During my working years in credit card industry, I have came across many credit card dispute cases from cardholders and merchants. I would like to share my experience with you here on one of those cases.  The technicalities have been omitted and the case is written in layman form for easy understanding.

The merchant involved in this case was a electrical retail merchant and was assigned a zero floor limit on every sales transactions by the Card Company.

One day, two fraud syndicate members went to the merchant shop to purchase a Home Theater System worth about RM15,000.  As per the card acceptance procedures, the merchant need to to call the Card Company for authorization for the transaction.  The fraud syndicate members were very friendly to the merchant and offer to call the Card Company for authorization on behalf of the merchant.

The merchant not realizing the consequences was sweet talked by the fraud syndicate members.  So one of the fraud syndicate members called his contact using his mobile phone and passed it to the merchant to proceed with the authorization procedures.

As expected the fraud syndicate contact pretended to be a staff of the Card Company and gave the necessary authorization code to the merchant.  The merchant completed the sales transaction this way and obtained the delivery address from the fraud syndicate members.

When the merchant began to deliver the goods, the fraud syndicate members appeared again and told him that because they are rushing for time to somewhere, offered to take the goods by themselves.

The merchant not realizing the fraudulent plan, released the goods to the fraud syndicate members.

This fraudulent transaction was detected by the Card Company and the payment to the merchant was withheld for reason of violation of card acceptance procedure – failure to obtain authorization.

The merchant was very angry and try to fight for their payment using threatening languages. The Card Company persisted with their decision to withhold the payment and finally the merchant gave in.

The substances of the case were :

1.  The merchant was cheated by the fraud syndicate using a counterfeit credit card. The merchant also violated the card acceptance procedures by not calling the Card Company directly to seek authorization for the sales transaction.  There was a financial loss to the merchant as goods were taken away.

2.  The Card Company did not violate any card acceptance procedures and would suffer losses if they were to pay the merchant as they will not be able to collect the money back from the genuine cardholder as the goods were not taken by him.