New Credit Card Scam Making the Rounds
A new credit card scam is making the rounds and has already victimized auto dealers in the Southeaest.
Here’s the way it works:
A customer comes in to your store to buy a vehicle and wants to put a substantial downpayment, or perhaps the whole vehicle price, on their credit card. They will wave a fancy high-end card at you. You agree. At first, the credit card gets declined. Then the customer says there must be some mistake. Call the bank’s number on the back of the card. You do so and the “card authorization center” gives you a six digit authorization code. You enter the authorization code into your POS terminal and get an approval. The customer drives off with the car (and the card).
Three days later, you realize the funds have not made it to your deposit account and you are hit with a chargeback. But what about the authorization you got from calling the 800 number on the back of the high-end credit card?
Here’s what happened. You fell victim to a fake card scheme and you will end up taking the loss.
Criminals create a fake credit card that appears on its face to be genuine, magnetic stripe and all. After the card is declined, the criminal asks the merchant (in this case you, the car dealer) to call the card issuer whose toll free number is on the back of the card. But the card is phony and so is the toll free number. The merchant calls the bogus number and gets a “card authorization center” or similar office and the person they speak to gives the merchant a 6-digit authorization number. The merchant then processes a ticket-only transaction inputing the phony authorization code into the POS terminal. The POS terminal accepts the transaction. Until your card acquirer interchanges the transaction, the criminal will have up to three days before the transaction rejects. That’s when you find out and the transaction is charged back. The criminal is long gone.
The key is to tell your sales people that a card authorization can only come from the POS terminal or from the voice authorization number provided by your card acquirer. If you get such an authorization, then you should be covered, but there is no protection for you if you talk to the issuer directly. It is a scam.
thecomplianceguide.com is intended for information purposes only and does not constitute the giving of legal or compliance advice to any person or entity. Because of the general nature of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on your particular situations and circumstances.
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