A client of mine recently had an enquiry from an overseas company for some goods, which in their business is nothing unusual. They insisted on payment before despatch as it was a new contact. The purchaser duly proffered a credit card to settle the amount due. The credit card was processed and an authorisation code given. As it was a new customer our client also went to the effort of telephoning the credit card company to ensure there were no problems. They were told to wait three days for the money to appear in their bank account before despatching the goods.
Three days passed and the money appeared so the goods were despatched. Several days later my client was contacted by the credit card company who informed them that the credit card number used was not legitimate (either a stolen card number or a cloned card). The credit card company then informed the client that they would be recovering the money by taking it out their bank account.
The client has taken legal advice and although there are some avenues to be considered the basic fact seems to be that the credit card company is perfectly within its rights to do this.
Firstly, it seems to me that no fraud has been committed upon my client (they received money and despatched the ordered goods). If a fraud has been committed the victim is surely the account holder of the cloned card or the credit card company. Indeed my client only has the credit cad company's word that a fraud has been committed at all!
Secondly, when my client reported it to the police they said they wouldn't even give it a crime number! So much for all our reporting to NCIS.
Most importantly when my clients and I asked our associates that use credit card facilities whether they knew that they were liable for losses due to CNP fraud, not a single one did. Merchants are being made to carry all the risk of CNP fraud and they do not even realise it. My message is to make sure all your clients realise the risks and act accordingly.