From: ciar04@vaxa.strath.ac.uk
Newsgroups: soc.culture.asean
Subject: Re: Social Development Unit (Re : was Sins of Singapore)
Date: 27 Jul 92 14:02:51 GMT
Organization: Strathclyde University VAX Cluster

In article <199207270807.AA04829@pe5.pe.utulsa.edu>, sya@pe5.pe.utulsa.edu (Syed Shibli) writes:

>I agree with you completely. I think one of the biggest weaknesses in the
>credit card protection schemes in the US is the "maximum liability"
>clause. The "maximum liability" of any cardholder for each lost or stolen 
>card is fifty dollars for cases reported within twenty four hours of theft
>or lost. While this serves to protect the cardholder splendidly, the impact
>of any liability is often felt by the merchant itself. I am not sure as to how 
>credit card cos handle such cases. When you have a merchant accepting your
>card at their stores, I should think that some sort of recompense would
>have to be given to the abused party should some card filcher come in and
>buy thousands of dollars worth of goods using a stolen card.
 
Let me give you some inside info. into the credit card business.

The provision of the "maximum liability" clause is made possible from various
sources.  Firstly, there is the insurance offered by the credit card 
franchise.  These claims are possible only if they can be proved to be
fraudulent.  The reason why a lower liability is given for reported lost or
stolen cards is because an immediate pickup code (F1 for Visa cards) is
broadcast to the headquarters when notice is received.  This is quite
effective, especially in preventing fraudulent use of the cards locally (i.e.
the place where the cards are lost).  Syndicates however do not operate in
this style.

If the merchant accepts a fraudulent card in good faith, and if the merchant
has done every reasonable step to ensure that the card is genuine, the loss
due to the fraudulent transaction will be borne by the merchant's bank.  The
merchant's bank can present the dispute transaction(s) to the issuing bank,
who will naturally reject the claim.  The merchant's bank would then 
re-present the claims (with additional evidence) to the issuing bank, who
will again reject the claim with additional evidence on their own.  The
merchant's bank would then present the claim for collection.  If this is again
rejected, the claims may then be sent for arbitration.  The process is
long and tedious and involve a lot of paper work.

The problems credit cards companies face are not so much of the small time
thief using the stolen credit card on a spending spree.  Rather, they are the
organsied syndicates that are causing the headaches.  I once had a case
where the credit card was stolen on Friday afternoon.  On Saturday, three
simultaneous transactions on the same card occurred in Japan, Hongkong and
Switzerland.  By Monday, we were hit several thousand dollars.

If you are in the credit card business, you will know that there are lots of
idiosyncracies in their operations.  As security measures become more
sophisticated (e.g. use of point of sale card readers), couterfeit measures
become even more sophisticated.  I still recall the day when one of the
syndicates were caught by the CID.  Their equipment (embossing machine, 
encoding machine etc) were even more sophisticated that the machines my
bank was using!

Friends of mine usually claim that my signature on the credit card is too
simple and can be easily forged.  I told them that having been involved
with the credit card business, I know that the signatures are not at all
relevant.  No credit card is absolutely safe (even unissued ones).

Regards.

#----------------------------------#-------------------------------------------#
|  W.H.Watt                        #  JANET:                                   |
|  Dept. of Accounting & Finance   #           w.h.watt@uk.ac.strath.vaxa      |
|  University of Strathclyde       #  Rest of the World:                       |
|  Glasgow                         #           w.h.watt@vaxa.strath.ac.uk      |
|  United Kingdom                  #                                           |
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