You open your credit card statement and give the charges a glance. There’s one charge that you don’t remember making, but the amount is only $5.95, and the company name looks vaguely familiar. Since your bill doesn’t include the merchant’s phone number or website address, further investigation would take more time than it’s worth. So you pay the bill and get on with your day.
That’s exactly what the scam artists were counting on.
The Federal Trade Commission (FTC) recently halted an elaborate, international scam that over a four year period ripped off $10 million from American credit and debit card holders. While sophisticated techniques were used to set up fake merchant accounts and obtain millions of credit and debit card numbers, in the end the scam relied on something simple – the knowledge that many people will pay a small charge rather than investigating it.
FTC Obtains Court Order Halting International Scheme Responsible For More Than $10 Million In Unauthorized Charges On Consumers’ Credit and Debit Cards
At the request of the Federal Trade Commission, a federal court has halted an elaborate international scheme that used identity theft to place more than $10 million in bogus charges on consumers’ credit and debit cards, pending a trial. More than a million consumers were hit with one-time charges of $10 or less, and their payments were routed through dummy corporations in the United States to bank accounts in Eastern Europe and Central Asia.
The defendants, using phony company names resembling real companies, and information taken from identity theft victims in the United States, opened more than 100 merchant accounts with companies that process charges to consumers’ credit and debit card accounts, according to the FTC complaint. The FTC believes the defendants may have run credit checks on the identity theft victims first, to be sure they were creditworthy. The defendants also cloaked each fake merchant with a virtual office address near a real merchant’s location, a phone number, a home phone number for the “owner,” a Web site pretending to sell products, a toll-free number consumers could call, and a real company’s tax number found on the Internet.
The FTC alleged that with spam e-mail, the defendants recruited at least 14 “money mules” – people in the United States they paid to form 16 dummy corporations, open associated bank accounts to receive the card payments, and transfer the money overseas. The defendants used debit cards linked to these bank accounts to set up telephone service, virtual addresses, and Web sites that helped deceive the card processors, according to the complaint.
The “money mules” responded to spam e-mail pretending to seek a U.S. finance manager for an international financial services company. The FTC has not determined how the defendants obtained the stolen identities or consumers’ credit and debit account numbers. Consumers’ payments were sent to bank accounts in Lithuania, Estonia, Latvia, Bulgaria, Cyprus, and Kyrgyzstan.
None of the consumers affected by the scam had contact with any of the defendants. Most consumers either didn’t notice the charges on their bills or didn’t seek chargebacks because of the small amounts – charges ranged from 20 cents to $10. Consumers who called the toll-free numbers that appeared on their bills either found them disconnected or heard recorded messages instructing them to leave a message, but no calls were returned.
The defendants are the 16 sham companies – API Trade LLC, ARA Auto Parts Trading LLC, Bend Transfer Services LLC, B-Texas European LLC, CBTC LLC, CMG Global LLC, Confident Incorporation, HDPL Trade LLC, Hometown Homebuyers LLC, IAS Group LLC, IHC Trade LLC, MZ Services LLC, New World Enterprizes LLC, Parts Imports LLC, SMI Imports LLC, SVT Services LLC – and one or more persons who are unknown to the agency at this time. The FTC charged them with making unauthorized charges to consumers’ credit cards in violation of Section 5 of the FTC Act. The court froze the defendants’ assets and ordered them to stop operating, pending final resolution of the case.
Scam protection = attention to detail
Scam artists like those nabbed in the action above count on the fact that you’re too busy to chase down a small charge to an unknown merchant. So when bill-paying time rolls around, set aside enough time to adequately review the charges appearing on your statement. This is especially important if you live in a household where one person pays the bills and more than one person use the cards.
Follow these steps to avoid becoming a victim of a similar scam:
- Thoroughly review your monthly statements. Verify every purchase and if you don’t remember it, check it against the receipt that you hopefully kept. If you don’t have a receipt, contact the merchant. If the merchant’s information isn’t available on the statement, contact the card company. If they don’t have the information necessary to contact the merchant and verify the charge, dispute it.
- If you have trouble remembering charges from month to month, make it a habit to check your accounts more often – perhaps weekly – by going online and looking over recent purchases.
- Set up a simple system to keep track of receipts. For example, put all receipts in a central envelope, basket or drawer. Then when the monthly statement comes it will be easy to verify each transaction. This is especially important if more than one family member uses the same card.
To file a complaint with the FTC, visit their FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,800 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.
Another good source for information on identity theft prevention is the Identity Theft Resource Center.