Online scammers

By DAILY MAIL REPORTER
Updated: 19:00 EST, 3 June 2004

BEWARE: the internet could be damaging your business's health.

Hairdressing firm Roland John is more than £8,000 out of pocket after its owners, Roland Grosset and Lynne Morgan, were targeted by fraudsters.

The salon has been in business in the Wiltshire town of Warminster for more than 25 years and employs 15 stylists and beauticians.

In November 2002, it decided to start selling specialist shampoos, conditioners and straighteners over the internet and by phone.

All went well until this spring. Lynne explains: 'We had a large number of orders through the internet for a couple of pairs of hair straighteners.' The straighteners cost about £100 a pair and the orders tended to be for a couple of pairs plus, sometimes, a bottle or two of shampoo.

When it received these transactions, the salon treated them like any other credit card payment: the card details were entered into the salon's card processing machine.

Because internet orders are treated as 'customer not present' accounts, there's a special prompt for this on the machine.

But the salon has found - to its cost - that while it should be safe to assume that an authorisation code would mean the transaction is completed satisfactorily, this is not the case.

Instead, in March this year they received the first of a number of letters from Barclaycard Merchant Services telling them that they'd been the victim of a fraudster - and the money they'd received was being clawed back.

Lynne says: 'I was horrified when I opened the first letter. I could not believe this could happen.'

The problem had come to light when cardholders received their statements and found they'd been charged by the salon for internet transactions they'd never completed. This is because the fraudsters had somehow got hold of the card details, and used them to rip off Lynne and Roland's salon.

Lynne says: 'We even got some of the cardholders calling us. Naturally, they were upset and were wondering how on earth this could have happened to them.'

But while the cardholders have got their money back, Lynne and Roland have had to take the loss on the chin.

They already pay 1.6% of each credit card transaction to Barclaycard - as well as £15 a month for the machine used to process payments. Lynne has written to Barclaycard threatening to take their business away, but to no avail.

She says: 'There is nothing we can do. We pay all this money to Barclaycard, as do their cardholders, but at the end of the day the fraudsters get away with it and Barclaycard doesn't lose out.'

According to the Association of Payment Clearance Services, it's a misconception that authorisation means a transaction is guaranteed.

In its guide - Spot And Stop Card Not Present Fraud - it says: 'The fact that a transaction is authorised and an authorisation code is provided does not guarantee payment - it simply means that the card has not been reported lost or stolen and that there are sufficient funds available at the time of the authorisation.'

A spokesman for Barclaycard, while admitting this was a 'terrible' individual case, says: 'If you take 'card not present' transactions then you do so at your own risk: if something goes wrong, you carry the can.'

He says there are two systems to which retailers can subscribe that should help prevent this kind of fraud.

The first, a software system called CV2/AVS, demands the three-digit code on the card signature strip - which should show the card is present. It also gives verification of the cardholder's address. But it doesn't stop identity theft fraudsters and does not guarantee 100% protection.

The second system, called Verified by Visa (there's also Mastercard Secure Code), is for online transactions and protects them 100%. Subscribing to both these systems would cost about £20 a month, according to Barclaycard.

Lynne says: 'Barclaycard never informed me of the CV2/AVS software until after I wrote to them complaining about this and asking how we could avoid this happening to us again. We've never even been told about Verified by Visa.

'What annoys me is that they do not publicise these systems. There must be so many small businesses being targeted by fraudsters: we need help from the banks to fight back.'