how to deal with phony credit cards or..

[stormchsrs]

Dear all,

Just heard from news said a merchant couldn't get his money from credit card company cuz the party who ordered and got the goods said he didn't order and receieve anything. This victim (the merchant) is in the restaurant business, he did not have a signed slip so he's out of luck. Can things like this happen to online business and how to deal with it? Please advice! Thanks!

[markg33]

Oh absolutely do things like this happen online. They happen offline as well as with phone ordering etc.

The short answer is there is not much you can do about it. (Well there is but it's too convulted to bother with.)

Basically, under the terms of your merchant agreement with the card companies the onus is on you to prove the customer ordered the goods. And even if you do have their signature, it's still problematic.

Here's the scenario: The customer get's his bill at the end of the month, notices the unauthorised transaction and complains to their card provider sometime the next month. They action it, sometime that month, and then you get the notification the folloing month.

That is three months after the transaction.

At this stage you are out of the money as it's already been reversed, and minus the goods you sent them. You spend the next month arguing with the card company, who eventually say "Our customer says the transaction is unauthorised and we are on our customer's side."

You are now some five months down the track.

You can follow up with the shipping company to see if they got a signature for delivery, but even if the right person did sign for it (which doesn't always happen, right?) you may not have much luck.

By now you should be seeing how long this takes and how complicated it is.

I've spoken at length about this with sales admin staff in well established direct mail and catalogue companies, and they say you just have to wear these on the chin.

It's not personal, it's just business.

[markg33]

Ooops. Didn't mean to be so pessimistic in my previous answer so here are some solutions.

As with all of these things an ounce of prevention is better than a pound of cure.

So, make sure your ordering process asks for all the right things to validate the customer. Check best pracitices on this. Usual things like valid email addreses, phone number, extra security numbers on the card etc.

In your online terms and conditions spell out all the rules. Have your lawyers read it. Make sure the customer has to tick that they have read and accepted them.

Put in extra order processing checks if the sale goes over a certain amount. EG if the sale breaches this amount call them up and ask for additional id.

Train your sales admin staff in what to look for in suspect orders. EG: Shipping address not matching card adress especially if one is in a completely different country, name not matching name on card, wierd order composition eg if they are buying products that a typical customer wouldn't put together or if they are buying all the high priced items on your site.

Monitor your rejection rates and your chargebacks. If they go high be on your guard. Order fraud seems to go in cycles.

One more thing on chargebacks. The card companies will charge you for these. About $25 from mememory, or the equivalent of a dishonoured cheque.

Hope all this helps