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Unauthorized Charges Gone Wild on Me

posted by Bob Lawless

When you study credit cards and all the bad stuff that can happen with credit cards, you don't expect it to happen to you. I also suppose that is true for everyone. Recently, we had our own little brush with credit card fraud. It all began when my wife called me at my office and asked, "Is there something you want to tell me?" A package of videos from Girls Gone Wild had shown up on our doorstep and was addressed to "R Lawless."

To convince my spouse that I had no idea why these videos had come to our house, my first instinct was to ask whether she thought I was stupid enough to place such an order and have it delivered to the house. Then, I remembered my courtroom advocacy training where I was taught never to ask a question to which I did not know the answer. We immediately checked our credit card records, and we found a number of other unauthorized charges for things like Netflix, Blockbuster.com, a magazine subscription, and a subscription to a Scholastic book series. We could not figure out what sort of fraudster was stupid enough to use our credit card to sign us up for subscriptions that get sent to our house. A little Internet research found the answer.

All of these companies have offers that give bonus prizes or services to a person who gets others to subscribe. Someone had used our credit card number to generate phony subscriptions that would qualify them for these bonuses. Presumably, it is more difficult to trace the person who originated such a fraud because the goods that were ordered ended up at our addresses instead of the fraudster's address. When we called the credit card company to report the fraud, the customer service rep said that they were seeing a lot of this sort of fraud recently.

In addition to canceling our credit card account, we pulled a copy of our credit report and have been closely monitoring all of our credit accounts. For the most part, the companies who had wrongfully charged us were pretty reasonable, the least they can do given that they have a business model that enables this sort of fraud. When told by my wife that we had received merchandise we had not ordered, the Girls Gone Wild rep had a little bit of "Are you sure you didn't order this" attitude but did eventually reverse the charges. It was also a little annoying that Netflix had authorized two accounts for the same postal address, certainly a situation that merits investigation.

The credit card company, on the other hand, billed us a $10 fee to close our account and transfer the balance to another card. Although a credit card company is allowed to charge the cardholder up to $50 for unauthorized charges, all of the companies had agreed to reverse our charges, and hence we had no unauthorized charges on our card. Essentially, we were charged $10 for the credit card company to protect itself from further liability. We had immediately reported the fraud, within moments of discovering the problem. I was inclined to tell the credit card company that we had notified them of the fraudulent use of the account number, and they were legally responsibly for any further fraudulent charges on that account (see 15 U.S.C. § 1643). My wife, on the other hand, wasn't inclined to engage in a protracted fight with the credit card company over $10, a wise decision that reflects exactly why the credit card companies can get away with charging millions of small fees that add up to billions of dollars in profits for them. Yes, it was only $10 but annoying nonetheless.

Comments

Bob-

Dude, that was hilarious….. “in an educational way” that is. Thank you for sharing, if anything you have just provided a roadmap on how to undo these nasty little mishaps. I could just imagine how my wife would react to such a thing. She probably wouldn’t believe me. It may be just me but it seems that when you make a good rational argument defending yourself and it is your wife that you are rationalizing with, they tend to counter with a wholly irrational argument. Maybe they blindside you with a incident that by now you have totally forgotten about. I guess to get you off track. Lucky for you, you had supporting evidence and a understanding wife. If it were me, even if I had proven my innocence beyond reasonable doubt, I would still be “back on the hook” for that stuff that happened long ago. For some reason “Collateral Estoppel” doesn’t work in that situation and don’t bring up “latches” for goodness sake! I wouldn’t be able to leave the house for a month. “I’ll give you latches!” "No honey, it doen't mean thaaatttt!".

Here's my security system: Nobody gets account details for any of my 13 credit lines. Instead, I maintain a cash position from credit in my high-balance debit account. I auto-pay the credit positions from this account, always pushing money, never allowing parties to pull (except YMCA and Netflix). This high-balance card is secured and details rarely released. Most merchants get my low-balance debit account details. So crooks are unlikely to get my high-balance card details, and if they get my low-balance card details, the worst they can do is $300 damage.

This also shows, in an amusing way, why every consumer should be getting their free credit reports from the credit reporting agencies every year. I try to stagger my requests so that I order one from each of the big 3 every 4-6 months. If you do it online through annualcreditreport.com, it takes about 2 minutes. I advise my clients to do this. Whether they listen?

Re: the $10 fee -- Would be interested if your credit card agreement provides for such.

In response to tuphat, I have not looked at the credit card agreement, but I am sure it has the necessary legal cover for the credit card company to charge the $10 fee. Technically, it was a fee to transfer the balance to another card, and it seems like a really lousy business practice. I really feel "nickeled and dimed" by my credit card company charging me $10 to do something that protects them from further liability.

In response to Roger Bertling, yes, I agree entirely. This is absolutely why everyone should be exercising their rights to get a free credit report and doing so regularly. At our house, it always ends up on the pile of "one more thing to do" and gets ignored. That is a bad idea. Do as I say, not as I do!

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  • As a public service, the University of Illinois College of Law operates Bankr-L, an e-mail list on which bankruptcy professionals can exchange information. Bankr-L is administered by one of the Credit Slips bloggers, Professor Robert M. Lawless of the University of Illinois. Although Bankr-L is a free service, membership is limited only to persons with a professional connection to the bankruptcy field (e.g., lawyer, accountant, academic, judge). To request a subscription on Bankr-L, click here to visit the page for the list and then click on the link for "Subscribe." After completing the information there, please also send an e-mail to Professor Lawless (rlawless@illinois.edu) with a short description of your professional connection to bankruptcy. A link to a URL with a professional bio or other identifying information would be great.

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