Small firms feel sting of credit fraud

Small firms feel sting of credit fraud
Owners often billed after being ripped off
By Thuy-Doan Le -- Bee Staff Writer
Published 2:15 am PDT Saturday, September 17, 2005
Story appeared in Business section, Page D1

Shari Stief recently received a phone call from a customer who claimed
she'd never made the $162 credit card charge at Stief's children's
shop on Arden Way.

Never mind that Stief, owner of three Once Upon a Child stores, was
holding a receipt with a signature.

Stief, who ultimately lost the $162 when the woman's credit card
company refunded her money, is among business owners nationwide who
are hit hard by credit card fraud.

Whether it's a stolen credit card used online or counterfeit plastic
used in a store, merchants are getting ripped off in what's become a
billion-dollar problem, according to national estimates. And small
businesses, particularly those selling online, may be the most
vulnerable.

"For large companies like Macy's, credit card charge-backs are a fact
of life, and they pass the cost on to us, but for a small business, a
credit card charge-back can be the end of business and charge them
into bankruptcy," said Randy Carpadus, co-owner of Bright Hope
Designs, a company that designs Web sites for businesses.

Charge-backs - the amount billed to the merchant by a credit card
issuer after a disputed transaction - are a nightmarish situation for
merchants, who also can face stiff fines and lose the right to accept
certain credit cards if their fraud and charge-back rates rise to
unacceptable levels.

Stief said most merchants don't think about credit card fraud until
they are hit. "All of our training is from the school of hard knocks,"
she said.

Credit card fraud has been on the increase in recent years. In 2004,
payment fraud cost U.S. online merchants an estimated $2.6 billion in
lost revenue, according to the annual Online Fraud Report by
CyberSource Corp. That's up from $1.5 billion in 2000.

Aside from their financial losses, businesses also want to protect
their customers from the recent rash of serious data breaches, in
which consumers' personal information was lost or stolen. This
happened to large retailers like Polo Ralph Lauren stores, as well as
data firms like Atlanta-based CardSystems Solutions, which had 40
million cardholders' data exposed.

A recent seminar in Sacramento held by Visa and the U.S. Chamber of
Commerce showed small companies how to combat credit card abuse.

"All merchants need to understand the sensitivity of the data and that
all crooks want to steal it," said Joe Majka, vice president of Visa's
fraud control.

Among tips offered to small businesses were:

* Limit the amount of data stored in company computers on individual
customers' accounts.

* Install computer firewalls to protect sensitive data.

* Use and regularly update anti-virus software.

Tom Mahoney, founder of www.Merchant911.org, which helps combat credit
card fraud, said merchants don't have enough information to adequately
screen credit cards.

Boston-based MaxMind sells a "geolocation" tool enabling merchants to
locate where an Internet order is placed.

"You can identify the location of the Web site. If it's coming from
overseas and the person is purchasing something with a U.S. credit
card, that makes the order more suspicious," said President Thomas
Mather.

Dennis Tootelian, marketing professor at California State University,
Sacramento, said hackers may target smaller businesses because of the
perception that they are less protected.

"They're really stuck," he said. "They really can't afford to not take
credit cards."

"I've been excruciatingly careful about only taking credit cards from
clients that I know," said travel agent Sue Heffner, who attended the
recent seminar. "People are getting your name from the Internet [so]
you don't know who you're dealing with."

http://www.sacbee.com/content/news/crime/story/13578460p-14418757c.html


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"The pressure is outrageous. Everyone is picked apart and it's so superficial and not real. I'm not superskinny and not overweight. I'm just normal."
-- Hilary Duff
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