From our friends at the Motor Dealers Association of Alberta (MDA):
There has been a significant increase in credit card fraud and chargebacks in the last few months. The MDA felt that it may be timely to create an information package outlining the proper processes when accepting credit cards for dealerships.
Recently at a Calgary dealership these people called the parts department to order parts. They start with a small purchase. When they come in, they check to see if the parts person asks for the card to authenticate the PIN or ask for ID, etc. If the parts staff doesn’t do their due diligence, they then do a much larger parts purchase.
When the parts person does not authenticate the card using the CHIP, the person waits approximately 60 days (or what is allowable by Moneris), and then they phone Moneris to say it was an unauthorized purchase on their card. Because the dealership didn’t validate the card with the CHIP, it is an automatic charge back to the dealership. In this case it was for a $3500 set of tires & rims. The reason we believe they wait 60 days is that is close the maximum allowable by Visa to make a complaint. Also, most video security systems do not store video footage for that long.
The second example was of a person making a parts purchase and the terminal stated their chip didn’t work. The parts person swiped the card and had the customer sign. Again, because this did not strictly follow the Moneris rules, when the customer phoned Visa and said it was an authorized purchase, the dealership was charged back.
Third example was a person trying to use a compromised pre-paid visa. When the parts person suspected something, he phoned to validate the card. The account information did not match the card. When the parts person went back to the counter, the customer had already vacated the premises.
To summarize, these people prey on parts departments where staff are uneducated or undisciplined to follow the Visa / Moneris rules. Most of the examples are over the phone purchases and they seem to target parts departments.
Credit card fraud can represent a considerable cost for your business. Training your staff to identify potentially fraudulent transactions is an important first step in protecting your business from financial loss.
Card-not-present transactions represent the greatest risk to merchants as these transactions occur over the telephone, through the mail or on the internet such that the physical credit card has not been inserted or swiped into a card reader. As a result, there is no guarantee that the transaction is being conducted by the legitimate credit card owner even though the credit card number itself may be valid. In these cases, the merchant bears the chargeback exposure if there are any problems with the legitimacy of the transaction.