Credit Card Merchant Liabilty

[shanenin]

I have been considering accepting credit card for payment for computer services/sales. I have not really needed the service, but it could be more helpful to try and close some deals over the phone and other things. Quickbooks offers a fairly cheap service that would allow me to accept cards with out having to use a machine. I was reading over the FAQ. It said me the merchant am liable for any fraudulent cards I accept(how can I tell) Is that standard in the industry, or just something quickbooks merchant services is doing?

Edited January 1, 2007 by shanenin

[jimras]

I don't know about the liability part but there is usually

some kind of "800" phone number that you, as a

merchant, can call to confirm that the card is good.

[shanenin]

what if the card is "good", but is stolen. I wonder if merchants who except a stolen card are held liable.

[blim]

Smart thinking, Shanenin!

What I would do is call my own credit card company and ask what happens if my card is stolen and who exactly is liable for fraudelent charges. I see advertisements that CC companies cover fraudelent charges and I always assumed that's why CC interest rates were so high, but after reading your post, I AM now curious how that works!

I DO know that there is an option for a customer to have the CC company call to confirm any charges (in cases of suspected ID theft) and would also ask your CC if a business person could request a confirmation from the customer.

Another option is to get the customer's telephone number (which I would assume you would need anyways..) and Google the number to see if it matches the name or look it up in the phone book if it's listed before running the card.

And assuming that the customer comes into the shop, ask for a drivers license with CC orders. I wouldn't mind showing my "mug shot" one bit if a businessperson asked and explained he/she is just covering his (and my!) fanny, in fact I would appreciate the businessperson being considerate of my identity's welfare.

Of course, the signature on the back of the card and the signature on your paperwork should match, but I see very few merchants comparing signatures!

Liz

Edited January 1, 2007 by blim

[shanenin]

I always assumed the credit card companys took the loss. Now it would make complete sence that they just pass this loss down to the merchants. I need to do some checking around, but my gut says it is standard practice to hold the merchants liable.

[thesidekickcat]

Only need to add one thing to Liz's great post, always ask for the confirmation security code on back of the credit card to verify it.

I didn't know my Visa card even had one until today when I called in an order to Swanson's Vitamins, and the nice lady who took my order asked for the last three digits of that security number near my signature to verify I had the actual card she said. Anyhow she said it is just another security thing to help them and customer stay safe. Funny I never noticed it before... that I remember anyhow.... or it could just be due to my CRS 'selective memory'!!!

As for liability for the merchant, one of those areas might be if the customer was unhappy with the product or service and you didn't make it right for him/her then they can do a charge back to the credit card company by calling the card company...with the card company doing an investigation to figure out who is at fault. We have used that a couple of times many years ago when things just weren't satisfactorily(sp?) solved but I can't remember now what it was all about, just that that was our only recourse left to us at the time and the investigation proved us out.

With so many bad cards out there, as a small business I would think it is a big risk to take credit cards or checks too for that matter but who knows except other people in your area. You might be able to talk to other small business owners in same field as you and see how much their losses are over a year due to bad cards and see if it is a low enough risk to do it.

Good luck to you in your business.

Pat

God bless everyone

[shanenin]

Thanks everyone for the good advice.

[Pete_C]

I think it really depends.

If you use a verification service; they assume the liability as long as you prove that you have done your best to verify identity. (The security code, a drivers license number...)

On the other hand , if you just use a processing service and they specify that you the merchant assume liability then that is the way it is.

That is why the verification services charge so much to handle merchant accounts.

[JDoors]

What Pete said; If you use a verification service (which costs money to use) they assume the liability (that's why they charge). If you accept a card for payment without verifying the card through such a service and it was presented fraudulently, it's your responsibility, and your loss.

The confusion lies with charges made to the consumer on their monthly statement, something we're more familiar with. If the consumer can prove the charges are fraudulent, then the consumer is protected by law (no more than $50 liability, often waived as a good-will gesture).

If you think you'll be accepting quite a few cards it'll probably be worth it to contact a veryfication service for information. I imagine a reader would cost too much for a home business (and it's possible they no longer accept all-phone-call accounts).

[Matt]

Where I work, if we accept credit cards, we make sure the person signed the back. My boss told me that if they signed it, we are not liable for fraudulent use. However, if they did not sign it, we ask for a photo ID, so that we can verify that it wasn't stolen. If we process an unsigned card, we are liable.

That, at least, is what I was told. It probably varies on different situations though.

[shanenin]

Thats what I thought. I wonder if quickbooks is not following industry standards and placing the burden of loss all on the merchant.

[JDoors]

Merchants are always liable for fraudulent presentation of cards. That's why they use confirmation services, check signatures, etc. If they weren't liable they'd have no reason to check anything at all.

[shanenin]

Merchants are always liable for fraudulent presentation of cards. That's why they use confirmation services, check signatures, etc. If they weren't liable they'd have no reason to check anything at all.

your probably right. If merchants had no reason to try and stop fraud, then would not even take minor precautions.

[jlwohac]

I don't sign my credit card on the back and have no problems whatsoever presenting my driver licence for signature verification when asked. (I know that this is not an answer to your question...but, I just wanted to throw that out..) If the card gets stolen and I am not aware of it, it will be a little harder for someone to use it. (I hope!)

[shanenin]

I don't sign my credit card on the back and have no problems whatsoever presenting my driver licence for signature verification when asked. (I know that this is not an answer to your question...but, I just wanted to throw that out..) If the card gets stolen and I am not aware of it, it will be a little harder for someone to use it. (I hope!)

If it is lost, any one could sign then use it around town. You should at least write on it, "please see id" .

[thesidekickcat]

I don't sign my credit card on the back and have no problems whatsoever presenting my driver licence for signature verification when asked. (I know that this is not an answer to your question...but, I just wanted to throw that out..) If the card gets stolen and I am not aware of it, it will be a little harder for someone to use it. (I hope!)

I think that is false hope to think it will be harder for someone else to use an unsigned card.

You are much safer with a signed card according to the credit card companies. Then if someone signs for something and it doesn't match your signature they can be caught for fraud.

Without a signature the card is up for grabs, that is one of the reasons it is so dangerous to have a new one come to your home mail box in case someone removes it from mailbox before you do and authorizes it. Yes the phone authorization is supposed to only work by your phone number, but there are ways to bypass it I've heard, along with the obvious one to break into house or use open window/door while you are gone and then use phone. Then all they do is sign the card and use it.

But if you sign your card, maybe you'll get lucky enough that a clerk would spot a different signature for purchase than on card and take card away or call cops/security etc.

Of course that doesn't protect you from them using card number to order things over the phone or internet, but it is one step better than not doing all that is possible to protect it.

Just heard on the local news tonight of current scams of people using stolen card numbers or copied credit cards to do very small purchases each month thinking people wont check out their statements or argue over small amounts, so it goes on for months before increasing it step by step which serves to keep it out of the automated safety watch features of credit card companies for unusual activity. I've heard of it happening like that on corporate cards before but now it seems they are doing it on personal ones too. I didn't get the full story, was busy with supper, but did hear the general warning to watch your statements and challenge all wrong charges no matter the size. Duh!!! Though I can see with people being so busy nowadays of how a person might have a general idea of how much the bill should be and if it is within a few dollars they might just think they had forgotten something, so pay it anyhow. Keep all your receipts and double check against statements always. And of course check your bank statements and balance check books too since so much is done nowadays with debit cards that could be stolen and misused same as credit cards.

P.S. As long as I am doing warnings, here is one I have mentioned before....Know when your statements are due to arrive each month, not only to get them out of mail box before someone else does who is after the credit card number printed on them, but if the statement is late arriving call credit card company as soon as possible to see why it is late. That is how my hubby discovered our number had been stolen and they had new cards made up using our passwords/credit card number/backup info etc to do it and said send to 'our' new address in California. The company never called to double check it with us. The card was sent to the crooks, and they were ATMing it at $500 a day. So by notifying the credit card company as soon as bill was late arriving here by a few days, we were able to stop it before it got really used heavily. Credit Card Security said it probably was an inside job of someone selling all our security info for the crooks to have when they called. (We burned everything that had important numbers etc at the time to protect ourselves, now it is safely shredded....a friend shreds hers and then uses shreddings as cat littler...she says she dares anyone to go through it afterwards to piece it back together...HA!!!)

Stay safe folks both online and off.

Pat

God bless everyone

Edited January 4, 2007 by thesidekickcat

[blim]

Totally off topic but after reading Pat's post about the kitty litter...another use for CC statements, CC offers, Bank Statements, etc. is to tear them up a bit and put these in your compost pile or bury them in your garden! They decompose while enriching the soil and what identity thief would think about looking there?

OK, carry on...

Liz

[JDoors]

... a friend shreds hers and then uses shreddings as cat littler...she says she dares anyone to go through it afterwards to piece it back together...HA!!! ...

Good use for the shreddings and a good deterrant! I've always wondered how they handle shredded paper at the recycling center -- Most paper is separated into various quality levels so the better quality papers can be sold for more. They can't do that with shredded paper, so what DO they do with it? I wonder what kind of mess it makes for them.

Re: Signed Credit Cards. Like others have said, NOT signing it is an invitation for someone to steal it, sign it, then pass the card off as theirs -- after all, it HAS their signature on it so who would question it? Sign it.

Another thing though is my signature is huge (think John Hancock). Credit cards (and nearly every other location I have to sign) have this little, teensy, tiny, itty-bitty place to sign. My signature on credit cards look NOTHING like my real signature. Hard as I try, I can't keep it in that little tiny box, all you see is the center of my signature with all the upper and lower loops completely cut off.

[jlwohac]

shanenin...That's probably a very good idea.

BTW...nice to see a fellow Minnesotan here!

[daisygrl]

I believe the merchant processing company would take the loss. They usually pass down the loss to the credit card processor to protect themselves. I'll try to do some research on google.com and figure out who would be left mainly responsible for the loss.

[TheTerrorist_75]

As the saying goes, "In God we trust, all others pay cash".