Fraudulent Transactions

With all of the systems put into affect in order to ensure consumer safety, the risk of the merchant's safety from the consumer has been neglected. Where is the protection of consumers defrauding merchants? The last person in line of protection when it comes to credit card fraud is the merchant. You must understand that the consumer is well protected when it comes to credit cards. Listed below are some tips you can use to make an attempt to prevent yourself from consumer fraud and chargebacks.

What Are Possible Signs of Fraudulent Transactions?

• Larger dollar amounts than normal orders.
• Orders with several quantities of the same item.
• Orders made up of big ticket items.
• Orders that have been placed on rush or overnight delivery.
• Orders using free email address providers like Hotmail, Yahoo, etc.
• Orders shipped to the same addressed but used multiple cards.
• Shipping international. AVS can not validate International addresses.
• Multiple purchases in a short time period.
• The ship to and billing addresses are different.

VISA and MasterCard

VISA and MasterCard implemented a security feature known as “CVV2” and “CVC2”. These are the three-digit numbers printed on the back side of the card (signature panel) to the far right. The three-digit code helps validate that the cardholder has the card in his/her possession, and the account is legitimate. You can include the code in your transaction and expect to receive a “match” or “no match” response. If you are using a shopping cart, make sure it is capable of collection these numbers. You are also not allowed to store these numbers.

American Express and Discover

American Express customers will locate a four-digit code on the right side of the front of the card. Discover Card customers are the same way as Visa & MC.

Use Address Verification Service (AVS)

on all transactions to verify the billing information provided in the order with what is on file with the issuing bank. At a bare minimum, the zip code should match before the transaction is approved. For future use during the chargeback process, it is best to retain the AVS response and a record of any follow up actions. The AVS messages are:

Y – Exact match on street address and 5 or 9 digit zip code.

A – Address matches, zip code does not

Z – zip code matches, address does not

N – No match.

U – Address information is unavailable or Issuer does not support AVS. These transactions are only applicable for Visa and the merchant isn't responsible for chargeback liability.

R – Issuer authorization system is unavailable, retry later

E – Error in address data – unable to complete check.

G – non-US Issuer not participating in AVS - Visa only. The error messages will vary from one provider to the next. Contact your provider for more information.

S – Address information is unavailable or Issuer does not support AVS - MasterCard only.

International orders

The most important warning sign for international orders is the country of origin. Be aware of cities or countries with high rates of fraudulent transactions.

Call the customer

One of the most effective ways to help eliminate fraud or chargebacks is to simply call the customer. A confirmation over the phone is most definitely advised for any large transactions. If you process a fraudulent transaction, not only do you lose the funds, but the product/service as well.

Do a reverse lookup

You can do a reverse lookup on any customer's phone number that is listed and it will allow you to verify the billing/shipping address information provided by the customer. Such web sites are www.anywho.com

What if I find a transaction to be suspicious?

Contact your authorization center and let them know you have concerns about the transaction. You can also call the customer to request additional information.

Preventing Chargeback Disputes

- Provide easy access to customer service phone numbers and contact information. Make it as easy as possible for a customer to contact you with any problems are concerns to discourage them from calling their card issuer to initiate a dispute.

- State your return and shipping policies on your website and in all correspondences with the customer such as invoices, etc.

- One of the main reasons consumers file disputes is they do not recognize the charge on their credit card statement. Your company name and phone number will be printed on their statement. It is best to have the company and web site name identical.

- Make it a policy to request the name of the card issuing bank for any purchase over a pre-determined sales amount. If the customer doesn't know it, then this is a red flag.

- When the billing and ship to addresses are not identical, then other precautions should be taken into consideration. Such actions could be to call the customer and verify the order.

- Send a confirmation email to the customer verifying their order.

- Consumers are starting to realize they can take advantage of merchants when the transactions are not in person by claiming they never received the product or service. To help fight your case on these disputes, it is advised to pay for the signature delivery service with any commercial mail carrier (FedEx, UPS, USPS, etc.). Not only will it help show the package was received by the customer, but it will also discourage consumers from taking advantage of merchants. Keep in mind that the signature service is not fool proof and doesn't satisfy all disputes of this nature.

- It may be a good policy to only accept orders with identical shipping and billing addresses.

- You may want to really scrutinize international orders as your protection against these consumers is very minimal and not accepting them could be a wise choice for your particular business.

- Placing fraudulent notices, buttons and images on your web site and order forms will help discourage any person trying to place a fraudulent order.