Accepting Credit Cards 5

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Reprinted with permission from Janet Attard* Copyright 2004. All rights reserved.
     
Are there any dangers in accepting credit cards?

The biggest danger is getting hit by crooks who are buying goods with stolen credit cards, stolen credit card numbers, or counterfeit credit cards. By law, the credit card holder is liable for only the first $50 in losses if their card is lost or stolen, or if someone gets their number and makes unauthorized purchases to their account. All purchases once the unauthorized use is discovered, get charged back to the mail order and Internet merchants, who have to cover the loss even though they shipped the merchandise.

How can that happen? If I ship the merchandise, and it hasn't been returned, why should I absorb the loss?

The merchant is always responsible for verifying that the person using a credit card is legally authorized to do so. You are supposed to compare the signature on the credit card to the signature on the sales slip at the time of purchase to verify the person using the card is the person to whom it belongs. You are also supposed to compare the number imprinted on the card to the number that shows up when a card is passed through an electronic verification terminal, since there are some counterfeit cards being used that have one number printed on the card and a different number encoded into the magnetic data strip on the back of the card.
If you are taking orders over the telephone, it is impossible to verify a signature or match numbers in this way. You have no way of knowing if the caller is the actual owner of the credit card and authorized to use it or if he or she is using a stolen card or has obtained the number fraudulently. Until the person to whom the card was issued discovers the loss or unauthorized use of the card and reports it, all charges are likely to go through up to the limit of the card. But once the cardholder discovers the unauthorized charges and challenges them, all the unauthorized purchases will be charged back to each merchant who accepted the card in payment for sales.

How much would I stand to lose?

The amounts can be substantial if you sell high-priced merchandise or if you sell the kind of products people order in quantity. California business owner John Ferguson, whose small company takes orders over the telephone and then ships merchandise to customers, had to borrow from friends and family to make good on $14,000 worth of fraudulent charges made on stolen cards. He implemented procedures to screen out possible fraudulent orders and during the following year refused to ship $25,000 in orders that seemed suspicious. Says Ferguson, "I don't believe I have refused any legitimate sales. If I had, the customer would have called to complain that they never received their order and not one has."

Is there any way to tell if an order placed over the phone is legitimate or not?

Based on his experiences, Ferguson says people ordering goods on stolen credit cards often share some of these characteristics:         

• They will usually be placing large orders.
  
• They might request/insist their order be shipped by overnight delivery. This is so they know exactly when the package arrives so they can be waiting to pick it up.
  
• They don't seem to care what the cost is. They want the item at any price. They hesitate to give you a daytime phone number.
  
• They request the item be shipped to an alternate address than the one listed for the cardholder.          

What should I do if an order does sound suspicious?

Under any of the above circumstances you should be particularly cautious and do everything possible to ascertain the person ordering the merchandise is actually the cardholder.
These tips, though not infallible, may help you decide if an order is legitimate:          

• Get a complete name, address, and phone number of the cardholder. Then, verify the information you are given by calling the merchant bank or using whatever other address verification system is in place for processing your charges. If the address you were given doesn't match the address of the cardholder, don't ship.
  
• Only ship to the address of the cardholder. People ordering with a stolen card generally request the merchandise be shipped to a vacant house or apartment. (Some shipping companies leave packages at the door if no one is home.)
  
• A person using a stolen card won't give you their real phone number. Find an excuse to call the customer back, using the phone number he or she gave you, and ask to speak to the cardholder. If you can't reach the cardholder, don't ship the merchandise.
  
• Look up the address and phone number of any local orders in the phone book.
  
• Be suspicious of foreign purchases made over the Internet, particularly if they are for very large amounts. Some US companies that sell on the Internet block all foreign sales because of the high incidence of fraud.
  
• Call and verify cardholder and confirm the order for any unusually large purchase made over the Internet or by mail.
  
• If the address and phone number check out but you still have doubts, ship the merchandise with signature confirmation of delivery required. That way, you get a signature back that may help you fight your bank if the customer has signed but claims to have never received the merchandise.
  
• Hold on to signed sales slips and orders for at least a year.
  
• Send a reminder letter to people when you ship an item telling them the item has been shipped and when they can expect it to appear on their bill. This type of letter can reduce complaints and chargebacks from people who simply forget what they ordered or from whom.
     

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