Beware of the renewed ‘bait and switch’ fraudster scheme

A harmful fraud scheme from the past has recently reemerged—ready to strike merchants when their defenses are low. Here’s what you need to know.

Everyone loves the revival of an old classic. Except when it comes to fraud.

Recently, fraudsters have revived a conniving scheme that can lead to chargebacks on high-value purchases. With the holiday season just around the corner and fraudsters are gearing up to take advantage of the vulnerable, it’s especially important to make sure you don’t become a victim. And that starts with knowing how it works and what signs to look out for.

How it works:

It begins with the fraudster stealing the cardholder’s information. (Usually, they have access to all of the cardholder’s cards, indicating that the cardholder was likely hacked.) The fraudster then uses the cardholder’s real name, phone number, and address—but usually a brand new email address—to place a high-value order. Since most of the information used is legitimate, the order is not detected as fraudulent.

As if that’s not bad enough, here’s where it gets really insidious.

The fraudster, posing as the company from which the order was placed, sends an email to the cardholder requesting that they confirm the purchase—and asking whether they’re happy with their item. (The email address usually does not include the company’s legitimate domain, e.g. companyname1@gmail.com.)  Alternatively, the fraudster may call the cardholder on the phone using a fake company number.

The cardholder responds that they did not order the item and, seeing the charge on their card, realizes their card has been compromised. However, they believe the fraudster is a legitimate rep from the company and will help them resolve the issue. The fraudster then “helpfully” provides the cardholder with “return labels,” promising a refund when the order is returned. When the item arrives at the cardholder’s address, they unknowingly ship the item directly to the fraudster—never to see their money refunded.

Just like that, the merchant receives a chargeback and loses the high-value item.

Here are a couple of tips to minimize your chances of falling victim to this kind of fraudulent behavior.

1. In most of these cases, fraudsters test multiple cards until they find one with a sufficient balance for the high-value order. If you see multiple card attempts on orders, that should raise a red flag.

2. On high-value orders, verify the legitimacy of the email address used to make the purchase.

The downside to these solutions is that they require a careful manual review of all orders. If you’re looking for a fraud detection solution that’s less time-consuming, more efficient, and delivers decisions with the highest level of accuracy, NoFraud may be a perfect fit for your business.

NoFraud’s proprietary software combines machine learning technology with human expertise to guarantee safe checkout, detect and prevent fraud, and eliminate the risk of chargebacks. In the rare case that a chargeback manages to slip through our system, you’re covered by our 100% Chargeback Protection Guarantee. Click here to get an instant quote.

If you would like to share your experience with this fraud trend or if you have any questions, please feel free to reach out via email to shoshanah@nofraud.com.