WRITTEN QUESTION E-2833/00

by W.G. van Velzen (PPE-DE) to the Commission

(8 September 2000)

Subject: Credit card fraud on the Internet

Credit card fraud on the Internet appears to be much more frequent than with purchases in conventional shops. Leading credit card companies confirm that this is a major problem which could put a brake on growing confidence in the new Internet economy.

1. Can the Commission give a breakdown of how things stand in this area (how many instances of fraud involving credit cards over the Internet are recorded, and what are the figures for credit card payments in conventional shops)? Can the Commission confirm that credit card fraud in e-commerce occurs roughly three times more frequently than with ordinary credit card transactions?

2. Does the Commission think that this type of credit card fraud is an obstacle to the development of e-commerce and e-Europe? How can the Commission keep the harmful consequences to a minimum and, in this context, how does the Commission guarantee implementation of the objectives laid down at the special ICT summit in Lisbon?

3. How can the Commission prevent a barrier being created, or even a competitive disadvantage, for Internet shops which, because of fraud and because the credit card companies pass on the costs of the fraud to them, have to pay a higher commission to the credit card companies than ordinary shops, and which are obliged to invest increasing amounts in costly anti-fraud insurance and in safeguarding payment transactions, both in absolute terms and in comparison with conventional shops?

Answer given by Mr Bolkestein on behalf of the Commission

(6 November 2000)

1. The Commission does not have detailed statistics on credit card fraud committed over the Internet. The figures announced by some payment card schemes only distinguish between face-to-face and remote transactions. Among the latter, there is no distinction between on-line transactions and the remote transactions originated by mail, telephone or telefax. Therefore the Commission is not in a position to confirm the statistics to which the Honourable Member refers.

2. The Commission agrees that the growth of payment fraud over the Internet, especially linked with the use of credit cards, is reducing consumers' confidence and could hamper the potential of electronic commerce. The Commission will address the concerns expressed by the European Council in Lisbon in a series of initiatives, notably a communication on preventing fraud and counterfeiting of non-cash means of payment. This communication will deal with the issue of Internet payment fraud and introduce a fraud prevention action plan of concrete measures. The Commission will also launch, in the framework of the e-Europe action plan, specific actions to increase the security of the Internet and of smart cards. Moreover, Article 8 of the distance selling Directive (Directive 97/7/EC of the Parliament and of the Council of 20 May 1997 on the protection of consumers in respect of distance contracts(1), which entered into force in June 2000) enables consumers to request cancellation of a payment and obtain a reimbursement where fraudulent use has been made of a payment card in connection with distance contracts. This provision applies also to payments made over the Internet using a card. The forthcoming communication on creating a safer information society by improving security of networks and combating computer related crime will map out legislative and other measures to increase safety of internet use. Finally, the Commission is examining existing systems of chargeback, provided by card issuers on a commercial basis or on a legal basis, which could constitute a tool for consumers victims of fraud.

3. The Commission is aware of the difficulties that the retail sector is facing with respect to payment fraud, especially for on-line sales. One of the objectives of the fraud prevention communication is to promote a high level of security of on-line payment systems, which will better protect consumers and merchants alike.

(1) OJ L 144, 4.6.1997.