Merchants & Stolen Credit Cards - Question

[SunnyD]

If someone purchases something with a stolen credit card/number, fraudulent transactions clear prior to the card being reported or flagged, then those transactions later get flagged and the cardholder reimbursed...

What happens to the merchant in this case? Does the credit card company take the loss or do they deduct the payment from the merchant, meaning the merchant takes the loss?

 

[Crusty]

I would imagine there's some sort of insurance policy for the CC companies for this kind of stuff, either that or they eat the loss.

 

[miri]

Originally posted by: SunnyD
If someone purchases something with a stolen credit card/number, fraudulent transactions clear prior to the card being reported or flagged, then those transactions later get flagged and the cardholder reimbursed...

What happens to the merchant in this case? Does the credit card company take the loss or do they deduct the payment from the merchant, meaning the merchant takes the loss?

What usually happens in that case is that the cardholder is usually instructed to contact the merchant to request a credit for the unauthorized charges. If the merchant complies then the merchant simply loses the money from the sale and the product if it has already been shipped. In this case the merchant loses.

If the merchant refuses to refund the money then the bank usually files a chargeback. This usually costs the bank around $15-25 for each unauthorized charge so they prefer that the merchant refund any unauthorized charges. The merchant is usually charged a chargeback fee as well so pretty much everyone loses in this situation.

 

[oogabooga]

I think it works pretty similar to a reported unauthorized charge. If it is an "unauthorized charge" the merchant will need to provide proof that they verified the transaction before it batched/transaction completed. For an online transaction usually that means they have to confirm they verified AVS (addy + zip) and CVV/CVC2 (Security code). For a retail transaction they'd need either to prove they swiped the card, or keyed + address verification. They'd also need the signed receipt for the transaction.

In cases where the transaction is truly fradulent - I.e. the card was cloned, the correct AVS/CVV information was provided for the card - I think the merchant stands in the right and get refunded the amount and it ends up being the credit card companies. If the merchant can't verify the transaction (no AVS/CVV, no signed slip, keyed in retail charge with no imprint) then they eat the cost.

Credit Cards are pretty messed up in a lot of ways for merchants, working with them somewhat I can see why some places don't want to take them... but then again the business gain from Credit Cards is hard to ignore.

 

[Brainonska511]

Originally posted by: miri

Originally posted by: SunnyD
If someone purchases something with a stolen credit card/number, fraudulent transactions clear prior to the card being reported or flagged, then those transactions later get flagged and the cardholder reimbursed...

What happens to the merchant in this case? Does the credit card company take the loss or do they deduct the payment from the merchant, meaning the merchant takes the loss?

What usually happens in that case is that the cardholder is usually instructed to contact the merchant to request a credit for the unauthorized charges. If the merchant complies then the merchant simply loses the money from the sale and the product if it has already been shipped. In this case the merchant loses.

If the merchant refuses to refund the money then the bank usually files a chargeback. This usually costs the bank around $15-25 for each unauthorized charge so they prefer that the merchant refund any unauthorized charges. The merchant is usually charged a chargeback fee as well so pretty much everyone loses in this situation.

I'll be damned if I have to clear up unauthorized charges on my CC by calling the individual merchants. I just tell the CC company and let them handle it.

 

[oogabooga]

Originally posted by: Brainonska511

Originally posted by: miri

Originally posted by: SunnyD
If someone purchases something with a stolen credit card/number, fraudulent transactions clear prior to the card being reported or flagged, then those transactions later get flagged and the cardholder reimbursed...

What happens to the merchant in this case? Does the credit card company take the loss or do they deduct the payment from the merchant, meaning the merchant takes the loss?

What usually happens in that case is that the cardholder is usually instructed to contact the merchant to request a credit for the unauthorized charges. If the merchant complies then the merchant simply loses the money from the sale and the product if it has already been shipped. In this case the merchant loses.

If the merchant refuses to refund the money then the bank usually files a chargeback. This usually costs the bank around $15-25 for each unauthorized charge so they prefer that the merchant refund any unauthorized charges. The merchant is usually charged a chargeback fee as well so pretty much everyone loses in this situation.

I'll be damned if I have to clear up unauthorized charges on my CC by calling the individual merchants. I just tell the CC company and let them handle it.

I think if it's a case of your card is being used by someone else in multiple places and it's been compromised most every CC company does take care of it for you.

If it's a case of one charge among a bunch of legit ones - I think they still usually take care of it for you, though they probably will ask if you've gotten in contact with them/know anything about the charge.

 

[SuperSix]

Bottom line:

The merchant loses.