After hitting dead ends with various top officials at MC/Visa, The Federal Reserve, etc I have finally found someone willing to listen. That is Congressman Peter J. Roskam who is on the House Ways and Means Committee and was the majority Chief Deputy Whip for The House of representatives from 2010-2014.

Please email the person he has put in charge of his investigation and if you have time also mail and/or fax Ryan a letter and copy Congressman Roskam. Below is suggested wording which you can cut & paste and of course feel free to elaborate and include your own experiences and/or comments.

Suggested wordin

Send to:
Ryan Peterman <ryan.peterman@mail.house.gov>

For Letters mail and/or fax:

Ryan Peterman
Senior Constituent Advocate

Washington, DC Office

Re: Unfair chargeback rules, regulations, policies and procedures issued by MasterCard, Visa, Discover and American Express condoning “Friendly Fraud” and Fraud   

Congressman Roskam,

I am writing this to you as one of the millions of merchants (voters) across the USA who accept credit cards for payment. As you have been made aware in the last few years many card issuing banks have begun rejecting legitimate chargeback replies even though merchants are filling the replies out in great detail proving the original charge is legitimate and the chargeback complaint should be removed and decided in favor of the merchant. It has gotten so bad that on some of the chargebacks a 5 year old child could see that the cardholder is simply trying to steal merchandise and/or services from the merchant.  Frivolous chargebacks allowed to be presented by the card issuing bank is an obvious

Also the card associations’ chargeback procedures leave much to be desired. In the typical non efficient ways of MC/Visa/Discover nothing official ever comes if you win. Only if you lose. Incidentally the cardholder’s issuing bank makes the determination not the merchant’s credit card company. Kind of a kangaroo court! American Express is somewhat better on these issues because they see both sides of the transaction.

We also need a better way to monitor the chargeback progress after it has been filed. Currently there is basically nothing.

And besides “Friendly Fraud” we need a better way to check the validity of all online (eCommerce) and phone orders for outright fraud (identity theft) which would also help in replying to “friendly fraud” chargebacks. In addition to address and zip code check we need to be able to check the cardholder’s name and email address currently not offered by MC/Visa/Discover. American Express does offer email address verification.

The verification for foreign cards is even worse causing merchants to decline many legitimate foreign card orders which loses millions of dollars in revenue for merchants and tax revenues for the US Government.

We would also like to see a user friendly way for merchants to report cardholders for felony theft and prosecution. Currently most Police Departments ignore these requests even if the theft committed is in the six figures.

The airline industry has taken a first step in forcing Visa to modify their policies and procedures http://www.eturbonews.com/60006/visa-amends-rules-help-airlines-reduce-card-not-present-fraud 

Feel free to contact me for more details.   

Respectfully,  

The U.S. payments card industry is in the midst of a monumental technological shift. When many issuers this year begin distributing chip-based payment cards that create a dynamic code unique to each transaction en masse, the United States will be the last large nation to make the transition.

The new cards are arriving thanks to Visa and MasterCard rule changes; come October, any fraud resulting from a payment transaction at many types of merchants will shift to the party-either the merchant or the card issuer-using the least secure technology, which means a lot of merchants are in the midst of overhauling their store payment systems to accept chip cards.

The good news is that the chip-based cards, which are often referred to as EMV (short for Europay, MasterCard and Visa, which collaborated to develop the technology), should make it harder for criminals to use fraudulent cards in stores. After all, that’s the goal, and the technology has reduced card-present fraud in all the 80-some countries ranging from the United Kingdom to Brazil that have made
the transition to chip-based cards over the past 10 years. But there’s also some bad news; nearly all of the countries that have already made the transition have seen their card-not-present fraud rates rise.
Just look at Canada, where a nationwide rollout of chip-based cards commenced in 2008. The transition helped card fraud costs at physical stores fall roughly 55% from C$245.4 million ($195.1 million) to C$111.5 million ($88.7 million) in 2013, according to Canada Bankers Association data. But card fraud didn’t disappear; it migrated online, as domestic card-not-present fraud costs grew 133% from C$128.4 million ($102.1 million) in 2008 to C$299.4 million ($238.4 million) in 2013. While card-not-present transactions include more than e-retail transactions, Canadian e-commerce during the same period grew only by about 40%, according to eMarketer Inc. data.

The criminals found the path of least resistance. Once a barrier emerged in physical stores, criminals found it was easier to use fraudulent cards to buy items online. That shift wasn’t unique to Canada, it has been the case everywhere that’s made the transition, says Julie Conroy, research director for research and advisory firm Aite Group LLC’s retail banking practice. The United States isn’t likely to be any different. “Criminals are very good at finding the weakest link and once EMV is in place, that weakest link will be online,” she says.

She’s hardly alone in her prediction. Numerous experts, including Perry Kramer, vice president of retail technology consulting firm Boston Retail Partners, agree. “The big fallacy about EMV is that it will improve security,” he says. “It really doesn’t. It just means fraud takes place somewhere else.”

There’s little question that chip-based cards will cause card-not-present fraud rates to rise-CyberSource Inc. says the current U.S. e-commerce fraud rate is 0.9%-the unknown is when. That’s because many payments experts expect the shift to chip-based cards to be rocky; only 59% of U.S. point-of-sale locations will be chip-capable by the end of the year, according to a February Aite Group report.

But even if it takes a while for the remaining 41% of stores to have chip-capable systems in place, the transition is coming. To prepare, online retailers can learn from the experiences abroad. Those lessons are leading online retail executives like Dave Klein, owner of motorcycle gear and accessories multichannel retailer MxMegastore, to focus on the difficult task of securing their sites against fraudulent cards while, at the same time, making sure they don’t put too many barriers in place that lead shoppers to abandon their carts. “It’s a balancing act,” Klein says.

Chip-based cards should help address card-present fraud in the United States, which is a big problem for retailers with physical stores; card-present fraud losses grew more than 31% from $2.463 billion in 2011 to $3.235 billion in 2013, according to a 2014 Aite Group report. Aite Group predicts that the shift to chip-based cards will help card-present fraud to dip roughly 12% from this year to next and will fall to $2.736 billion by 2018, the lowest dollar amount since 2012.

But if the U.S. market experiences a similar pattern to the U.K. market in making the transition, card-not-present losses will soon climb. U.K. card-not-present fraud costs jumped 79% between 2005-when it shifted fraud liability to the party using the least secure technology-and 2008, when fraud peaked. Aite Group similarly expects U.S. card-not-present fraud costs, which grew more than 33% between 2011 and 2013, to continue to rise. By 2018, it expects card-not-present fraud losses will reach $6.4 billion, more than three times the $2.1 billion in losses reported in 2011. That’s far greater than 126.7% growth rate between 2011 U.S. Commerce Department-reported e-commerce sales, which totaled $194.3 billion, and research firm eMarketer Inc.’s 2018 forecast of $440.4 billion.

“There’s going to be nowhere else for fraudsters to go but online,” says Sean Curran, a director in consultancy West Monroe Partners’ Technology Infrastructure & Operations practice. “That’s where they’ll go. Online retailers have to be ready.”

Technology can help online merchants fight back. U.K. card-not-present fraud losses started to dip in 2009, because more merchants and issuers began using sophisticated tools that let merchants determine a shopper’s true identity, Aite’s Conroy says. Retailers like Klein hope that those types of technologies-he uses tools from Eye4Fraud-will help him avoid some of the mistakes U.K. e-retailers initially made.

MxMegastore put Eye4Fraud’s technology in place last June after being hit hard by online fraud in December 2013 when the retailer had about two dozen incidents that a month later resulted in chargebacks. The criminals had bought a number of pieces of casual apparel and they entered shipping and billing addresses that matched. Klein didn’t suspect anything until he was hit with the chargebacks.

History tells us the “liability deadline” for EMV (Europay, MasterCard and Visa) rollout in the United States will see a surge of fraud online.

Learning from others’ misfortune

The rollout of EMV cards in the United States has a deadline of October 2015. This has logistical issues but perhaps more importantly it is likely to prompt a major shift in credit card fraud to card-not-present transactions. As the second largest market for online revenues,[1] when the US moves to EMV technology at “brick and mortar” POSs, we can expect a transition from offline fraud to online channels such as the desktop and mobile, as fraudsters increase their fraudulent activities.

Figures from the UK Card Association show how this occurred in the UK after it adopted EMV technology – a trend that played out in other countries across the world.[2] The difference between then and now though is that e-commerce is now a retail phenomenon. According to eMarketer,[3] over $200 billion of additional spending could flow through CNP transactions globally by 2017, presenting a vast world of opportunity to online fraudsters looking for a piece of the pie.

Responsibility moving up the food chain

The burden of liability no longer rests solely with merchants. For years, they have been responsible for ensuring their customers’ transactions are secure. Typically this involves aligning with either a trusted payment service provider (PSP), payment gateway, or hosted pay page (HPP) that works with a fraud prevention leader. The goal is to ensure transactions are secure as well as able to provide crucial information of fraudulent behavior the retailer is experiencing.

However, financial regulators are increasingly linking fraud mitigation and compliance with regulations, which pushes the liability moving up the food chain, extending from merchants to payment choke points.

As well as needing to offer an integrated fraud solution to their customers, online payment processors need greater access to sophisticated fraud tools to protect themselves from regulatory action that could destroy their reputation.

Payment processors are constantly looking for new ways to differentiate from their competitors. Adding services such as fraud mitigation allows them to offer value-added services to their online merchant base, add revenue and increase customer retention.

Value-adding above commoditization

Payment processing fees are becoming commoditized, and a “race to the bottom” on pricing is now the norm. Additional services like fraud can help offset the revenue lost in interchange fees.

As technology becomes more pervasive, accessible and affordable, more ‘brick and mortar’ businesses are using the Internet as an additional sales channel to increase revenue and customer satisfaction. This includes ambitious SMEs [small and midsize enterprises] who want to be able to grow their businesses and compete in an increasingly crowded space by offering great products at great prices, while providing a great overall customer experience.

Efficient fraud prevention options that suit the business are vital technological tools that can have a drastic effect on business success. The business impact of fraud prevention is often underestimated, but setting rules and thresholds that turn away the fraudsters while allowing legitimate transactions through makes a huge difference to any retailer’s bottom line.

Providing fraud mitigation services at the payment processor level can give the end customer a friction-free buying experience.

The problem for merchants is that sophisticated fraud solutions are often expensive, complex and difficult to manage. This presents an opportunity for online payment processors to provide a trusted fraud solution to merchants that reduces fraudulent transactions – mitigating fines or penalties from regulators – while allowing and promoting business.

Integrating this into the payment processing system will help make the process simpler for merchants to configure in a way that suits their business and reduces exposure to payment fraud.

One problem often cited by both large and small online merchants is the IT constraints they face. Smaller merchants do not have access to IT resources, and larger merchants fight for resources with other departments within the business. Integrating a fraud mitigation platform at the payment processor level reduces or eliminates the need for additional IT resources, making fraud prevention available and attainable by all merchants.

Pure-play merchants may be the least prepared

Many “pure-play” e-commerce merchants that do not have an offline presence are unaware of the incoming tide of new fraud when EMV is implemented in the U.S. This new surge in fraud could catch them by surprise and cause havoc.

Forrester expects online retail sales in the U.S. to reach $294 billion by the end of 2014, or approximately 9 percent of all sales in the U.S.,[4] while forecasting a yield of approximately $414 billion in online sales (11 percent) by 2018. Fraud always follows opportunity, and with EMV providing an extra layer of security to card-present payments, fraudsters will go after whatever they perceive to be the easiest target. Unfortunately, this often means smaller online retailers who traditionally struggle to provide high-level fraud prevention.

Payments providers that take on the responsibility and liability of secure transactions will benefit from adding value to their offering and increasing their bottom line, ensuring that the EMV opportunists have nowhere left to turn.

Fraud is migrating now – as an industry, we must respond

As evidenced by the rash of recent, large-scale data breaches, fraudsters are faster, more sophisticated and better networked than ever before. Detailed data on financial credentials and personal identities is hitting the market, making fraud reduction more and more difficult. Asking online merchants alone to fight this battle is a weak strategy. Partnering with payment processors and card schemes gives merchants a better chance of mitigating their fraud risk. At Kount we have seen fraud increase every year. The solution is not to tackle fraud in a draconian way – this will ultimately turn away legitimate customers. The key is to get the balance right. Online commerce is massive for our industry, and for the global economy it is imperative that we allow all legitimate trading to happen and stop fraud at the same time. This needs to be a collaborative effort from all parts of the payment chain and tackling fraud at the top of the chain (PSPs, banks and acquirers) will make the most difference.

The Facts

-Amex ESA means you have a direct account with Amex the other two products are bundled with your MC/Visa/Discover processing
-any credit card processor recommending these products doesn’t understand the ticketbroker industry. Your first red flag!
-with your current Amex ESA account any Amex chargebacks you receive are handled by Amex which sees both sides of the transaction. As you are probably aware that unlike MC/Visa disputes Amex almost always decides in favor of the merchant (you) if you properly document your reply.
-with OptBlue or OnePoint your Amex transactions are bundled in with your MC/Visa/Discover transactions so all chargebacks are handled by your MC/Visa/Discover processor instead of Amex.
-with your current Amex ESA you can use Amex’s great fraud tool where you can log on to and verify cardholders name, address, CVV and phone #. It’s  https://www406.americanexpress.com/aavweb/HomePage.do You must have your Amex account setup online to use this tool and be logged in for it to appear. If you don’t have its easy to setup at

You can also call Amex  at 800-528-5200 and they will help you set it up in a few minutes.
-if you switch to OptBlue or OnePoint you will no longer have access to online Amex or verifyit

The advantages of OptBlue or OnePoint

-it is true lower rates are available. With OnePoint most often you will pay 2.89% which is still higher than what you pay now.
-with OptBlue you will have a slightly lower rate than your current rate and it will be batched along with your MC/Visa/Discover transactions so you’ll get your Amex dollars one day sooner than ESA. So a day sooner than now.

In my opinion Amex ESA is by far the way to stay. And you know I’m being honest because to be truthful OptBlue and OnePoint pay me a small residual while ESA does not.

Any questions feel free to give me a call at 847-381-3482 or email bhoidas@gmail.com