As security technology transforms, so does a criminal’s strategy on how to make a dishonest buck. In addition to keeping your business safe by arming your equipment with the best software and security offerings, getting back to the basics can really save your bottom line. Learn to identify the red flags in a potential customer’s behavior and follow best practices to insure you don’t fall victim to the type of scam illustrated below.
A well-dressed patron walks into a jewelry store. The gentleman explains that he’s looking to purchase a pricey tennis bracelet for his wife as an anniversary gift. When the merchant attempts to run the man’s credit card, the transaction is declined. The jewelry store employee politely tells the man his card has been declined and asks if he has another form of payment. The customer gets irritated—makes a bit of a scene—and calls the “issuing bank” from his cell phone. Quickly, he makes contact with the bank’s customer service representative. He then hands the phone to the merchant who receives reassurance from the bank that the card is good and the transaction can be authorized offline.
What does this mean?
The merchant believes they are receiving a legitimate offline authorization and completes the sale. The cardholder then happily walks out of the store with the expensive piece of jewelry in tow. The merchant will only realize that they were defrauded when they receive their monthly statement indicating a Code 72 dispute (i.e., the issuing bank received a transaction that was not authorized). The jewelry store’s account is debited and a chargeback reversal is denied.
What just happened?
Actually, the cardholder probably never had the money in their account or credit line to begin with. Are you wondering about the call to the bank? That call was made to a co-conspirator, not the bank. The cardholder most likely called a friend who provided the merchant with a fake six-digit authorization code. As a result, the issuing bank has no valid record that the sale was authorized from the jewelry store. The merchant, therefore, is responsible for the fraudulent sale and will take the financial loss, not the bank.
What can I do to prevent this from happening?
This in-store scenario is just one of two ways this scam is executed. The cardholder may also request an offline transaction over the phone. Don’t fall for it—ask where the authorization code was obtained. The only valid way to acquire a voice authorization is to call the credit card company yourself, using the toll-free number located on the back of the card. Here are a few major credit card toll free numbers:
Visa/MasterCard: (800) 228-1122
American Express: (800) 528-2121
Discover: (800) 347-1111
If you’re looking for a card processing partner to guide you through these types of sticky situations, contact a Heartland representative today at 888.963.3600 or visit heartlandpaymentsystems.com.