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Credit Card Cramming



Credit Card Cramming

The Federal Trade Commission revealed a fast growing consumer alert last week. It includes a relatively unheard of fraud, “cramming”. It’s not necessarily new, though there has been an uptick in these types of crimes and this has the financial sector worried. The FTC says it’s a rapidly growing type of fraud and you may not know right away if you’ve been targeted. It’s dangerous both to consumers and small businesses. Here’s what happens.

Small Charges

Small charges are popping up on credit card bills each month. Most are less than $30 and those making the charges are hoping you won’t even notice and if you do, that you’ll be too busy to contest them. There are approximately 20 million American consumers who are targeted every year and so far, fraudsters have got away with a whopping $24 million. Those numbers are increasing, too. These small charges of ten, twenty or thirty dollars are ‘crammed’ into your monthly invoice and the FTC says that sometimes the charges are “buried so deep in your credit card bills, you might never even notice it”.

Payday Loans

One trend seems to revolve around payday loans. Consumers apply for these cash advance loans and then begin seeing charges on their phone bills or credit cards. They would call the toll free number associated with the charges, only to enter a very long out and confusing series of “please hold” tactics. One customer service rep would forward the caller to another representative who can “better help” the consumer and his problem. The fraudsters rely on the consumers to get aggravated and then think to themselves that recouping $20 just isn’t worth the hassle.

Now though, the scam has spread to include small businesses away from the check cashing outfits. The criminals are honing in on the fact that small business owners and other merchants would rather eat nails that face charge backs. It can be costly for these business owners and worse, some credit card networks only allow two or three in a single month before kicking the merchant out for disputed transactions. The crammers know this. They will target several credit card processors at the same time. They do this so that they can first, get in and out before getting caught and second, they know that a network won’t honor a retailer’s disputed charges after the second or third time, so they know it’s time to move on.

Big Investigation

In 2010, the Federal Trade Commission kicked into overdrive and launched a heavily targeted effort on crammers, scammers, “shady operators and misguided merchants”. As it turns out, while there are merchants who are becoming victims in the crimes, there are those who are the actual fraudsters. The goal was to target those merchants that were actually involved in the crimes. These, say the FTC, were the “merchants that thrived on small, regular charges to credit cards or checking accounts“. The investigation continues, and in fact has been ramped up.

And so far, the FTC has found a number of these businesses, including a clothing club that has been accused of charging credit cards and bank accounts every month, even after the consumers have closed their accounts – and many have even returned the shoddy clothes that were not quality made. Another company, this time a “job certification center”, has been accused of charging up to $100 every year in order to “certify” consumers so that they may apply for janitorial and maintenance jobs.

The jobs, as it turns out, required no certifications or registration fees. The FTC has also targeted companies that promised free government grants, but charged fees for repackaging what they find (and what the consumers could find for free) and made available to the paying clients. Clearly, the targets have been on consumers who are already against a wall: those looking for jobs, grants and low cost clothing.

According to many of the released reports, more than a few of these operators accused of fraud reportedly returned the consumers’ funds and agreed to not enter into the direct marketing industry. Some have gone to trial, though, and for those, many were banned from ever participating in online marketing or accessing any consumer banking or credit card accounts.

FTC Recommends

The FTC has some recommendations for reducing your odds of being crammed. There have been strides made in identifying and shutting these companies down, but there are still ways to protect yourself, too. Many of these tips, says an FTC spokesperson, comes down to common sense.

Consumers are urged to check with the Better Business Bureau first and foremost. That said, these thieves will often change their company names so that it’s difficult for consumer watchdog groups to keep up and to keep their databases current. Also, instead of using a debit card linked to a checking account, you should use your credit card. Consumers are better protected against fraud when they have their credit card companies behind them. It also protects the consumer’s checking account.

Cramming companies rely on their websites, which are often very well designed. Many have even taken to buying time on networks for infomercials. These efforts are made to convince consumers of their legitimacy. If it sounds too good to be true, it likely is. Keep in mind that your credit card company is as determined as you to ensure you don’t become a cramming victim. Remember, it costs the card companies money, too. The good news is that most credit card networks will have their own instigators who are prepared to launch their own investigations – especially if several of its consumers have been targeted. This makes it that much more important to choose the right credit card and the right credit card companies. It could be the difference in a faster reimbursement.

Finally, be sure to memorialize everything. That means you should document conversations with anyone you speak to who is involved, the date and time of the transaction and whether it was an online company or traditional merchant. Report any suspicious activity and be sure to closely review your monthly bank or credit card statement as well.

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