Preventing Chargebacks
The following 15 items will provide helpful insight into
preventing chargebacks and fraud. 1. Top Factors Contributing to Fraud
» Top four by Percent
- 24.7% Stolen Cards
- 23.1% Counterfeit Cards (Skimming, Stolen Identity)
- 20.8% MOTO
and Internet Fraud
- 14.9% Lost Cards
2. Store cardholder data securely Cardholder Information Security
Program (CISP) Requirements:
- Install and maintain a working firewall to protect data
- Keep security patches up-to-date
- Protect stored data
- Encrypt data sent across public networks
- Use and regularly update anti-virus software
- Restrict access by "need to know"
- Assign unique ID to each person with computer access
- Don't use vendor-supplied defaults for passwords and security parameters
- Track all access to data by unique ID
- Regularly test security systems
and processes
- Implement and maintain an information security policy
- Restrict physical access to data
3. Factoring
» What Is Credit Card Factoring?
Credit card factoring, sometimes referred to as laundering, works
like this: A company that does not have a credit card merchant
account with
a bank or credit card company recruits another company to process
its credit card transactions through its own merchant account.
When the
processing merchant receives payment for the credit card charges,
it turns the money over to the company without an account, but
it keeps
a previously agreed to percentage or other fee. This seemingly simple procedure for earning extra cash usually does
not work so well for the credit card processing merchant. The "guaranteed" easy
income frequently turns into losses far beyond any commissions. » Financial Risks Of Laundering
When you agree to process other merchants' credit card charges, you
take on the responsibility of paying for any chargebacks, which very
likely will exceed any commissions you might earn. When the banks
charge you for these chargebacks (and they will, since you submitted
the charges through your account), you will not be able to pass the
charge backs on to the business that enlisted you to process the
charges. When these companies close or move and become inaccessible
to their customers, they are inaccessible to you, the processing
merchants, as well. 4. MOTO/Internet Transaction
» Fraud - no cardholder authorization Helpful Hints:
- Block future purchases by establishing a negative database of
specific credit card numbers you have had a problem with as well
as set customer
access by limiting the number of transaction per hour / day.
- Use
AVS (address verification service) and CVV2 for added protection.
With AVS you key in the street number and zip code on "card not
present" and "card present" non-swiped transactions. Always ship
merchandise to
the credit card billing address for maximum protection. International
credit cards do not support AVS and offer no protection.
- Include
your merchant phone number on customer billing statements so they
can call you prior to initiating a dispute.
- Know more about your
customers, perhaps only giving repeat customers the privilege of
purchasing by credit card.
Credit card fraud on the Internet is serious and largely an unacknowledged
problem. Although consumer security has grabbed headlines, US consumers
face little risk because federal law caps liability for unauthorized
charges at $50. The real risk belongs to merchants. Merchants carry
full responsibility for fraudulent credit card transactions. While
all online merchants are at risk, small and mid-sized merchants are
most vulnerable. The rules are the same for Internet transactions as for MOTO (mail
order / telephone order) but the Internet makes it easier for criminals
to put merchants at risk. Two of the most prevalent forms of fraud
occur from 1) identity theft where fraudsters get personal data and
apply
for
cards under assumed names and 2) where criminals pose as legitimate
online merchants gather data for unsuspecting consumers. Internet fraud
orders fall into two categories: 1) items that are easily exchanged
for cash and 2) transactions that do not require physical shipment
of goods. 5. Get An Imprint
» No imprint obtained
» No cardholder authorization Helpful Hints:
- There are two ways to prove a card is present at the point of
sale. One is to get a full read on the mag-stripe by swiping it through
a certified credit card terminal. If the card will not swipe,
then
you are required to obtain an imprint of the embossed information
on the card (a photocopy is not a substitute).
- Fill out the manual
sales imprint draft with the date of the sale, purchase amount,
authorization code to tie this imprint directly
to the sales draft that prints from your terminal. Attach both
drafts together for storage.
6. Respond Promptly to Retrieval Request
» Non-receipt of request
for copy or response not in time
» Requested copy illegible Helpful Hints:
- Both customers and issuing banks may request copies of sales
and credit drafts. Once a request is initiated a 30-day clock begins.
Responding quickly to get your copy of the draft back is very
important.
- Keep all sales drafts readily available for 180 days then
store for long term in a safe and secure place.
- Legible
drafts, store thermal receipts in a cool, dry place and make sure
information is legible before completing the sale.
Replace
ribbons often to prevent illegible copies.
- Will your customer
remember the transaction? Always be sure signage matches billing
statements and when possible help customers
remember
by sending confirmation directly to cardholder's address.
7. Credit / Refunds
» Credit not processed Helpful Hints:
- Always put return policy near the signature line of the sale
receipt (signage at the point of sale is not enough to meet the rules
and
regulations of the card association).
- Never give credits
in cash or check.
- Never give credits on items if you are unsure the
sales are made from your merchant account or that have been paid
to you. Customers
presenting
their credit card statements or print outs from their bank
are not sufficient evidence and in these cases, you should instruct
your customer
to contact their card issuer with a dispute.
8. Account Numbers Don't Match
» Non matching account numbers. Helpful Hints:
- The number on the face of the card should match the number read
from the mag-stripe. This terminal security feature is available
on most terminal systems.
- On phone orders, read
back the card number.
- Pay close attention when keying any offline
transactions and credit transactions since these items do not require
a terminal
authorization
check.
9. Duplicate Transactions
» Duplicate Transaction Chargeback Helpful Hints:
- Always run reports and balance your batch prior to settling your
terminal system. Look for duplicate sales on the same card number
for the same amount.
- Be sure to call terminal help desk to respond
to any error message when transmitting your batch to ensure it
is submitted only once.
10. Merchandise Not Received / Service Not
Rendered
» Non receipt chargeback Helpful Hints:
- Do not process cards prior to delivery.
- Obtain a cardholder's signed
proof of delivery.
- Installment transactions cannot include finance
charges.
- Notify customer of any currency conversion fluctuations.
- Put terms
in writing including shipping and handling charges.
- Note the
receipt staes"deposit" or "balance".
- Prepayment
may be processed on custom-orders if noted on receipt.
- On items
out of stock and where delivery will be delayed, you should immediately
advise the customer in writing and offer them
options to
purchase similar item or cancel the sale.
11. Recurring Transactions
» Cancelled transaction Helpful Hints:
- Stop processing immediately for cancelled orders
12. Decline Authorization Means Decline
» Non receipt chargeback Helpful Hints:
- Do not reduce amount or split sale in an attempt to get a declined
card through the system.
- Do not call for a voice authorization
on a decline message (only call when instructed).
13. Merchandise / Service Dispute
» Not as described
» Defective merchandise Helpful Hints:
- Make customers aware of return policies and procedures.
- If a customer
disputes transaction this way, they must first attempt to resolve
with you. Always keep full detail and accurate records.
- Ensure
package delivery for breakage.
14. Ownership Cash Advance
» The owners, principals, and
officers of the merchant business may not swipe their own credit cards
through
the terminal, regardless of
the intent. Because they have control of the business checking account
funds, this is considered an illegal form of a cash advance and is
strictly monitored by fraud control. 15. Employee Training
» Focus on card security Helpful Hints:
- Match embossed numbers to mag-stripe.
- Check for bankcard hologram.
- Look for V or MC next to expiration
date.
- Verify signature panel has not been altered.
- Compare signatures
on card with signed draft.
- Hold on to the card during approval
process so you can quickly check the cards basic elements and compare
signatures.
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