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Nickel-and-dime scammers had help

How did they rip off 1.35 million credit cardholders? Tiny amounts billed to poorly labeled merchants.

By Teresa Mears Aug 30, 2010 8:11PM

How do you steal $10 million and get away with it?


An international credit card ring stole its millions a few dollars (or less) at a time, placing bogus charges of 20 cents to $9 on 1.35 million credit and debit cards. Most were never challenged.


As we wrote previously, there are ways to protect yourself against such fraudulent charges. But business professor Randall Stross, writing in The New York Times, raises an interesting point: Why do banks give you so little information on your credit card statement about the companies with which you've done business?


AS Stross wrote:

Credit card companies do not make it easy for consumers to recognize fishy charges. The monthly statements' description of each transaction -- the "merchant descriptor"-- is frustratingly brief. Consumers may regard some charges suspiciously, but they soon learn that being overzealous, reporting legitimate transactions at unrecognized merchants, wastes time and brings a measure of embarrassment.

Banks are limited by Visa and MasterCard to a maximum of 28 characters for a business description on the statement, Debra B. Rossi, head of merchant business at Wells Fargo, told Stross.

MasterCard had no comment, but a spokeswoman for Visa said the company could certainly provide more space for merchant details -- "if there is marketplace demand."


No one wants to challenge a legitimate credit card charge, but it is sometimes hard to remember all one's small charges, especially for items ordered online, where there is no written receipt. As the online world makes this type of fraud easier, you'd think banks and credit card companies could easily manage to produce statements with full addresses and phone numbers of all the companies with which we've done business, as well as an understandable explanation of the type of business.


The $10 million scheme was unveiled in late June by the FTC, which got a court order to shut down the fraud. The scam, which ran for about four years, was audacious in its scope, as detailed by Robert McMillan at Computerworld.


This is how it worked, according to the FTC:

  • The scammers set up more than 100 fake companies with names close to those of real companies, using mail-forwarding services to create addresses near the companies' real locations.
  • The fake companies created websites in which they appeared to offer goods or services and toll-free numbers that transferred all calls to Eastern Europe.
  • The fake companies got credit card-processing accounts by using identities and tax ID numbers stolen from real people with good credit, including a California deputy attorney general.
  • Using spam e-mail messages (here is an example), the scammers recruited "money mules" in the United States to send the proceeds abroad, using dummy corporations they created and bank accounts they set up.
  • The money was transferred to bank accounts in Lithuania, Estonia, Latvia, Bulgaria, Cyprus and Kyrgyzstan.

Gary Warner at CyberCrime & Doing Time has a list of the fake companies and their addresses, as well as more details on the workings of the scam.


Would you have noticed a small bogus charge on your credit card? How much time would you have spent tracking it down? Would you like to see more information about merchants on your credit card statements?


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