Consumer Credit Fraud: What Victims Need to Know
$43 billion is the global projection for losses from credit card fraud by 2026.
Fraud attempts are on the rise, with 46% more than last year. The United States accounts for nearly half of all global fraud, and up to 80% of credit cards have been compromised in data breaches (yes, you read that right). Consequently, this is the perfect time for consumers to take credit fraud very seriously.
If those hair-raising statistics aren’t alarming enough, consider the consequences of being the victim of consumer credit fraud, which can include financial losses, damage to credit scores, and the need to resolve fraudulent transactions and disputes with financial institutions.
Fortunately, there are steps you can take to minimize the impact of fraud on your finances and credit history — but it’s crucial that you act fast.
In this post, we’ll explore what consumer credit fraud victims need to know and what steps you can take today to protect yourself against fraudsters.
What is consumer credit fraud?
Consumer credit fraud, also known as credit card fraud or payment card fraud, is a type of financial fraud that involves the unauthorized use of an individual’s credit or debit card information to make fraudulent purchases or transactions.
It is a form of identity theft and can cause financial harm and emotional distress to the victim.
Here are some common forms of consumer credit fraud:
- Credit Card Theft: This occurs when a person’s physical credit card is stolen, and the thief uses it to make unauthorized purchases.
- Card Not Present (CNP) Fraud: In this type of fraud, the criminal uses stolen card information to make online or phone transactions where a physical card is not required. This often involves making online purchases or setting up recurring payments.
- Account Takeover: In an account takeover, the criminal gains access to a person’s existing credit card account by stealing login credentials or exploiting security vulnerabilities. They may then make unauthorized transactions or change account settings.
- Card Skimming: Criminals can attach small devices called skimmers to card readers at ATMs, gas pumps, or point-of-sale terminals. These devices capture card information from unsuspecting users, which can later be used for fraudulent transactions.
- Phishing: Fraudsters may send phishing emails or messages that appear to be from legitimate financial institutions, requesting card information, login credentials, or personal details. Unsuspecting individuals may unknowingly provide their information to scammers.
- Lost or Stolen Cards: If a person loses their credit card or it is stolen, someone else may find and use it to make unauthorized purchases.
- Application Fraud: Criminals may apply for credit cards or loans using someone else’s identity and then run up debts in the victim’s name.
- Identity Theft: Identity theft can be a broader form of consumer credit fraud where an individual’s personal information, including their Social Security number, is stolen and used to open credit accounts, apply for loans, or commit other forms of financial fraud.
What happens if you are the victim of credit fraud?
If you are a victim of credit fraud, you must take prompt action to minimize financial losses, protect your credit, and resolve the issue.
If you suspect or know that you have been a victim, take these ten steps immediately:
1. Change Your Passwords and PINs:
- Take this step immediately to prevent further unauthorized access. Even if you have not been a victim of fraud, it’s a good idea to change passwords and PINs at regular intervals, regardless.
2. Contact the Credit Card Issuer or Financial Institution:
- You can usually find the contact number on the back of your credit card or your account statements.
- Report the unauthorized transactions or activity to them. They will guide you through the process of resolving the issue.
3. Freeze or Close Affected Accounts:
- The issuer will issue you a new card with a new account number.
4. Review Your Account Statements:
- Be thorough in your examination and report any suspicious activity immediately.
5. File a Fraud Report:
- Most financial institutions and credit card companies will require you to file a fraud report to document the unauthorized transactions. They may provide you with a fraud affidavit or form to complete.
6. Place a Fraud Alert or Credit Freeze on Your Credit Reports:
- Contact one of the three major credit bureaus (Equifax, Experian, or TransUnion) and request to place a fraud alert on your credit reports. This alert will notify potential creditors that they should take extra steps to verify your identity before extending credit in your name.
- Consider placing a credit freeze on your credit reports, restricting access to your credit information. This can help prevent fraudsters from opening new accounts in your name.
7. File a Police Report:
- This documentation can be helpful when dealing with creditors and credit bureaus.
8. Monitor Your Credit Reports:
- You can request free annual credit reports from each bureau. Look for any suspicious accounts or inquiries and report them.
9. Keep Records of All Communications:
- Maintain a record of all correspondence and phone calls related to the fraud. This includes dates, times, names of representatives, and case or reference numbers.
10. Be Patient and Persistent:
- Resolving credit fraud can take time. Follow up with your credit card issuer, financial institution, and credit bureaus until the issue is resolved.
Who pays when a credit card or debit card is used fraudulently?
Here’s the good news: If your card has been used fraudulently, your liability is typically limited.
However, the specific rules and protections vary depending on your location and the type of card used (e.g., credit card or debit card).
In the United States, under the federal law known as the Fair Credit Billing Act (FCBA), your maximum liability for unauthorized credit card charges is limited to $50.
However, many credit card issuers have policies that provide even greater protection. In practice, most credit card companies offer zero-liability policies, meaning you are not responsible for unauthorized charges.
Debit cards may have different liability rules, which is bad news for cardholders.
In the U.S., you are not responsible for any charges if you report a lost or stolen debit card before any unauthorized transactions occur.
However, if you report the loss or theft after unauthorized transactions, your liability can depend on how quickly you report it. If you report it within two business days, your maximum liability is limited to $50. If you wait longer than two business days but less than 60 calendar days, you could be liable for up to $500.
You could be responsible for all the unauthorized charges if you don’t report it within 60 days.
That being said, here’s some more good news: Many financial institutions, both for credit and debit cards, have adopted zero-liability policies, which means you are not held liable for any unauthorized charges as long as you promptly report the loss or theft of your card.
Similarly, your liability is typically limited for unauthorized online or mobile banking transactions if you report the unauthorized activity promptly. Under the Electronic Fund Transfer Act (EFTA) in the U.S., your maximum liability is $50 if you report the loss or theft of your debit card or unauthorized online transactions within two business days. If you wait longer, your liability can increase.
It’s important to review your specific cardholder agreement and check with your card issuer or bank to understand the exact terms and protections associated with your card.
How can you protect yourself against credit fraud?
First and foremost, regularly monitor your financial accounts. That means diligently reviewing credit card and bank statements and checking for unauthorized transactions or discrepancies. You can also set up alerts for unusual or large transactions to catch fraud early.
With rates of cybercrime through the roof, securing your online presence with strong, unique passwords for your financial accounts and two-factor authentication (2FA) wherever possible is more important than ever. Password managers can help generate and store complex passwords securely.
To further combat cybercriminals, ensure that you use only secure websites (look for “https://” in the URL) for online transactions and stay vigilant for phishing attempts that impersonate legitimate organizations. You should also install antivirus and anti-malware software on your devices and keep them updated, and be cautious when sharing personal details both online and over the phone, as fraudsters may use this information for social engineering attacks.
Lastly, protect your personal information by safeguarding documents such as credit cards, checks, and statements. Shred sensitive documents before disposal and avoid sharing your Social Security number unnecessarily.
If you have been the victim of consumer credit fraud and would like further guidance (after having taken all of the steps outlined above and followed any instructions from authorities, of course), our team stands ready to assist in any way we can.
Would you like some help?
If you are a client and would like to book a consultation, call us at +1 (212) 382-3939 or contact us here to set up a time.
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