When a Cardholder Suspects Fraud, Who Picks Up the Tab?
If you possess a credit card, chances are you’re aware of the risk of credit card fraud. If you’re not…you should be.
Data published by the Identity Theft Resource Center (ITRC) suggests about 14.2 million credit card numbers were exposed to fraudsters in 2017. That’s an 88% increase over the previous year. Not only that, the Social Security numbers of 158 million Americans—roughly half the country’s population—were also exposed.
2017 was an exceptionally bad year due to the monumental Equifax hack. It’s not much of an outlier though; as we conduct more and more business digitally, security vulnerabilities and exposures will continue rising.
Considering the risks, you should know who’s responsible when credit card fraud occurs, and what to do if you suspect fraudulent activity.
Who’s Liable for Credit Card Fraud?
The Fair Credit Billing Act, adopted by Congress back in 1974, establishes the share of liability you carry as a debit or credit card user.
According to Federal law, your total liability when using a credit card is capped out at $50, no matter how long it takes to report suspicious activity. With a debit card, though, you only have that protection if you report the fraud within 48 hours. After that, your maximum liability increases to $500, if reported within 60 days. Beyond 60 days, you can be held liable for all debit card losses.
Of course, that’s just the minimum consumer liability guaranteed by law. Many banks these days offer limited- or no-liability credit cards in the event of a fraud incident.
If you’re not liable, though, then who is? In most cases, your bank takes on the liability initially, compensating you for the loss. The bank then tries to recover its own losses by clawing the money back from businesses who allow the fraudulent transactions to occur.
Ultimately, the party who covers the cost is the one judged by the bank to be most at fault. This is often the seller, as they accepted the transaction.
What to Do if You Suspect Fraud
If you see a transaction on your statement you don’t recognize, be sure to review it closely. The billing descriptor (the name of the business that appears on the statement) won’t always reflect the business name, so make sure it’s not simply a case of mistaken identity.
If you’re confident that you did not complete the transaction, you can then contact your issuing bank. The bank will be able to provide more information about the transaction and determine whether a reversal—referred to as a “chargeback”—is the right course of action.
It would also be a good idea to put a hold on your account and cancel it to ensure that no additional fraudulent transactions occur.
You’ll also need to notify the three major credit reporting agencies—Equifax, Experian, and TransUnion—and inform them of the incident. If someone gains access to your existing credit card account, it was probably a crime of opportunity; they’re not likely to access sensitive information like your Social Security number. However, it’s still a good idea to request a free copy of your credit report and review it carefully to be sure nothing else turns up.
Remember: you’re legally entitled to one free credit report from each agency every year. Going forward, you should request a report from one every few months. Monitor your reports carefully to ensure no strange loans or other activity turn up in your name.
Not Sure if Fraud is Responsible?
Don’t recognize a transaction on your billing statement, but not sure if it’s fraud? Maybe you are just unsatisfied with a purchase, but can’t get ahold of the seller? That’s where eConsumer Services comes in.
Our consumer recovery experts will work with you to recover your funds and make things right in a fraction of the time it takes to resolve a credit card chargeback. Contact eConsumer Services and get started.
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