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Ecommerce merchants shafted by banks

Posted by Michael Bloch in ecommerce (Tuesday February 24, 2009 )

It seems there’s been another major security breach in the US banking/card processing system that has exposed the details of many cardholders. That’s bad news for the cardholders – and likely for ecommerce enabled merchants too.

As reported by Merchant911, the Pennsylvania Credit Union Association has said:

“This is a very large compromise, similar to the Heartland compromise, but slightly smaller.”

However, as pointed out by Merchant911 also, this is the bit that really stinks is this statement from the association:

“Since track data was not compromised, we are not suggesting that you block and transfer these compromised accounts. Chargeback rights should exist for all Card Not Present transactions simply by the cardholder asserting a dispute for the unauthorized transactions.”

Nice huh, if a compromised card gets through your fraud screening, then you’ll also be left to pay the hefty chargeback fee! It makes me wonder how many times in the past this has also occurred.

If I’m understanding this correctly, this is totally irresponsible for a financial institution to allow cards known to be at risk continue to be in circulation. At the very least, any fraudulent transaction associated with these cards should see any chargeback fee to the merchant waived and it not recorded as a black mark on their merchant account record.

As mentioned, this isn’t a small breach – the size of the Heartland incident is still unknown, but according to the company, they process 100 million transactions a month and the breach took place over a period “longer than weeks”.

These massive breaches are happening far too often and online merchants should not be the whipping boy nor have to pay for the incompetency of financial institutions and major processors.

However, what’s right and fair and what actually happens are usually two different things, so merchants need to be even more vigilant in screening credit card transactions being placed through their sites. Pick up some credit card fraud screening tips.


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