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A Merchant's Lesson In Online Credit Card Fraud

Aug 17, 2007
We had recently opened the online jewelry store Lulu Bells Treasures. A couple of small sales trickled in during the first few days. Then a sale for a $400 14k gold bracelet appeared. We were ecstatic. The store was moving in the right direction. The sale was approved and the zip code matched the bank's records. However, there were codes indicating the customers street address didn't match. We tried to call the customer and there was no answer or answering machine. This should have been a flag that something was wrong. However, we were new online merchants and were inexperienced in mail order.

The next step was to call our store's merchant services provider. The representative advised us that there was nothing unusual about the situation. People moved all the time. This person probably moved recently within the same town and didn't update their credit card billing address yet. Of course the risk was all ours but they advised us that it was probably safe to send the merchandise.

We decided to proceed with the sale. Perhaps it was a birthday gift or anniversary present. We didn't want the customer to be dissatisfied. This was a new online business and we wanted to build a good reputation. Also, this was a relatively large sale for us at the time. Within a few days the gold bracelet was delivered and signed for at the billing address. We thought this was the end of the story.

About a month later we received a message from the true cardholder. She lived in the same town as the shipping address but stated she never purchased a gold bracelet. As a matter of fact she was out of the country on her honeymoon and returned to find that someone had stolen her credit card number to make many purchases while she was away. Of course we provided the true cardholder with a refund. Our big first sale turned into a big first loss.

The local police department in the cardholder's town called us, and to our surprise they found the woman that was fraudulently using the card within a week. The detective advised us that she wasn't a very smart criminal since she used her home computer to make all the purchases. They were able to track her down through her internet service provider. He also explained that they recovered the gold bracelet and that it was still new in the box. It would be returned to us after it was used as evidence.

After a few months passed we still hadn't heard from the police department regarding the return of the gold bracelet. We called and asked for the detective that contacted us initially. He now had a different story. He now said that they never recovered the bracelet, and therefore, it could not be returned to us. We argued a bit and then realized that something unethical probably had happened. We thought it was in our best interest to drop the matter. Too much time had been spent already on this matter.

A couple of months later we received a form to complete from the defendant's attorney. The attorney was asking for leniency for the accused woman. It took us no time to make our decision. We signed a statement asking the court to consider leniency and community service as opposed to jail time. At this point we realized that although she was wrong, there were other individuals that were guilty as well. Unfortunately these individuals would never have to face charges.

Quite a few lessons were learned. If a sale seems suspicious don't proceed until you are fully satisfied that it is legitimate. Check out any suspicious situation with the card holders bank. Since then we have evolved into a much larger business and have learned how to identify potential problems and avoid losses. We rely upon sophisticated software that screens the transactions. Almost all of the fraudulent attempts are blocked and no longer waste our time. And, there is also the knowledge that only comes from experience. If something feels wrong it probably is wrong. Learn to trust your instincts and act accordingly.
About the Author
Lulu Bells Treasures® brand jewelry has been offering high quality 14k gold, sterling silver, diamond and beaded jewelry since 2003. 100% Satisfaction Guaranteed! Visit them today at http://store.lulubellstreasuresinc.com/brsogo.html to view their large selection of gold bracelets.
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