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Old 19th April 2006, 04:38 PM   #1
jackie
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Default Detecting credit card fraud

I'm new here so forgive me if this has been discussed.

I'm wondering if anyone has any tips about detecting this type of fraud. A few months ago I got an order for $700 worth of black-eyed Susan seeds. I shipped them with signature delivery confirmation, but the customer filed a chargeback and won, so I lost the cost of the seeds. The order was placed by phone using that system for deaf people -- I forgot what it's called -- and later when I talked to my credit card company I was told that this is a red flag and a common scam. I hate to refuse all orders from deaf people, so I've set a $100 limit for phone orders of this type.

In the past 3 months I've had almost $4000 in chargebacks, all ordering a lot of a single item, so I'm watching out for this type of sale. In my first 9 years in business I had 3 chargebacks, and in the last 3 months I've had 12! I don't know if I've been flagged as an easy target or if the industury as a whole is seeing more of this. First Data tell me that it's just a cost of doing business and I should just write it off and move on, which is fine if it's one or two a year but not 12 in 3 months!

Today I had a woman call to order $4125 worth of garden seeds. It would be almost impossible for anyone to plant this many seeds in a year, so I asked her what she wanted these seeds for. Her story didn't make much sense, so I refused the order, then she placed a $1200 online order which is still too much as far as I'm concerned. I'm going to sleep on it but I will probably refuse the order.

Any tips on detecting fraud?

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Old 19th April 2006, 05:14 PM   #2
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What kind of info are you collecting? cc #, exp Date, name on card, billing address, security number on back of card? If you are collecting all these, how are you processing?

As for phone orders, I would never take a phone order where there is no receipt. I always use an online order form, a contract or PayPal so there is always a written record. I have had maybe 5 chargebacks in my 9 year history and have won 4 out 5 because the 4 were either mistakes by customers or in one case a customer who was very disgruntled. The 5th one was legitimate fraud - a stolen card. Luckily it wasn't for that large amount.

I think the key is to authenticate all the bits of information I mentioned above. That should stop most fraud. That is why I like to either run web orders through PayPal or my LinkPoint Gateway.

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Old 19th April 2006, 06:12 PM   #3
jackie
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Default

Quote:
Originally Posted by David Wallace
What kind of info are you collecting? cc #, exp Date, name on card, billing address, security number on back of card? If you are collecting all these, how are you processing?

As for phone orders, I would never take a phone order where there is no receipt. I always use an online order form, a contract or PayPal so there is always a written record. I have had maybe 5 chargebacks in my 9 year history and have won 4 out 5 because the 4 were either mistakes by customers or in one case a customer who was very disgruntled. The 5th one was legitimate fraud - a stolen card. Luckily it wasn't for that large amount.

I think the key is to authenticate all the bits of information I mentioned above. That should stop most fraud. That is why I like to either run web orders through PayPal or my LinkPoint Gateway.
I collect all the info you mentioned. I used to run phone orders through First Data, but I just switched to PayPal Pro and so far, so good. Web orders go through PayPal or Authorize.net gateway. My record was similar to yours for years; it's just recently that I've had a run of bad sales. I'm really wondering if anyone else is seeing this type of sale.

Most of my sales are online, but it is invariably the phone orders that wind up in dispute. I hate to quit taking phone orders because a lot of my customers are older people who don't have a computer or aren't comfortable ordering online, and most of them are good customers.

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Old 19th April 2006, 07:53 PM   #4
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Maybe you could limit the size of your phone orders? Also you could limit phone orders to existing customers. Luckily, I've never had a chargeback (knock on wood!). I hope for the best for you!

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Old 19th April 2006, 08:32 PM   #5
foxdmatt
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I have looked up cc fraud among internet sites and found that newish companies that take cc's have a fraud rate of nearly 30% in the past year, but companies that run their cc#'s through PayPal have it reduced to the normal brick and mortar % of about 2-3%. Interviewing the buyers is an excellent way to protect yourself for such a large order. Good Luck

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Old 20th April 2006, 11:42 AM   #6
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Scambusters has a page with suggestions on preventing credit card fraud for Internet merchant accounts:
http://www.scambusters.org/internet-...-accounts.html

You may also find something of use in these articles from Merchant911:
http://www.merchant911.org/articles.html

Hope this helps!

--Torka

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Old 9th June 2006, 11:42 AM   #7
jason.bordeaux
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Default Credit Card Verification

To follow up on David's post, your credit card terminal should ask you for the cardholder information (address, zip, etc.). If the information that you entered does not match the legitimate cardholders info, you will be notified immediately with a message. It is also important to note that you are charged 30%-50% more in processing fees if you do not perform these verification procedures.

Your terminal should be programmed to perform these services. If not, ask your merchant processor to download new software. Better yet - get a new processor! This one has not been taking care of you.

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