An online credit card scam using identity theft and fake merchants raked in millions by charging millions of victims pennies at a time. Don Hankins photo.

An online credit card scam that stole millions of dollars, pennies at a time, was halted by the U.S. Federal Trade Commission. The online credit card scam used fake companies and identity theft to steal small amounts of money that went undetected by consumers or fraud detectors. Over four years, more than a million people were charged anywhere from 25 cents to $9 on their credit cards in an online scam that added up to more than $10 million.

Most scam victims didn’t notice

The elaborate online credit card scam operated undetected because scammers made very small charges and set up more than 100 bogus companies to process the transactions. PC World reports that U.S. credit card holders financed most of the scam because about 94 percent of all charges went uncontested by the victims of identity theft. According to the FTC, the scammers charged 1.35 million credit cards a total of $9.5 million, but only 78,724 of these fake charges were ever noticed. Typically they made just one charge per card number to fake business names such as Adele Services or Bartelca LLC. Avivah Litan, an analyst with the Gartner research firm who follows bank fraud, told PC World:

“They know that most of the fraud detection systems won’t detect anything under $10 and they know that consumers won’t complain about a 20 cent fee. What’s different here is the scale, and that they got away with it for so many years.”

A trend in credit card fraud

The online scam is a textbook case about how online services used to facilitate business in the 21st century can be exploited for credit card fraud. As credit cards are increasingly being used for inexpensive purchases–they’re now accepted by soda machines and parking meters–credit card fraud criminals have cashed in on the trend. The IDG News Service reports that the scammers found loopholes in the credit card processing system that allowed them to set up fake U.S. companies that then ran more than 1 million fake credit card transactions through legitimate credit card processing companies. One of the largest payment processors in the U.S., First Data, was a favorite of the scammers. Of the 116 fake merchant accounts the FTC uncovered, 110 were with First Data. The scammers also set up bogus accounts with Elavon and BBVA Compass.

Source of identity theft uncertain

The FTC believes the defendants may have run credit checks on the identity theft victims to be sure they were creditworthy. The FTC doesn’t know where the scammers obtained the credit card numbers they charged, but they could have been purchased from online carder forums, black market Web sites where criminals buy and sell stolen information.

A textbook online credit card scam

To create the virtual infrastructure for the online credit card scam, Webpronews reports that the scammers set up fake physical addresses and fake web sites pretending to sell products, along with a real company’s tax number found online. Scammers then sent out spam e-mail pretending to recruit American finance managers for offshore financial service companies. Those selected by the scammers were persuaded to set up dummy corporations to receive the credit card payments and send the money to bank accounts in Lithuania, Estonia, Latvia, Bulgaria, Cyprus and Kyrgyzstan.

Credit card fraud is a problem that can be avoided with a little vigilance. If you need emergency cash loans, apply at Personal Money Market.

Even under the most watchful eye, your identity can be stolen very quickly. In fact, according to the 2008 Internet Crime Report published by the federal government, total loss from all types of fraud was $264.6 million, up from $239.1 million in 2007. What is going on?

In this age of wide-spread information about how to protect against identity theft and fraud, it seems that many people are not getting the message. Yet the World Wide Web, which has a lot of information about how to protect yourself, also contains many more ways to become a victim of fraud without even knowing it. If this happens to you and you need to get some emergency cash, your application will most likely be denied because your credit score is not what you thought it was. Here’s how to clean up your credit report should this happen to you.

Check Your Report Often

Many times, credit fraud happens because people do not keep a watchful eye on their credit report. The law allows you to get a free report once per year, without having to sign up for any credit monitoring service. An example, freecreditreport.com, actually requires you to sign up with their monitoring service before you can get your credit report. This is not free, and there is a better site (annualcreditreport.com) that will give you a free report each year. Get your report from here, rather than get caught in with the fancy, yet humorous, jingles of the other site. Once you download your report, look it over very carefully for any charges that you have not made. Anything that looks suspicious, make a note of it for the next step.

Call the Reporting Agency

Once you have made a note of any suspicious activities, call the reporting agency. This will be one of the three big agencies: Experian, Equifax and TransUnion. Find their consumer number and call them about your report. Explain to them that you did not make those specific charges and request to have them removed. However, if the creditor insists that it is a legitimate charge, the reporting agency may not be able to remove it. In this case, you will need to contact your creditors next.

Call the Creditors

Typically, your creditors will be credit card companies and other types of charge accounts, including any emergency cash loans that you may have needed to borrow. But it really could be any creditor that you owe money to. Locate phone numbers and start calling each company to dispute any charge. Though this may be easier when you first get a statement, try anyway as you never know what may happen. If you cannot get any results right away, ask to talk with their boss. Repeat this as many times as necessary to get results. Once you get results, make sure they really do remove the charge from your report by calling the reporting agency once again.

Pay Off Legitimate Debts

After you have all the charges that you did not authorize removed from your report, look at all the charges and debts that you did authorize but have not paid off. The best way to get this cleaned up is to pay them off. Simple enough, but this requires a bit of planning and execution on your part. Proper budgeting, with a debt repayment plan, is the best way to get the legitimate debts cleared from your credit report.

Use Emergency Cash Wisely

There are always going to be times when your expenses will outlive your income, leaving you to survive on emergency cash. Tread carefully and use these loans wisely—otherwise, you will do more harm than good to your credit report. Keep this in mind as you are cleaning up your credit and paying off your debts.

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