As the world continues to adjust to the new realities of the coronavirus pandemic, scammers are looking for new ways to con people out of their money. Fraudsters who once depended on in-store schemes are now forced to learn new techniques for pulling off scams as they move their operations online along with retailers around the country. Unfortunately, the tactics they develop now can have an everlasting effect on online merchants, even after the uncertainty of COVID-19 passes and the economy stabilizes.

Let’s take a look at credit card identity theft, its prevalence during the coronavirus pandemic, and proactive steps online merchants can take to protect themselves from falling victim.

What is credit card identity theft?

Identity theft involves a fraudster illegally obtaining a victim’s personal information and using it to assume the victim’s identity. The scammer can then go on to empty the victim’s accounts, open loans and lines of credit in their name, and redirect payments headed towards the victim, such as Social Security checks, tax refunds, and paychecks, to their own accounts. Identity theft is believed to be the most common crime in the U.S., with more than 3.2 million cases reported to the Federal Trade Commission in 2019 alone.

Credit card identity theft occurs when a fraudster gets their hands on the credit card information of a victim and uses it to make purchases or obtain a service. It can also take the form of a scammer using the victim’s information to open a credit card in the victim’s name and then racking up a huge bill with the card. Scammers use various methods to get the information necessary to pull off these forms of identity theft, from hacking devices remotely, to luring victims into insecure sites, to phishing for information via bogus online forms and phone calls.

Credit card companies offer robust consumer protection against fraud with liability generally limited to just $50. In most cases, the merchant who accepted the fraudulent charge is the one left to cover the loss.

An increase due to COVID-19

The nationwide lockdowns and stay-at-home orders due to COVID-19 have led to a steep increase in online purchases and transactions. In fact, according to online sales data reported on digitalcommerce360.com, e-commerce sales for the last week of May, are 40% higher than online sales of the last week of February.

While this sounds like good news for online merchants, the flood of new customers and the increase in sales from existing ones can make scammers difficult to detect. It’s easier for scammers to pull of their cons now with so many other customers available for cover.

Aside from the methods described above, credit card identity theft now also takes the form of a fraudster hacking an existing customer’s account and using their information to make their own purchases. Many online platforms allow customers to save their information to the website, and despite robust security measures taken by the online merchants, scammers can hack into these accounts with devastating effects.

Warning signs of credit card identity theft

Merchants can protect themselves from becoming victims of credit card identity theft by learning how to recognize the red flags that may indicate the occurrence of a scam.

First, be on the lookout for dormant accounts that are suddenly very active. While it’s possible for a customer to regain interest in your business and begin making purchases again, it’s unlikely that they will go from making no purchases in months, or even years, to racking up a huge bill in just a few weeks.
Scammers may prefer to hijack a dormant account with the hope that its owner won’t be aware of the takeover until it’s too late, but if you know to be wary of sudden activity, you can catch them before they do much damage.

Another red flag is a new customer who uses multiple credit cards to make small purchases. Many scammers use online merchants to test out credit card numbers they’ve hacked before moving on to larger targets.

Finally, be on the lookout for an increase in gift card purchases. Scammers love using stolen information to purchase gift cards, as once these cards are purchased, they can’t be invalidated, even if the victim is aware of the scam and tries to stop the purchase.

Going forward

As mentioned, though the increase in these scams is due to COVID-19, there’s no reason to believe the fraudsters will stop executing these scams once the economy returns to its normal state. It’s a good idea to use this time to train your staff how to recognize signs of credit card fraud and to establish a protocol for suspicious activity on your website. Often, the best way for merchants to protect themselves from credit card identity theft fraud is by utilizing a fraud prevention service like FraudFix. We are committed to providing our clients with strong, dependable fraud protection through the
pandemic crisis and beyond. Your complete fraud protection is our only priority.

Sources:

https://www.prnewswire.com/news-releases/identity-theft-on-the-rise-during-covid-19-pandemic-according-to-identityusa-301044010.html
https://www.businesswire.com/news/home/20200408005181/en/Coronavirus-Pandemic-Store-Closures-Shift-Consumer-Buying
https://merchantriskcouncil.org/news-and-press/mrc-blog/2020/ecommerce-fraud-and-covid-19