Experts identify 15 ways to cut down on credit card fraud

Discount Store News, May 26, 1986 by Larry Schwartz, Pearl Sax

Experts Identify 15 Ways to Cut Down on Credit Card Fraud

The average, frequently-used credit card passes through the hands of over 1,000 people each year. Any one of them can steal the number from the credit card and use if fraudulently or sell it to someone else who intends to use it fraudulently. These people include waiters and waitresses, cashiers, store clerks, hotel, motel, airline and car rental reservation clerks, telephone order takers, bank tellers and computer operators.

Thousands of other people use lost or stolen cards frauduelently, as well as counterfeit cards, altered cards, expired cards and cards on which the credit limit has already been exceeded.

Two weaknesses of the credit card system make it possible for billions of dollars in losses to be inflicted on the nation's merchants and banks. First, the authorization procedure, which is generally used only on transactions over $50 or $75, only confirms that a credit card exists with the digits given, that it has not yet been reported lost or stolen, and that a sufficient credit balance remains available to cover the transaction at hand. This process in no way confirms that the customer using the card is actually the legitimate cardholder.

Second, on transactions under $50 or $75, the merchant is instructed to refer to the hotlist, the small-print, tightly-packed listing of credit card numbers which have already been reported lost or stolen, closed or delinquent in payments. It is often four to six weeks after a card is reported lost or stolen that the hot-list gets into the hands of the merchant. During this time period, the fraudulent card user can have had a bonanza racing from retailer to retailer and calling or mailing orders to merchant after merchant to order items under the $50 to $75 limit. In this way, by acting quickly, a thief can milk a card having a $2,000 limit for as much as $20,000.

To make matters worse, it is almost impossible for merchants to get their merchandise back after it is stolen by a credit card thief even if the criminal is apprehended; the chances are fewer than one in a hundred that whe will ever be apprehended or brought to trial.

The only sure-fire way to avoid loss, we have found in our 13 years of front line anti-fraud experience, is to detect and halt the fraudulent transaction before any loss of money, merchandise or services can take place.

Here, then, are 15 ways to detect and halt credit card criminals and their fraudulent transactions.

1. Ask for two forms of identification, a driver's license and another major credit card, because fraudulent card users often don't have any further identification to identify them a sthe cardholder.

2. Check the signature on the credit card charge slip against the signature on the credit card and on the additional card and on the additional forms of identification. (Always have the customer sign the credit card slip before you call for authorization on the sale. It is easier to get a conviction for forgery than for credit card fraud.)

3. Check the physical description of the customer against the description which appears on the driver's license.

4. Check the edges of the card, the line-up of embossed numbers, the signature panel (to be sure another signature hasn't been pasted over the original) and the magnetic strip to reveal flaws.

5. Be wary of customers who take the credit card out of a pocket instead of out of a wallet or purse. This is often a common tip off of credit card fraud artists.

6. Be wary of customers who are in big rush or try to confuse the clerk.

7. Watch out for customers who try to buy many things in a hurry.

8. Look out for "pink collar" criminals who come into the store with children who may distract the clerks during transactions.

9. Pay attention to the authorization operator or terminal operator who asks the clerk to pick up the card. This is a possible indication that the card has been reported lost or stolen, the credit limit has been exceeded or the card has expired.

10. Abort the sale if the credit card number appears on the hot-list.

11. Many groups of merchants have a "ring around" system for sharing information on thefts, including those in which fraudulent credit cards were used. Establishing lines of communication among other merchants and participating in such a system will give you descriptions of fraud users and the type of merchandise they purchase.

12. For phone-in sales, be wary of children using credit card numbers. Ask to speak with a parent.

13. Check the Directory of Prison Addresses and Zip Codes when you receive an order from a prison address. Make sure that the order isn't coming from an inmate using a stolen credit card number.

14. Ask for the name of the issuing bank on credit card orders. A person who is using a stolen credit card number won't known the name of the issuing bank or will try to make one up, since the name of the bank doesn't appear on credit card charge slips from which he might have stolen the number.

15. Check the name and address given by the credit card user. The issuing bank can verify if it is the same as the name and address to which the card was issued.