The credit card fraud detection conundrum

Written on February 20, 2010 – 11:12 am | by admin

It’s a Catch-22. Visa and MasterCard policies state merchants are not required to demand identification as a condition of a credit card sale, but then consumers get mad that cashiers aren’t doing their due diligence when processing their plastic.A Houston TV news team recently tested this conundrum by visiting area retailers to see if employees checked a purchaser’s identity against the names on the credit cards they used. In their ruse, the news station workers made purchases on each other’s plastic to prove that big-name stores make it easy for credit card thieves. Then they ran with the story about how easy it is to use someone else’s credit card as no one was asked to prove that they were the actual cardholder.And the story got results. Apparently, Sears and Kmart will be “retraining” more than 2,100 employees on the proper handling of credit card transactions. But, really, what’s “proper,” according to Visa and MasterCard, is just checking the signature on the receipt against the signature on the credit card. That’s about it. Here are more interesting Visa and MasterCard credit-card verification rules:If a card is unsigned, a merchant should not complete the transaction unless proper identification is presented. Why? Because without the signature, the card is officially invalid. Once you sign that card, you are in essence agreeing to all the terms and conditions that card holds. But hold onto your hats, guys, because I’ll let you in on a secret: I haven’t signed the back of my credit cards or debit card and guess what… They still work. No one checks.Also, according to Visa and MasterCard, if a card has “See ID” written in the signature space on a credit card, the card is technically invalid since there is no signature. But that doesn’t stop a stop a whole lot of sales from going through, either.Discover stands out from the crowd in regards to credit card checking policies, as it states in its merchant manual that retailers should ask for government-issued identification for verification, as well as checking signatures. So, yes, it would appear that the situation is ripe for fraud. But very few people or merchants seem to be all that concerned — unless, of course, they become a victim of fraud. One of Visa and MasterCard’s arguments against ID checking is that since the issuing bank guarantees reimbursement for fraudulent purchases, cardholders shouldn’t be all that worried. While they want to prevent fraud, it is a business cost that is passed on. What’s even more interesting is that Visa is testing the fraudulent end of the fraud see-saw by OKing a big increase in the number of no-signature transactions. Possession of the card alone will become sufficient for more than 90 percent of transactions because clerks now have no reason to ask you for your card.So their dirty little secret is that some fraud is acceptable, but not too much. See related: Should you write ‘See ID,’ not sign, back of credit cards?, Visa expands no-signature-required credit card transactions

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