Credit Card Fraud Takes Another Merchant Down

I got a call early this week from the CEO of an on-line company. He contacted me through the Prevent Chargebacks website. This company deals exclusively in digital content – streaming video to be precise. They’ve been in business for less than a year and already listed in the Terminated Merchant File (TMF) For those of you who may not be familiar with the TMF, it’s that file that all the on-line payment processors share. It contains a list of merchants that have had their credit card processing terminated – usually for excess chargebacks.

A sad, familiar story

Here was an on-line company who had a great business concept, set up a merchant account and credit card processing with some of the most well known names in the industry, and thought they had a successful business. Unfortunately they hadn’t done their homework and the bank and processor never bothered to tell the whole story. Fraud screening wasn’t part of the equation. The CEO thought the processor was doing it for them – after all, they were paying higher fees because they was on line and therefore at more risk for fraud.Our CEO and his small company watched the business grow comfortably to $40,000 – $50,000 per month volume and then got a notice from the processor that they were terminated. Oh, and by the way, the processor is holding about $20,000 of the company’s money to cover any other chargebacks.

I can’t tell you how many times we’ve heard this story at Merchant911. The merchant can’t accept credit cards and he can no longer get a processor. He’s essentially out of business. This company was providing streaming video that some customers has already paid for and they wanted to do the right thing and continue providing it in spite of the fact that they no longer had access to their money to pay the bills.

What to do?

This company needed help desperately and they needed it fast. They were losing money by the hour.I’ve been doing this Credit Card Fraud Prevention thing since 2001 and I’ve made a few contacts over the years. I knew that good fraud screening and a program like Payer Authentication was going to provide the help they needed if they could get a processor to even talk to them. After all, they were on the TMF and that makes it tough. I had to be honest with their CEO – if they could get someone to do business with them, it was going to come at a premium price. Realistically they had no choice; it was anti up or fold.I phoned my contacts at Cardinal Commerce and told them the situation. Cardinal Commerce agreed to talk to the folks and see if something could be worked out. I don’t know how this will shake out and I probably never will. But if the company is to be saved, Cardinal Commerce will be the ones to do it.

The lesson learned

I can’t tell you that if this company had taken the Preventing E-Commerce Chargebacks course they wouldn’t be in the position they were in, but I can tell you that at least they would have known that they had to have fraud screening. They would have known how to get it through reliable vendors, and they would have known how do some of their own manual screening. The price of the course is only the cost of a couple of charge back fees. We think it’s well worth it.

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