Scam of the day – August 5, 2014 – Clever credit card scam

There is a reason that scam artists are the only criminals whom we refer to as artists.  Some of them are just amazingly clever.  Sharron Parish was recently arrested and charged with scamming Apple out of $309,768 as well as scamming Enterprise Rent a Car and other victims.  His scheme was a devilishly simple exploitation of a flaw in credit card processing by retailers.  According to law enforcement officials, Parrish would go to stores and attempt to pay for expensive goods with debit cards from closed accounts.  When the card was processed at the retailer, it would, of course, come back as declined.  Parrish, it is alleged, would then feign surprise and tell the clerk that he just needed to call his bank to straighten this misunderstanding out.  He then would make a fake phone call in front of the clerk after which he would tell the clerk that the bank gave him an authorization code number from the bank for the clerk to enter into the credit card processor in order to authorize the sale.  The clerk would enter the number and the sale would go through.

But how did Parrish know the code?  He didn’t.  Because of a vulnerability in the credit and debit card processing system and random number of digits so long as they were of the proper length would cause the credit or debit card denial to be overridden.

TIPS

Retailers should be very wary of this easily perpetrated scam which is particularly harmful to the retailer because since the credit or debit card was already declined by the bank, the retailer who puts the sale through is held liable for the purchase.  Retailers should not permit their clerks to allow denied cards to be used under any circumstances.  The risk is too great.