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Finance

How Credit Card Fraud Is Investigated

Banks have to follow a law called the Electronic Fund Transfer Act when they believe that merchant credit card fraud has occurred. They also have their own policies and procedures in place to deal with this problem.

When a Bank Suspects Fraud

If your bank or creditor notices that your card was used in an unusual location, they will consider that a red flag. They will also start an investigation if your card is used for larger purchases than usual or if the card is used at a suspicious vendor. The bank will also look into any debt that you have directly disputed.

First Steps in the Investigation

If you informed your card issuer about a potentially fake transaction, they will first check to see if it is friendly fraud.” This means that a cardholder actually made the purchase but did not remember doing so. Vendors often have merchant fraud protection to defend against this.

When a bank first begins their probe, they may advise you to let credit reporting agencies know that you are disputing the item and put a freeze on your credit.

Completing the Analysis

Since fraudulent purchases are considered identity theft by law, the creditor may opt to work with local police or even the FBI in serious cases. You should give all information about the potential scam to the police through a formal report for your own protection.

A bank may take a few months to finish their inspection. If they determine that identity theft occurred, they will have to get the money back from the vendor. If the merchant does not agree with the bank, they can send the bank written validation that the charge was not false. The bank will then have to examine this data before they can return your money. In any case, the bank will send you a written summary of its findings.

How Much Money You Will Get Back

If the bank concludes that you did not in fact make the charge in question, you will be entitled to a refund. The amount will depend on the terms of your card agreement. Examine this agreement carefully. Some card issuers offer complete protection from fraud, meaning that you will receive full repayment. If they do not, they may only send you a refund if the charge is over $50 on a credit card or over $500 on a debit card.

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