Key Post Visa "Merchant Agreement" & "Mail Order Agreement" Mail Order Scams & Visa Response!

nconroy

Registered User
Messages
38
When we set up our business many years ago, 17 in fact, we were a victim of a credit card scam. Transactions were over the phone, before chip and pin.
Visa had to be contacted for authorization for each transaction.

Scam went on for six weeks, a lot of goods were shipped, all transactions authorized by isa. All cards were transacted with card number, full name, Vaddress, expiry date.
My wife did get suspicious, and did use a code 10 on one of the transactions, and was assured there was no problem. We checked with our own bank, and a friend in another bank. All assured us the transactions were valid, otherwise we would not get authorization from visa.
At this point, let me explain, all goods were being shipped to the UK, and all cards were UK cards.

Anyway, it all came to a head when a more senior visa rep was on the phone and my wife again expressed her doubts. This lady asked my wife if she wanted to invoke a code 10, which she did and the fraud was uncovered.
All hell broke then, Visa Fraud dept, Garda Fraud got involved. We assisted as best we could, but no one was caught.

All during the investigation, Visa would give no support. They even processed another £10,000 which was going through the clearing system.

As a retailer, who had processed many "mail order" orders we were not initially worried. After all, we had followed the book, several people in the banks had assured us that the transactions were Ok becouse Visa had authorised them.
Visa would not engage with us at all. It was business as usual, we still processed visa, even did some mail order transactions.

It was one of the Garda Fraud squad that gave us a warning, as he was finishing up. "Watch out for Visa, they will clean out your business account.

It works like this. Visa continue doing business as usual, processing cards, as time goes by, the cardholder discovers there was used (not stolen) and fill in a form repudiating the transaction. Visa process the repudiated transaction, gets the retailer's side (forms to be filled in), looks for documentation to support the transaction etc. When everything is looked into and the retailer has the correct authorization it should be the end of it. Cardholder refunded, retailer vindicated. BUT, and this is a big BUT, once Visa is notified of a disputed transaction by the cardholder, they immediately, before contacting the retailer, withdraw the disputed funds from the retailer account. They have a Direct Debit for the commission payments, so they have access to take any amount out of your account.
Thankfully, thanks to the heads up from the Garda and corporation from our own bank, we instructed our bank only to allow visa commission charges to be withdrawn from our account.

Around four weeks later (and up to threes months), disputed visa transaction forms were coming into us. Of course, once the first non commission direct debit was bounced back to Visa, the gloves were off and they came at us with everything. You see, their policy is to clean out your account before you even know about the disputed claims. That way, they have the money and you are out of business without the wherewithal to fight them. There is no legal aid for this kind of thing. ISME do not do small retailers, so you would not have anywhere to go.

Visa's case:
We should not have being processing mail order (telephone orders). As a retailer we had a Merchant Agreement with Visa. To do mail order, you should have a Mail Order Agreement, these apply to Dell, Amazon etc.
This was news to us, nowhere in the Merchant Agreement does it say not to do mailorder. In fact, every time we called for authorization it was offered as an option. If Visa wanted to prevent Merchant Agreement retailers doing mail order, it would be a simple matter to block such transactions when authorization was being sought.
A Mail Order agreement puts all the responsibility for identifying the cardholder on the vendor, anything goes wrong with a Mail Order transaction, it will be the vendor who suffers the loss.

However, with the Merchant Agreement, the onus is not completely on the vendor to identify the cardholder. Visa has some responsibility for securing the cards.

What about the authorizations.
Well, authorization is not a guarantee that Visa has applied will pay the retailer.
According to Visa. It confirms that the cardholder, with that name and address has sufficient funds to support the transaction. So, not a guarantee for the retailer that they will get paid.

Anyway, we battled with Visa for several years. we had the money, they did not. They even served an injunction on all my assets.
They eventually lost interest, but not without subjecting myself and my wife to about two years or worry. I had confidence that Visa would not take it to court as it would reveal how easy it is to commit credit card fraud and how little Visa did to prevent it. For example. If the card is issued outside the country, no check is done against the address, no pin numbers are required.
Judges have credit cards too and would not be impressed with the security Visa were using to protect their cards.

There are many small retailers still doing mail order type transactions, despite not having a Mail Order agreement with Visa. The credit card companies do not want to stop them doing so. There is too much business being done in this sector and Credit Card companies are willing to take a certain amount of loss, at the same time bully as much as they can to push some of the loss back at the retailer and the cardholder.

When we started our business, we had no retail or business experience. We learned fast, had good processes in place, paid our taxes and bills on time, made sure we got paid. We found running our own business not as difficult or mystifying as we thought it would be. Most of of our the business relationships were fair, transparent. But Visa thought us a lesson, they could have put us out of business, have put many other small retailers out of business.
But they did not and I am thankful to the Garda who warned us
 
Back
Top