By Brian Martell
Who’s on the hook? Businesses should take certain precautions when dealing with customers
By Brian Martell
A report from the bank sat on top of the controller’s desk. It contained
nothing unusual, just the normal debits and credits associated with the
business activity from the main account.
A report from the bank sat on top of the controller’s desk. It contained nothing unusual, just the normal debits and credits associated with the business activity from the main account. But wait: why was it wet and stained with coffee? All the administrative staff could feel the palpable tension in the room. Raised voices, and run-on sentences coloured with profanity and delivered with staccato ramblings left nothing to the imagination of the distressed controller’s agitation.
Nothing is more jarring than having your long held beliefs dumped upside down. In the case above, few instances will prompt that response more than finding out that what you thought was a secure means of receiving payment was in fact a fallacy. Almost every merchant in North America, including B2B , which is the case for most office coffee service (OCS) operators, accepts or uses credit cards. The belief that most of us have (had) was that once a credit card transaction has been accepted by the bank or the service provider and the money is in the merchant’s account, the transaction is legitimate and the money is the merchant’s to keep. The reality is far different than the belief.
Banks and credit card processors have the ability to go back into your account and take back the money that was deposited there if the cardholder objects to the charge or if the card was used under fraudulent circumstances. To underline how much authority they have to do this, the time limit from transaction to payment reversal is 10 months. For the bank or processor, all they are committing to saying is that there is sufficient credit on the card to allow the transaction to go through. The onus is on the merchant to ensure the transaction is not a scam or that the customer is not going to try to reverse the charges. Banks and credit card companies indicate this in the fine print of their service agreements with merchants, and there is very little attempt made by the financial services industry to warn merchants that they are on the hook for all credit card transactions if they are fraudulent. They will not verify any other piece of information given by the merchant.
Credit cards have long been used in the OCS business to guarantee payment, especially for new accounts. It is more likely that this form of payment will be accepted when no credit experience exists with a customer, even with the service fees that are charged. OCS providers need to be careful with new accounts or with their online stores if they use the Internet as a means of marketing their products. The most common form of theft will be credit card fraud, where the “customer” will use a stolen card. So how do merchants protect themselves from credit card fraud if the banks will not? There are several strategies to do so:
Ask for all contact information (address, phone, etc.) and do a reverse lookup on the Internet to verify if the name, address and phone numbers match up. This is more important for Internet sales, unsolicited offers to buy, and pickup orders.
If a customer is paying with a credit card and it is declined and another card is offered, this is a sign that the transaction may be fraudulent. Orders that are “bill to” with a different “ship to” address should be vetted out before being accepted.
Orders placed online or through e-mail where the extension of the e-mail is from a free service have a higher incidence of fraud than those with a company’s e-mail extension. If the e-mail looks like a legitimate company it may still be suspect. The best way to verify it is to type in “www.” in place of the prefix on the address and see if it directs you to a real company or to a site that offers free e-mail domains.
Anyone you do not know who is picking up products from your company should provide a photo ID, which you should scan or photocopy if you have any doubt about the authenticity of the transaction or if it is the first time you are dealing with this customer.
Credit cards are a convenient way of ensuring payment if you are concerned about extending terms, if you do not want to accept cheques from new or one-time customers. They are not a guarantee of payment, even if initially accepted. Cardholders who have been subject to fraud will get their money back, and neither they nor the banks will pay for the theft – you will. The old song Lemon Tree is a metaphor used by a father to warn his son about the aspects of life that appear to be ideal, but in the end leave you empty. In the last stanza before the chorus he says: “A sadder man but wiser now I sing these words to you…”
Brian Martell works at Heritage Coffee as vice-president of sales, and has 21 years of industry experience. Brian has also been the recipient of three prestigious awards: the Don Storey, Stuart Daw, and the Albert DeNovelus Customer Service awards. Questions, comments, feedback, start a dialogue? E-mail him at email@example.com.