed house to have the merchandise delivered to. Sometimes they will break into the house but many times they just wait for the delivery, sign for the package and then take off with the goods.
Unfortunately, Merchant Service that retailers pay to process credit cards for them do not actually "Approve any transactions." It is up to the merchant to approve a transaction and take ALL the risk.
Credit card companies namely MasterCard & Visa bind the credit card gateway, the card processor and the retailer to their terms and conditions by contract. Credit card companies often advertise to cardholders that they are protected from any fraudulent transactions.
The way they are able to guarantee the cardholder is is by issuing what is known as a Charge-back to the retailer. The banks and credit card companies never pay a dime of their money to the cardholder.
The retailer in effect becomes the victim of the fraud. The cardholders money is credited by debiting the retailers Business ACH account for the Charge back. Penalties and additional fees may also be charged to the retailer depending the merchant services agreement the merchant services provider agreement with the actual processor.
Dealing with fraud is expensive. for every $100 in fraud, a retailer should expect to pay about $235 in recovery costs not including the merchandise that is almost never recovered.
Fraud and theft should be expected as part of the cost of doing business but can be minimized.
This is a busy time of the year for most retailers and even busier time for criminals. For gun shops fraud will seldom involve guns. It will be usually involve fraud purchases of firearm accessories.
Educate employees to spot unusual transactions. This should be done in a way the does not alarm or offend honest legitimate customers.
A few suggestions:
Good luck to all retail, e-retailer FFL dealers.
- Educate employees to spot unusual transactions. This should be done in a way the does not alarm or offend honest legitimate customers.
- Do not accept personal checks.
- Do not accept money orders these are easily counterfeited too. If you do accept money orders only accept USPS certified money orders.
- Do not accept phone in credit card orders. There is no paper trail with this type of transaction and criminals know this.
- Always require an address, 5digit zip code and 3 digit security code (CVV2) match from the back of the card for any non-swiped card transactions.
- Ask for a second form of valid Id for all swiped purchases over $50.00.
- Do not ship to an address other than the cardholders unless it can be verified. A company address can usually be verified by phone and the use of tools such as a white pages search and Google maps.
- Criminals will often target merchandise that is in high demand and easy to sell. These items include expensive rifle scopes, lasers, night vision equipment, some knives, uppers and parts for M4 and AK rifles, large quantiles of ammunition, etc. Anything that can be delivered directly to the customer is a potential thieft target.
- It is often difficult or next to impossible to contact the cardholders credit card company or issuing bank. If the item(s) amount is $500 or more, it is wise to try calling the customer to confirm. I also always send an email order confirmation with a read and acknowledge flag.
- Police are aware of fraud and identity theft but do not have the time or resources to investigate cases less than $5,000. While the FBI has an Internet fraud division, they will not act unless the crime involves seven figures or more, yes, I said $1,000,000 or more.
- Do file an incident report with your local police department if you become the victim of cardholder fraud. This report will be your receipt for loss (theft) that you may be able to write off on your taxes.
- Don't expect any common carrier to take responsibility even though your package should be insured. An adult signature is all that is required. Carriers are not required to obtain the card holders signature, only a signature. The purpose of the signature is for proof of delivery, nothing else.