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Know your rights when facing credit card fraud

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Credit card fraud has been on the rise in recent years, and you may be wondering what to do if you have been an unfortunate victim of this crime.

The Federal Trade Commission reports that there were more than 393,000 cases of credit card fraud reported in 2020, up 45% from the about 291,000 cases registered for 2019. And these numbers have been growing steadily in the last few years. The FTC hasn’t released its data for 2021 to date.

Credit card fraud is one of the most common forms of identity theft and it involves the criminal use of of someone else’s personal credentials in order to use the credit card to purchase goods and services in an unauthorized manner.

There are systems in place to help victims of credit card fraud sort out the damages, so, let’s take a look at the different forms of credit card fraud, and the recourse necessary if you find yourself in a situation where your personal information has been violated.

What is credit card fraud?

Credit card fraud is the unauthorized use of another person’s card information in order to rack up charges or get money from their card account. Perpetrators could also sell your information to others for a fee. It falls under the broader category of identity theft. The consequences to you include being billed for charges you did not authorize, and inaccurate input in your credit report.

Ways to engage in credit card fraud

Chip-and-pin cards, otherwise known as EMV credit cards (after Europay, Visa and Mastercard) have helped reduce certain types of fraud. But card-not-present fraud remains a huge problem, and it could cost retailers as much as $130 billion worldwide by 2023.

In the digital age there are a number of ways fraudsters can obtain your information to commit credit card fraud, in addition to old-fashioned methods that involve getting their hands on your card, including the following:

  • Skimming: Skimming is when a thief places a device on a credit card scanner and transmits the data to a nearby mobile device, then uses it to create a counterfeit card. People who process credit cards could use a skimmer device attached to a card swipe machine to read a card’s magnetic stripe. They could also attach skimmers to ATMs to get your card information.
  • Phishing: Phishing is when thieves try to extract personal information from you via email or over the phone. Fraudsters could send you an email presented as being from your financial institution. It could direct you to a website where you will be asked for your card information. Downloading or opening the wrong file from an email can add spyware to your computer. For example, keylogging software can end up on your computer or cellphone if you accidentally click a link on a phishing email.
  • Hacking: Businesses that store your card information could get hacked and your card information could be stolen in a data breach. Large institutions such as banks and retail businesses are more susceptible to targeted data breaches that may put your personal details at risk.
  • Card-not-present fraud: Fraud committed online or by phone, when the thief does not have your physical card in their hand, but they have obtained your card details by other means.
  • Accidental credit card fraud: When a friend or relative believed they have permission to use your credit card, but you didn’t know about it, or the person changed more than you expected.

Reporting credit card fraud

If you have been a victim of credit card fraud, you do have certain legal rights. The Fair Credit Billing Act (FCBA) allows you to dispute errors on your credit card statement.

To take recourse to this law, you should send in a dispute statement (including your card information and a statement of the issue, along with any documents that make your case) to your credit card company’s address for billing inquiries, not the address to which you send your card payments.

You should send this dispute letter within 60 days of when you first got the card statement with the fraudulent charges. It would be best to send this by certified mail with a return receipt so you have proof of delivery.

The card issuer should acknowledge your letter within 30 days of receipt, and it should also resolve your issue within 90 days of getting it.

Report fraud in a timely manner

Most credit card companies today offer zero-liability fraud protection if you report the charges within 30 days. By law, your liability is limited to $50 for card-present fraud. Meaning, the most you could be liable for is $50, thanks to the Fair Credit Billing Act.

Regardless of liability, you obviously want to report fraud as soon as you notice someone is using your account. If you fail to report the fraud, you’ll be responsible to pay the bill when it is due. Once you make a claim, you’re not responsible for any charges under investigation; you just have to make your minimum payment based on the charges you made that month.

It’s a best practice to regularly review all your credit card statements to make sure you’re able to quickly catch any transactions that you didn’t make. This can also help you protect your credit score.

What usually happens in the end?

Once again, you should report fraudulent charges and provide any necessary documentation, the bank has 30 days to respond to your issue and begin an investigation. From there, the bank has to complete the investigation within 90 days.

Fortunately for consumers, most instances of credit card fraud end with the dispute charges being removed or money placed back into your account.

In the meantime, you should have received new cards, with new account numbers, to replace the compromised accounts.

Rights with credit reporting

You have the right to place a fraud alert on your credit report. This lets creditors know that if someone applies for credit in your name, they should take steps to verify whether it is indeed you. If you put in an alert with one of the three major credit reporting bureaus (Experian, TransUnion and Equifax), it should notify the others.

Another right you have to deal with the fallouts from credit card fraud is to block the inaccurate information from getting on to your credit report. The Federal Trade Commission advises that you create an identity theft report with the agency and send it to the credit bureaus, along with proof of your identification and a letter providing input about the fraudulent charges.

The credit bureau will then tell the lenders involved that you are a fraud victim. The lenders cannot pass on the debt to debt collectors. The credit bureaus will also investigate and make changes to your report if you prevail. You could also put in a credit freeze on your credit report so that fraudsters cannot open an account in your name.

After you report to them, providing a copy of your FTC identity theft report, lenders and debt collectors should not report fraudulent accounts to the credit bureaus. Debt collectors should also stop contacting you about the debt.

Avoid being a fraud victim

Fortunately, the card networks have a “zero liability” policy that ensures that you will not be held responsible for fraudulent charges. And federal law limits your losses for unauthorized credit card use to $50. Various states have their own consumer protection laws that could offer you additional protections, too.

Even though you are not responsible for unauthorized charges, it is best to avoid being a fraud victim in the first place. For one, the losses sustained by the card networks as a result of fraud are likely to be passed on to consumers in some form.

It’s best to be on your guard against fraud and also check your credit report regularly to make sure there is no activity you don’t recognize.

The bottom line

Credit card fraud has been rising for some years now as digital technologies provide new avenues for fraudsters, in addition to the old-fashioned ways of getting your information from your physical card. You have various rights to deal with the fallouts, but it’s best to be vigilant to begin with.