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Seller Beware!
So how do you protect yourself? By taking the following precautions. Though each one in itself may not be a red flag, if you see more than a few, your "fraud antenna" should go up.
Don't make the assumption that just verifying a credit card—getting an authorization number—is sufficient fraud protection. All the verification process does is to check that the card has not been reported stolen and that it has sufficient free credit available to fund the purchase.
Your first level of fraud protection is Address Verification Service (AVS). AVS compares the billing address of the customer with the records held by the card issuer. If the card number and billing address match, AVS gives it a thumbs-up. But this service has its limitations. The card could be stolen, with the thief requesting that the order be shipped to another address. AVS has other problems too. It works only for addresses in the United States, so it's no help for international orders. If you sell software or information that can be downloaded instantly, AVS provides no protection. All a thief has to do is to obtain a valid billing address that corresponds to a stolen credit card number, and your instant buy becomes an instant fraud!
If you don't use AVS, make sure that the customer's billing address matches the shipping address. If it doesn't, find out why the customer wants the product(s) shipped to another address.
Ask for two phone numbers—work and home. Then do a telephone number search on suspected fraudulent orders. You can purchase a database of phone numbers on a CD or use services such as AnyWho, which lets you do a reverse search on a phone number. This will allow you to confirm the contact information for the phone number that the customer has provided.
Place notices, buttons, and images on your order forms and your web site content that let consumers know that fraudulent orders will be pursued to the fullest extent of the law.
Look at the product being ordered. Does it match similar frauds you caught in the past? We discovered that most orders for US Robotics modems were fraudulent orders. We guessed that it was a very popular modem and could easily be resold at swap meets.
Be wary of large orders, especially for brand-name items or multiples of the same item (such as three MP3 players).
If the customer demands overnight delivery, this can be a sign of a fraudulent order. Since the scam artist isn't paying for it, he or she doesn't care how much it costs and will want to get it in a hurry.
Look at the customer's email address. The majority of thieves use a free email address to hide their identity. With fraudulent orders, the customer's email address is often one of the free email services such as Hotmail, MSN, or Yahoo! You can find a list of free email domains on the AntiFraud web site that are used most frequently in fraudulent transactions, along with a very extensive list of domains that have been used for fraud.
Another clue is a suspicious billing address such as 123 Main Street. You can check to see whether an address is real by using Yahoo! Maps.
And finally, if someone places a very valuable order and asks that it be left at the front door, be suspicious. It could be a sign that a thief is using an innocent person's house as a drop-off point. If the order is for a high-priced item, request that it be signed for.
If you suspect fraud, what do you do? Follow these steps.
Call the customer. Use the phone numbers you requested and collected from him. When you contact him, don't automatically assume that you're dealing with a thief. The customer could have entered incorrect information, and you don't want to offend him and lose the sale. In general, though, a thief will not want to have a long conversation with you.
If the phone number is wrong, try contacting the customer via email for a valid phone number. Be very suspicious, though—most people usually don't supply the wrong phone number, unless it was mistyped.
If the billing address doesn't match or is incorrect, ask the customer to repeat it. If the area code doesn't match the city in the billing address, ask why.
Ask the customer for the name and phone number of the establishment that issued the card. Both are usually printed on the back. If the customer can't supply it, this is a sign that he doesn't physically have the card—just the number.
If you still feel uncomfortable with an order even after talking to the customer, ask for payment in advance. And if you're hit with a fraudulent order, document all contacts. This will give you greater protection and a fighting chance of getting your money or product back. Keep all voice mails and emails, along with caller ID info, in order to prove your case.
Remember, it takes a lot of orders to replace just one order lost to fraud. So it's better to skip the ones that you're not 100% certain about. Follow these tips and protect your business. No one else will!