Card fraud is not always as simple as an unknown charge from an unknown vendor. I experienced this firsthand, as described below, and was forced to spend time defending my innocence. It is outrageous, which is why everyone should be aware of it. The same type of fraud could happen in the business world on a Commercial Card/P-Card. As a card program manager or administrator, there are things you can do, including a way to detect possible fraud even if a cardholder fails to identify a problem. Keep reading to see what happened to me and action items for a Commercial Card program.
The Fraud: What Happened
This summer, I received via mail five bottles of a keto diet supplement that I did not order, nor did I ever visit a related website. My initial reaction to the package was one of surprise; I thought there must be a mistake, not fraud. That quickly changed when I looked at my credit card transactions online and saw a fraudulent charge by an unknown vendor for a little over $200. I immediately reported it to my card provider and they issued a credit, as well as closed my account and sent a new card to me. However, the fraudster (the “vendor”), in response to the subsequent chargeback, requested a chargeback reversal, so I had to fight back in order to retain the credit. Fortunately, I succeeded.
Conclusions About the Fraud
The fraudster somehow obtained my personal information, including card details, then facilitated an online order, followed by a charge. They package who knows what into bottles, slap on a label (which looks nearly identical to a product sold on Amazon), and ship. They spend a minimal amount of money to net a couple hundred bucks. When they are hit with a chargeback, they produce documentation reflecting a fake order, saying they fulfilled it.
For more details about my experience, listen to the 19-minute podcast by AP Now for which I was their guest of the week. You can access it from the AP Now website (episode 66) or YouTube.
Mail truck photo by Pope Moysuh on Unsplash
Action Items for Commercial Card Programs
Educate
Share this story with your cardholders and managers to make them aware of the fraud and the importance of transaction review. Fraud detection begins with them.
Ensure your procedures manual addresses what cardholders should do about different types of problematic transactions. For example, provide a decision matrix and start with the question, “Are you familiar with the vendor who processed the charge?” Follow it up with “If yes” and “If no” instructions, leading them down the right path.
Request that your cardholders do not discard any delivered products that no one ordered until the matter is resolved. In my favor, I informed my card provider that I still had the unopened supplements and would happily ship them back somewhere if someone else wanted to pay for the shipping.
Be Persistent
Do not be tempted to let a fraudulent transaction go, even when the dollar amount is small. Closing a card and getting a new one can be pain, especially when a card is tied to recurring charges, but leaving a compromised card open can result in more fraud. In my case, this “vendor” said I signed up for ongoing shipments of the supplement; they would have kept charging my card.
Utilize a “New Vendor” Report
On a weekly basis, generate a report of new vendors that have charged your organization’s cards. Contact your card provider about creating this type of report if they currently do not offer it. Alternatively, if you use a third-party auditing solution, see if it can monitor for new vendors. Besides helping you identify potential fraud, both external and internal, such a report can reveal when a cardholder uses a different vendor instead of an approved one.
While fraud will never go away, effective controls can make a big impact and keep your card program going strong. Learn more about P-Card controls.
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About the Author
Blog post author Lynn Larson, CPCP, launched Recharged Education in 2014. With 20 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more…