Don’t get caught by card scam

Banking & Payments Federation Ireland is aware of a number of incidences in which hardware stores have been targeted by fraudsters who place big orders and pay with stolen card details, writes Erica McKinney, Financial Crime and Security, Banking and Payments Federation Ireland.

The fraudster typically gives a plausible story as to why the order needs to be fulfilled immediately and arranges for the goods to be picked up by courier. The transaction is later charged back when the genuine cardholder notices the transaction on their account.

A typical scenario

A hardware store gets a call from a new customer saying they have been let down by a supplier on a job they are doing and are looking for a big order to be filled as soon as possible. They provide a listing of the materials required and advise that they will send a courier to pick the goods up. The hardware store is understandably keen to fulfil the order because of its value but also because of the possible repeat business it might bring.

The fraudster pays over the phone, using stolen card details. The courier comes to collect the items and a few weeks later the retailer receives a chargeback, because a stolen card number has been used to make the purchase. Unfortunately, the hardware store is liable for the full amount and ends up at the loss of the sale amount and the goods supplied. The use of a courier is important because it means the customer will never be on the premises and, therefore, cannot complete a chip and pin sale, be identified by CCTV or demonstrate that they actually have the physical card. This adds an extra layer of protection to the fraudster. In some cases, the fraudster will try to maximise the fraud by hitting a hardware store a number of times over the course of a few days or weeks before the first chargeback is raised.

Protect yourself

Protect yourself with the following advice:

• Authorisation is not a guarantee of payment. It just states that there are sufficient funds available and the card has not been reported lost or stolen. It is the retailer’s responsibility to ensure that the genuine cardholder is carrying out the transaction.
• Ensure staff are educated on the risks of taking orders over the phone. Your staff are the first line of defence in analysing an incoming order.
• Always check the credentials of new customers, particularly if placing a high-value first order or making multiple orders in a short timeframe.
• Be mindful of sudden big orders, especially when they are rush orders or a courier is being used to collect the goods. If it seems too good to be true, it usually is too good to be true.
• Watch out for multiple cards being offered. The fraudster is generally going to pay using a stolen card and won’t know the available limit so they may try a card that declines and then offer another number before the sale goes through.
• Ask for a name and address for the card used and ask your acquirer (the bank or financial institution that processes your card payments) to perform a name and address check with the issuer. This might help identify the less well-prepared fraudsters, though it is worth noting  that a positive name and address check is not sufficient to defend a chargeback.

Before taking transactions over the phone you should ensure that you have the correct terms in place with your acquirer. They will also be able to advise you on best practices for payment card transactions.

You can find more information including downloadable training documents on the following links: www.bpfi.ie/customer-assist/business-customers/fraudprevention-publications/ and www.bpfi.ie/customer-assist/business-customers/reducecard-not-present-risk/

This Business Support article featured in the July/August 2017 edition of The Hardware Journal.