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Stay Protected During the Holidays

December 21, 2012

From the NFIB Small Business Legal Center

The media, consumer groups and even banks offer a wealth of information about how individuals can protect themselves from fraud. But how can business owners guard themselves against credit card thieves who place orders over the Internet or by phone? In many instances, the business ships goods before discovering that the credit card number was stolen.

An NFIB member from Connecticut who recently lost $10,000 in merchandise ordered over the phone can attest to the horror and frustration that comes with credit card fraud. Business owners shouldn’t “expect to get assistance from the credit card company, because it might not happen,” he warned. “The credit card company is not obligated to investigate or find the perpetrator.” To avoid this scenario and to defend your business against fraud, consider the following:

1. Get all the information related to the credit card.

More Ways to Fight Fraud and Scams

Have the caller read the cardholder’s name—exactly how it appears on the card—along with all 16 account digits, the card verification number and the card’s expiration date, as well as the complete address and phone number associated with the account holder. Do not immediately ship goods to customers who are unable to or refuse to provide a full name or offer a possibly bogus name or address, such as Joe Smith or 123 Main Street. Make sure you get the card verification number in this case because three- or four-digit codes do not appear on credit card receipts. Since many fraudulent transactions result from a stolen number rather than a stolen card, a customer who is able to supply this number is less likely to be in possession of a stolen card.

With this information, you will be able to use the address verification service. This service works by comparing the billing address supplied by the customer with the bank’s database. You can also call the card-issuing bank and ask them to make a courtesy call to the customer to verify the charge. Visa claims that the use of the card verification method can reduce chargebacks by as much as 26 percent.

2. Be wary of orders that use different “bill to” and “ship to” addresses.

This can be a sign of fraudulent credit card use. Request telephone numbers for both addresses if the customer wishes to ship the order to a different “ship to” location. With the information you collected, you can use a Web site like, which integrates telephone numbers, maps and e-mail addresses to check for bogus billing addresses.

3. Watch out for unusually large next-day delivery orders.

Orders larger than the typical size of orders at your business should raise a red flag, as should orders requesting next-day delivery. Fraudulent users need to have their orders approved and delivered before the fraud is discovered, and the order is canceled. And fraudulent users are not concerned with cost, since they do not plan to pay. Also, watch out for to international orders. While of course not all overseas orders are fraudulent, some countries, especially developing nations, have a bad reputation for fraud. Experts advise against shipping international orders that have different “bill to” and “ship to” addresses.

4. Do everything possible to validate the order before it is shipped.

When orders are not placed in person, it may be beneficial to have the customer fax copies of both sides of the credit card. It may also be helpful to request a copy of his or her state-issued identification card, which provides additional proof that the customer is the true credit card holder. If the customer does not know all the information you are asking for or have it in his or her possession, he or she may give up.

5. Take immediate steps to reduce damage if fraud is discovered.

First, call the police to report the crime, then call the cardholder’s issuing bank and ask someone to place a courtesy call to the cardholder. Have the person at the bank mention that you have the address where the charged product is being shipped. When the cardholder returns your call, convince him or her to report the crime to the police in the city where the product was shipped. You may be able to recover the stolen merchandise.

Most importantly, trust your instincts. If the caller does not seem completely confident about the information he or she is supplying, or you do not feel comfortable sending merchandise, don’t do it. It may be better to lose an order than to risk giving away your merchandise for free.

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