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Losses
U.S. Federal Law can hold the cardholder victim
responsible for up to $50. Merchants in high-risk
industries, like unattended automated fuel pumps
or Internet sales, anticipate a certain amount of
credit card fraud, and set prices accordingly.
These higher costs are then passed onto the
customer.
Credit Card Companies
In
2003 the Wall Street Journal estimated that the
credit card industry generated $500,000,000 in
annual revenue in research and investigation fees
paid by consumers and businesses. This additional
revenue offsets some of the costs incurred by
credit card issuing and processing companies' when
investigating chargeback claims. Some merchants
believe the high revenue generation by the banks
from the crime victims, reduce the incentive for
the credit card banks to implement procedures to
reduce credit card crime. However, the companies
which collect these fees are not capable of
dictating fraud prevention policies to the rest of
the world. Payment transfer associations, like
Visa and Mastercard, receive profit from
transaction fees calculated as a percentage of the
amount of money they transfer. These associations
are motivated to enact policies which increase the
amount of money transferred by their systems.
Credit card fraud has a chilling effect on
merchant acceptance of credit cards, motivating
merchants to not accept credit card payments to
mitigate their risk of loss. These payment
transfer associations are therefore motivated to
enact policies and enforce regulations which
reduce credit card fraud.
Merchants have begun to request changes in State
and Federal Laws to protect consumers and
merchants from fraud, but the credit card industry
has opposed many of the requested laws.
Because all card-accepting merchants and
card-carrying customers are bound by contract law,
according to the agreements they sign with their
processing / issuing banks, respectively, State
and Federal law has a smaller role in preventing
merchants from being tricked. Payment transfer
associations enact regulatory changes, and issuing
/ acquiring banks, merchants, and cardholders are
contractually bound to these new regulations.
The Criminals
In
the
US,
persons that commit credit card crime largely go
unpunished and repeatedly victimize consumers and
businesses. The
Secret Service
handles crimes involving the US money supply, they
have a limit of $2,000 before investigating each
crime. Most credit card criminals know this and
keep purchases from any one business below $2,000.
With credit card crime occurring across state
lines, criminals often are never prosecuted
because the dollar amounts are too low for local
law enforcement to pay for extradition.
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