Cardholder Not Present

[John]

Just a warning to anyone who accepts credit card transactions by phone or mail.

It seems that when a transatcion is completed without either chip/pin or the customer's signature, the customer can deny the transaction.

This happened to us recently, and despite providing valid customer details Name, address, phone no., three digit security no, etc., and of couse having got card approval in the usual way at the time of the sale, the customer was able to deny that the transaction ever took place. Without his signature, obviously, it hadn't.

When I pointed out to the card company's representitive that this would give me, as a customer, a licence to purchase goods and services by phone, mail, or on the internet, then simply deny the charges when the credit card statement arrived, she had no answer!

The card companies probably have nothing to loose by treating small traders in this off-hand manner. Surely they could not pull a stunt like this with a big player, say Microsoft or Time Warner.

[realhotglass]

Sorry that happened to you John.
It would be a tough lesson; I hope others appreciate the heads up.

Your card company rep should have had some suggestions for you; I know I’ve spoken to card services here numerous times asking about the merchants rights in these cases . . . some of their advice is mentioned below.

Usually, if the merchant has taken a few initiatives, the bank will at least have some form of evidence from the merchant that the card holder was indeed involved, or at least the merchant will likely get some form of warning it is a fraudulent attempt to use the card by others before the sale.

We do a fair amount of trade with US clients, among other export destinations, and have heeded warnings from our bank about how best to take e-mail / fax / phone orders for cc payments.
We’ve then looked at the problem objectively, and devised some precautions.

I would like to share these, even though we've never had a cc chargeback to date. (Have been dreading it though, as I believe it is way too easy for consumers to defraud merchants.)
Perhaps these measures have helped with that so far.

Indeed, the cardholder can do a number of things to reverse a charge on their credit card account.
They can; deny any knowledge of the transaction; deny they ordered the goods; or agree to ordering the goods but deny receiving the goods . . . and then make a request to the card issuer for a chargeback of the amount to the merchant, usually with a hefty fee added, payable to the bank (of course).

Further, they can advise the credit card issuer that; goods where not as described; that goods where defective or damaged; that goods where not fit for their proposed purpose or of sub-standard quality.
In these cases, they have to return the goods to the supplier, or the card issuing bank, before a chargeback is made.

This is getting quite well known worldwide, but in particular the US consumer is VERY aware of this, and I suspect that the US has a much bigger problem with fraudulent consumer activity than the UK or Australia.

(Probably not as bad as Nigeria though, from the amount of urgent e-mails I get for ‘How can I order large quantities of your goods, to be paid by cc’ : / I believe these also come from South Africa and Russia a bit now too.)

Anyway, you can do a few things to protect yourself, and the legal card holder for that matter, from cc fraud.

Be suspicious of anyone that can't come into the shop, they ask can they order over the phone etc, for whatever reason.

Ensure goods are delivered to a physical street address, not c/- Post Office or PO Boxes etc.
Ensure whoever you ship with gets a signature on delivery. (Registered Post, courier service, etc.)
Phone the purchaser at least once to check phone correctly given. (Confirm some little detail with them etc.)
Use caller id if available to record incoming call number, ensure it matches number(s) given, if not ask what number they've called you from (work ?).
Check name with online phone directories (generally available worldwide) and check addresses and phones given by client.
(Sometimes silent numbers, unlisted numbers etc are a problem, but it's worth trying.)

Have a 'standard' credit card Payment form you can fax or e-mail to a client, for them to fill in and fax back (note, fax back only, as e-mail is not secure).
On this form, get all details possible; Name, address, phone, fax, e-mail, card type, number, expiry date, name on card, a section saying please charge X to my credit card for goods as per confirmation e-mail or fax, and a section they sign.
Send an Order confirmation e-mail or fax to the client, outlining exactly what they're getting, for what price, and other relative terms (lead times etc). (You can have a place on the Payment form amentioned above, but I like to send the last e-mail, where they agree to purchase and details of the goods etc shown.)
Ask them to print this, and have a section they sign on this order confirmation too.
Ask the customer for a photocopy or scan of their credit card (front and back).
Get them to fax the Payment form, Order confirmation, and credit card copy.

Now you have 3 copies of paper with their sig, copy of credit card, and all contact details. Compare sigs etc as you usually would.

There are other reasons to go through this process.
1. You get to check if phone, fax, e-mail details are correct.
2. There is a rapport with the client, rather than just a phone call they make to you.
3. The order confirmation is clear on what the deal is, so client can't say the goods where incorrect, or at least it's harder to justify that claim.
4. Everyone is clear on what is being charged, and terms associated with sale.
5. The copy of credit card is obviously a good thing to have, and should be of great persuasion to the bank in case of client denial. If you get authorisation ok, you should be covered. But remember, authorisation only tells you the card isn’t listed as stolen (at that time), and that there are enough funds available and locked away for your sale once approved.

If you are in a business with a bit of lead time (my kiln work, framing, etc is good for this), advise cc is charged before work commences, and this gives you maybe 2 or 3 weeks to get charge in the system, and if client gets their statement in that time, they would be expected to normally phone any anomalies to the bank immediately. Sort of covers you a bit that way.

Have a limit for cc transactions, and anything over that amount is to be transferred either by SWIFT or internet transfer direct to your bank account. They can’t get a chargeback on that !

I know all the forms and copying etc might be seen by the merchant as a possible put off to (new) clients, but you can advise that it's a once of thing, and it is there to protect the client from fraud too.
This usually keeps them on side, they seem to understand this.

I don’t do all these things in Australia for more local transactions, certainly not for trade sales to framers etc, but would do so if I felt the transaction was riskier than normal (retail, one or two a year, or anything that smelled a bit fishy). Mostly I’m looking to cover myself with o/s sales.

I think that about covers it, if I think of any other tips, I'll let you know.

I also have my standard order form, if you want to take a look and develop your own.
E-mail me and I'll reply back with pdf attachment to anyone interested.

Sorry for the big post, but this really is a pet peeve of mine with merchant providers . . . I really feel they leave merchants out on a limb too readily with cc sales.

[John]

Many thanks Les for your comprehensive reply. Welcome to the forum.

You have certainly given me a few ideas which will help me to prevent this from happening in the future.

It seems to me that the card company is over-eager to dismiss the vendor's claims when dealing with a chargeback. For example they dismissed my claim out of hand yet, considering the level of card fraud, they have shown absolutely no interest in finding out how I happen to be in posession of the cardholder's name, address, telephone number, start date, expiry date, card number, three digit security number, etc.

My argument is that either this transaction took place, or else I have attempted to defraud their cardholder, yet they appear to be disinterested in my 'criminal' activity.

[realhotglass]

Thanks for the welcome, John.

You know, you're absolutely right there, about the head in the sand attitude of bank merchant services.

Look, if the client hasn't lost his card, or had it skimmed somewhere and you'd normally see other (usually very high value) card fraud happen at the same time, and you happen to have all the correct details (especially expiry and css), then surely you can be assummed to have received the information either from the card holder, or from an illegal source (some sort of list of stolen cards etc).

You'd think the bank and authorities would want to investigate a bit deeper for sure !

Who says you can't have your cake and eat it too ? The bank seems to be able to.

If you want a copy of that form I use, e-mail me.