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Suspect card fraud? How to file a claim

Steps to take when reporting fraudulent use of your card

By  |  Published: May 19, 2017

Suspect card fraud? How to make a claim

If you spot an unauthorized purchase on your credit or debit card statement, will you know what to do, who to call, and how to protect your account?

Forty-seven percent of Americans have experienced card fraud in the past five years, according to the ACI Worldwide 2016 Global Consumer Card Fraud report.

Knowing what actually constitutes fraud, and what to do when it happens, is the best way to protect yourself from additional bogus charges, and potential liability for not reporting it in a timely manner.

What is fraud? What isn’t?
“At its basic level, fraud is any transaction that’s not authorized by the cardholder,” says Matt Freeman, head of credit card products at Navy Federal Credit Union.

An important second element, says David Pollino, senior vice president and deputy chief security officer at Bank of the West, is that the charges must not benefit you.

In other words, if your spouse went into your wallet without your knowledge and used your credit card to pay the phone bill, that’s not reportable. “It may be unauthorized, but you were receiving a benefit, so it isn’t fraud,” says Pollino.

Other cases of mistaken fraud include when consumers don’t remember or don’t realize that they authorized a purchase, says Eileen Grogan, assistant vice president of payment solutions at Affinity Federal Credit Union.

“People think they’re signing up for a free trial of something, but embedded in the terms and conditions is a recurring order of an item,” she says. In such cases, you will have to fight with the merchant directly, unless the merchant makes it extremely difficult to cancel, which is when you’d call your card issuer for help.

Finally, before you jump to fraud conclusions, be aware that merchant names sometimes appear differently on your statement. If you’re not sure about a transaction, Grogan suggests looking for the phone number listed under the merchant name on your statement. A quick call to that number can often help jog your memory (or confirm your suspicion), she says.

How to detect fraud
Checking statements and account activity regularly, line by line, can help you spot fraud. Sometimes, it will be glaring – for instance, a $250 charge in New Mexico, when you’ve never left Ohio. Other times, it may be more subtle.

“Fraudsters often test out small amounts, even pennies, to see if they can get away with using your card,” says Grogan. A pending charge for $1.99 might signal someone is gearing up to go on a spending spree, she says.

You want to report in a timely manner, which means as soon as possible.

— David Pollino
Bank of the West

The best way to keep tabs on such activity is to set up fraud alerts, says Freeman. Most issuers allow you to get texts, emails and push notifications whenever a transaction takes place. 

You have 60 days to detect, report fraud
Generally speaking, the longer you take to report fraudulent charges to your creditor or bank, the more hoops you may have to jump through to be credited back the money.

“You want to report in a timely manner, which means as soon as possible,” says Pollino. However, financial institutions recognize that most consumers do not check their accounts online daily.

“In a worst-case scenario, say a transaction takes place somewhere near the beginning of a statement cycle. The statement takes about a month to go to you, and then you don’t review it right away. That should all take place within 60 days, and banks would expect to hear from you within that period,” says Pollino.

That’s straight out of the Fair Credit Billing Act, which specifies that the reporting of errors (or unauthorized charges) should be received by the financial institution “no later than 60 days after transmitting the periodic statement on which the error is first reflected.”

Beyond that 60-day window, the issuer must still take up an investigation on your behalf, but it may take more time, and you could be liable for up to $50, depending on the issuer.

“Each institution has its own policies, but most of the time they are more generous than the law requires,” says Pollino. Most issuers offer zero liability protection to the consumer no matter how long ago the transaction took place. “Customers have come to expect that they’re not responsible for unauthorized transactions.”

For the most part, banks and creditors do what they can to help. In fact, 90 percent of U.S. consumers said they were happy with the customer service they received after a fraud experience, as per the ACI report.

Debit card liability rules are different
The timing of your fraud reporting matters more if it involves a debit card transaction. That’s because you may have more liability, and the bank has up to 10 days to investigate your claim and refund your money – meaning your actual money might not be returned to you right away, or at all.

Here are the ground rules, as outlined by the Federal Trade Commission: If you spot debit card fraud and call within two business days, the most your liability can be is $50. Between Day Two and Day 60, your liability shoots up to $500 (although many banks have voluntarily scaled back that amount to $50 to be more in line with credit cards).

Once you go past 60 days, it can really cost you. As Regulation E, the Federal Reserve’s rules and procedures that govern electronic funds transfers (EFTs) explains, if another fraud takes place after 60 days, the bank does not have to reimburse you for those subsequent charges at all.

Still, in the era of wanting to provide good customer service, says Freeman, it’s likely that your bank will try to work with you.

What to do once you spot fraud
Now that you know how to spot fraud and that you should report it right away, here’s a quick walk-through of the process. “The first call is to financial institution to cancel the card and protect yourself,” says Pollino.

You can call the 800 number on the back of your card or on your billing statement, or go online and look for a link to report or dispute the unauthorized charge, says Grogan. If calling, ask to speak to the fraud department (or press the appropriate number on the customer service menu). You will either be transferred, or the person on the line will take down your information, and someone will get back to you if necessary.

You should be prepared to give the date of the transaction, the amount, and the merchant name that’s appearing.

— Eileen Grogan
Affinity Federal Credit Union 

“You should be prepared to give the date of the transaction, the amount, and the merchant name that’s appearing,” Grogan says. You will likely have to answer a few questions, too, such as if your card is in your possession, and if you’ve ever given out your account number.

Keep a record of when you called, to whom you spoke, and any notes about the conversation; for online claims, take a screenshot or print out the confirmation page for your records.

If the creditor agrees that fraud is likely, your account will likely be closed, says Freeman, and the issuer will send you out a new card with a new account number. In the meantime, the credit card company will open an investigation, and will contact you if necessary.

Most creditors will issue a provisional refund at the time the claim is submitted; with debit accounts, funds may take a few days to reappear.

When to file a police report
Where things get more complicated is if you actually know the person who used your card without permission.

“Primarily, filing a police report is necessary only if you know the perpetrator," says Freeman. “If you lost your card or transactions are happening across the globe, a local police report won’t be very effective,” he says. Of course, when so-called “familiar fraud” takes place, especially with family members, sometimes people don’t want to take that step to allege a crime has been committed, says Freeman.

“There are times when the merchant will produce evidence that an item was indeed ordered and the product was shipped to another family member who made the purchase,” says Grogan. In those cases, it may be necessary to file a police report, but she says, many consumers tend to drop the matter at that point, choosing not to alert authorities.

Another time a police report might be required is if the amount of the fraudulent charges is significant, says Pollino, but each financial institution has its own policy. If this extra step is needed, the bank will guide you through the process.

Next steps: Clean up, monitor your credit
Since you’ll most likely be getting a new account number after reporting fraud, don’t forget to make any necessary changes if you have recurring charges on that account, says Pollino. That way, you won’t have to deal with late payments on top of everything else.

Other than that, you should be set. “In most cases, when there is fraud on your card, the criminal doesn’t have any information other than your account number,” says Freeman. Therefore, the new card number should typically be all the protection you need.

However, if your purse or wallet was lost or stolen, and the thief also has access to your personal information (such as your Social Security number, address and date of birth), you should check your credit report, and take the extra step of contacting the credit bureaus to place a 90-day fraud alert on your file, says Pollino. This will prompt lenders to take additional precautions before granting new credit in your name.

You can take it a step further and institute a credit freeze, which prevents new credit from being opened in your name. Credit freezes require active management on your part, and depending on your state, may cost you a fee. 

The Federal Trade Commission has set up a special website, IdentityTheft.gov, that will walk you through the process of cleaning up your credit and creating a customized plan for undoing the thief’s damage.

Protect yourself from fraud
Although you can’t completely prevent fraud, there are two ways you can make it harder for thieves:

  • Upgrade your payment methods. “Chip cards are a huge step in the right direction because they have a higher level of safety. And, Apple Pay, Samsung Pay, and other mobile payments have even better security features,” says Pollino. “This is technology that we hope people embrace.”
  • Update your contact information. “Financial institutions do a great job monitoring for suspicious transactions, and they may call or email you,” says Pollino. “If they can’t get hold of you, they may shut down your card.” And you won’t find out until you try to use your card and have a purchase declined.

See related: 7 exceptions to ’zero liability’ policies, Fraud alerts: Your credit’s first (and free) layer of security

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Updated: 06-23-2017

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