42-Year-Old Credit Card Law Hurting Online Retailers
Four-hundred pound hackers sitting on their beds aren't the only cyber-risks that online enterprises have today. Outdated cyberlaws, according to Chargebacks911, are hurting consumers and ripping off businesses.
The Fair Credit Billing Act of 1974 is still the legislation that e-commerce abides by, and fraudsters are exploiting the 42-year-old law.
“One of the primary objectives of the Fair Credit Billing Act of 1974 was to encourage credit card spending,” said Monica Eaton-Cardone, COO and co-founder of Chargebacks911. “The concept of ‘zero liability’ was created so cardholders could use their credit cards without worrying about fraud. For several decades, the Fair Credit Billing Act did exactly what it was intended to do, and credit card spending skyrocketed. But the problem is, the Act wasn’t designed to oversee digital transactions, shipped products or online purchases. As a result, this loophole has led to a dramatic rise in chargeback fraud.”
The chargeback allows consumers to report a fraudulent charge to their bank to obtain a refund, and the burden-of-proof is on the merchant to defend the legitimacy of the transaction.
“Because consumers have the legal right to contact their banks to report a fraudulent purchase – without requiring any communications with the usual legal authorities, such as the police – the chargeback mechanism is being badly abused,” said Eaton-Cardone. “People who’d never consider filing a false police report are calling their banks and demanding chargebacks for frivolous reasons. And far too often, they’re walking away with the product and the refund.”
Chargeback fraud is a multibillion-dollar burden the retail industry, and industry experts are pushing for new legislation - and with election year, their timing is impeccable.