Credit card fraud is a wide-ranging term for theft and fraud committed using a credit card or any similar payment mechanism as a fraudulent source of funds in a transaction. The purpose may be to obtain goods without paying, or to obtain unauthorized funds from an account. Credit card fraud is an intricate crime, which is aggressively prosecuted by authorities. An accusation of credit card fraud can have serious negative consequences for individuals and businesses. If you are facing allegations of bank card fraud, you may be facing jail time and significant fines if found guilty. In addition, if you are a business owner, you may lose what you have worked so hard to build. If you are under investigation for credit card fraud or if you are facing charges of credit card fraud, you need the support of a knowledgeable and experienced Houston White Collar Crimes Lawyer.
Credit Card Fraud is rather common all over the United States, as is the prosecution rate for such crimes. Any form of credit card fraud or abuse — even the possession of someone else’s credit card with the intention of committing fraud or theft — can be charged as a felony and lead to jail time and significant fines upon conviction. Whether you are accused of “borrowing” a friend’s Visa to pay for gas or you actively opened an account in someone else’s name and engaged in thousands of dollars of purchases, if you have been charged with fraud then you need experienced legal counsel.
It is possible to simply be accused of credit card fraud or for there to be circumstances in the case that constitute reduced charges, which means reduced penalties. No matter the case, it is important to have a Houston Credit Card Fraud Attorney to help you from the time you are accused until the end of the case.
If you are investigated for a credit card fraud crime in Houston, do not discuss anything with detectives. Even if you believe that you are innocent of the accusations or think that you can simply “explain what happened” so that the the problem is resolved, it is not wise to say anything to an investigator. Always insist on talking to an attorney first. If you have been arrested for Credit Card Fraud in Houston, TX, take fast action with a skilled and resourceful Houston Criminal Lawyer. Contact the Charles Johnson Law Firm immediately anytime night or day for a free phone consultation at (713) 222-7577 to discuss your case.
Overview of Texas Credit Card Fraud Laws
Performing a variety of fraudulent acts in connection with a credit card amounts to the crime of credit card fraud in Texas. Prosecutors must be able to prove beyond a reasonable doubt, that the defendant had an intent to receive some type of benefit by the following means, the most common of which are:
- Using a credit or debit card the defendant knows is not his own;
- The card has expired, been revoked, or cancelled;
- Using a fictitious card, or the pretended number of a fictitious card
- Receiving any benefit that the defendant knows has been obtained by violation of this law;
- Stealing a credit or debit card with the intent to use it, sell it or transfer it to anyone but the cardholder;
- Buying a credit or debit card from someone the defendant knows is not the issuer of the card;
- Selling a credit or debit card;
- Inducing the cardholder to use his/her card to obtain property for the defendant’s benefit when the cardholder is financially unable to pay for it;
- Possessing a credit or debit card that is not the defendant’s own and having the intent to use it.
Credit card fraud is a problem that affects the entire consumer credit industry. It is one of the most common types of fraud and also one of the most difficult to prevent. According to the Federal Trade Commission (FTC), credit-related complaints have consistently ranked among their top 10 complaints for many years. In fact, some organized crime rings and even drug dealers have shifted criminal career paths to engage in this simple, lucrative, and relatively safe form of crime.
Credit card fraud can occur in person or via the Internet. Most consumer action groups, police departments, retail stores, and agencies, such as Better Business Bureaus (BBB) and the FTC, routinely release information for consumers on how to avoid credit card fraud and identity theft. Nevertheless, there are numerous forms of credit card fraud that are committed by enterprising thieves, organized rings, business owners, and even otherwise legitimate cardholders.
One method of obtaining account information or even an actual credit card is through postal theft. Other methods that have proven surprisingly effective in obtaining personal information include impersonating a card or application verifier via telephone, obtaining copies of past bills, or utilizing on-line directories. In some situations, offenders are also able to take advantage of contacts within the various credit bureaus to obtain legitimate bankcard account information for counterfeiting or telephone order purchasing. After having illegally obtained legitimate cards or account information, offenders then create fictitious identification including driver’s licenses, social security cards, and other materials to aid in the commission of credit card fraud.
Once the information is obtained, there are several forms of fraud that can occur. One popular type of credit card fraud is the advance payment scheme. This scheme utilizes counterfeit or stolen credit cards. The offender either makes an advance payment on the card or overpays an existing balance with a fraudulent check. Since the account is credited upon receipt of payment, cash advances can be immediately withdrawn before the payment check has cleared. Through numerous payments on numerous cards, an offender can realize large profits within a relatively short period of time.
Another type of credit card fraud involves the illegal counterfeiting of credit cards. New technology has aided criminals in producing exact replicas of existing cards and in creating fraudulent cards including the so-called “hidden” counter-measures. Illegal counterfeiting may be primarily responsible for the overall upsurge in credit card fraud.
Counterfeiters also buy and sell magnetic strips to produce fraudulent credit cards. The magnetic strips are essential because they contain names, account numbers, credit limits, and other information for legitimate or contrived Visa/MasterCard holders. By using a desktop computer system, source material, and peripheral equipment, a counterfeiter can produce a fraudulent bankcard with relative ease. As technology has improved, counterfeiting credit cards has become a multi-step process. These steps can often include using desktop computer systems and peripherals such as laminators to produce more realistic looking cards. The counterfeited cards come complete with a hologram and fully encoded magnetic strip. Most of the supplies used to manufacture counterfeited bankcards, including the plastic cards and Visa/MasterCard holograms (the Visa dove and the MasterCard interlocking globes) are smuggled into the United States from the Far East.
Costs and Statistics
- It is estimated that the global rate of credit and charge card fraud is seven cents for every $100 transaction. Illegal credit card purchases totaled $788 million in the United States alone for the year 2004, representing 4.7 cents of every $100 worth of total purchases. Similar estimates have been reported in Great Britain, where it is estimated that £535.2 million were lost due to credit card fraud in 2007. In addition, Australia loses an estimated 4 cents per every $100 transaction to fraud.
- According to estimates, over 229 million records containing individuals’ identifying information have been compromised by data breaches since 2005, Although it is difficult to estimate or predict the number of compromised records that will be or may have been utilized for perpetrating fraud, the sensitive nature of the information contained within these records harbors the potential for increasing credit card fraud losses. Estimates of monetary amounts lost from data breaches can reach hundreds of millions of dollars.
- The Federal Trade Commission reports that victims’ information was used to perpetrate credit card fraud in 23% of the cases brought to the attention of the Identity Theft Clearinghouse in 2007.Of online credit/debit card fraud, the Internet Crime Complaint Center(IC3) reports that this type of fraud ranks 4 in the types of fraud committed over the Internet, compromising 6.3% of complaints reported to the IC3 in 2007.
- A report issued by Cybersource shows that, according to a 2007 survey of both small and large online businesses, 1.4% of all online revenue was lost due to payment fraud, with an estimate of $3.6 billion in losses for 2007. Additionally, the survey found that 1.3% of all accepted orders resulted in fraud losses. The median fraudulent order was $200 versus a median of $120 for legitimate purchases. Those retailers which also accept orders not located with the U.S. or Canada reported that international orders were rejected at a rate approximately 2.5 times higher than U.S. and Canadian orders due to suspicion of fraud. Overall, merchants rejected 4.2% of total orders on suspicion of fraud.
The Response/Current Efforts
Merchants are more at risk from credit card fraud than are consumers. Regardless of whether the transaction occurred in person or on-line, the consumer generally only has to face the hassles of reversing a fraudulent charge, canceling their lost or stolen card, or paying the first $50 of the loss (although most credit card companies waive this fee). In contrast, a merchant loses the cost of the product sold, must pay numerous credit card charge-back fees, and even faces the possibility of having their merchant account closed.
Many methods of safeguarding credit card purchases exist. Credit card companies started using holograms in 1981 to identify genuine cards at the time of purchase. At the same time, large-scale hologram counterfeiting operations developed in Taiwan, Hong Kong, and China. A separate market emerged for these holograms, which sell for between $5 and $15, depending on the quality of the hologram. In 1994, the Canadian Combined Forces Special Enforcement Unit and the Combined Forces Asian Investigation Unit arrested members of a Chinese syndicate that produced approximately 300,000 counterfeit holograms and had distributed 250,000 of them. Based on the quantity delivered and using an estimate of $3,000 lost per card, Visa and MasterCard estimated that their combined losses caused by this group approached $750 million.
The FTC recommends that consumers sign their cards in a manner that requires the user to show photo identification, carry their cards in a separate compartment of their wallet or purse, destroy carbon copies, void incorrect receipts, reconcile monthly account statements, and shred unsolicited credit card offers. These steps will reduce the likelihood of either fraudulent purchases charged to the victims’ accounts or more severe identity theft.
Credit card fraud is a recognized issue of import. One problem facing the struggle to reduce this type of fraud, however, is the lack of law enforcement resources devoted to this type of crime. Although law enforcement acknowledges the extent of the crime, resources are often such that many agencies are simply not able to allocate the time and manpower needed to police these crimes. This is especially true when a fraudulent transaction may only account for $20-50 loss per victim, such as with the recent cases involving the company Pluto Data. While these fraudulent transactions are noteworthy, they may simply not garner the resources that more salient crimes attract. Additionally, many credit card frauds may suffer from jurisdictional problems; for instance, many of the fraudulent transactions may take place in a city, state, or country other than that in which the victim is residing. Due to the lack of consistent law enforcement involvement and jurisdictional issues, ensuring transaction safety often falls to the individual; as a consequence, many, especially merchants involved with online transactions, utilize a variety of methods for ensuring credit card security and safety.
Internet credit card transactions are referred to as CNP (cardholder not present transactions). In order to validate a card, many on-line merchants use cardholder recognition software, validity checks, and red flag order settings. These “red flags” are based on subtle differences in the card’s information that have also proved fraudulent in past purchases. For example, one red flag arises when the shipping and billing addresses are not the same. This is especially true in situations involving PO Boxes and private, rented boxes (e.g., at Mailboxes Etc.). Other types of red flags are purchases of high dollar items or orders in multiples with requests for rush or expedited shipping. On-line criminals generally like to receive their items quickly for resale purposes and, since they have no intention of paying the bill, they do not mind the higher cost for shipping.
One of the latest technological advancements in the race to foil credit card fraudsters is the employment of new chip-based technology in credit cards. Rather than relying on the standard magnetic strip to divulge card owners’ information, the new technology stores this information on a computer chip embedded within the card which requires a pin to unlock—a practice that is currently underway in Europe and has been going on in France for over ten years, where credit card fraud has dropped 80%. This system is currently being unveiled in Canada and is also being employed by select card issuers in the U.S.
Also, both Visa U.S.A. and MasterCard currently offer state-of-the-art identity check offerings. Visa U.S.A. invited cardholders to link their cards to passwords that would be required when shopping at participating on-line stores. The service, “Verified by Visa,” is designed to raise the level of security and allay fears of fraud that haunt many merchants and consumers. Verified by Visa is a way to authenticate on-line buyers to on-line sellers in which customers register for a password with the bank that issues their credit card. Merchants are linked back to the card issuer that verifies the cardholder’s identity based on that password. In addition to programs such as “Verified by Visa”, Visa is also using a new “advanced authorization” system. By evaluating 40 variable factors (such as whether or not the card being used was part of a known security breach or if items are being ordered at a high-volume quick rate), the system can provide banks with an instant rating of the transaction’s potential for fraud, allowing the issuer to decline the purchase if warranted. This new system is reported to be able to flag up to 40% of false transactions which may have gone undetected previously.
Additionally, many major credit card companies have banded together to help to ensure safety by issuing what is known as the Payment Card Industry Data Security Standard (PCI DSS). This standard requires all merchants to follow the same guidelines of data security. It is unknown how many retailers are PCI compliant, but Visa estimates that upwards of two-thirds of its large and medium-sized merchants meet requirements as of January 2008. In order to assist business owners in this endeavor, card companies and payment processors are supplying tutorials and Webinars to business owners in order to help navigate the intricate technology regulations. The latest version of the security standard is scheduled for release in October 2008.
Recent initiatives in an effort to battle credit card fraud and identity theft have also emerged on a federal level. A recent amendment to the Fair Credit Reporting Act requires consumer reporting companies to provide consumers with a free copy of their credit report (including information on where you live, how you pay your bills, and whether you’ve been sued, arrested, or filed for bankruptcy) once every 12 months, at the consumer’s request. This went into effect on December 1, 2004 in the Western states and is now available nationwide. This allows consumers the ability to closely monitor their own credit histories without paying charges to reporting agencies.
Defenses to Credit Card Fraud Charges
Police and prosecutors have the technological sophistication to effectively investigate credit card fraud, whether it allegedly occurs via the Internet or in person. The police may be able to follow the trail of an online credit card purchase back to the computer used in the transaction, to find a suspect in an online credit card fraud investigation. For credit card fraud cases occuring inside a store, the police may request security camera footage to show the person who signed for a specific purchase at a specific time.
Houston White Collar Crimes Attorney Charles Johnson will conduct a thorough, independent investigation into the case against you — seeking both exculpatory evidence and possible misconduct by the police investigators.
If you are facing charges for credit card fraud, contact Houston Lawyer Charles Johnson personally anytime night or day at (713) 222-7577. Attorney Johnson will be able to work with you and investigate the case against you, explaining your options along the way.
A defense attorney, who is experienced in this type of law, will be able to look for possible defenses in your case. Sometimes fraud, credit card theft, embezzlement and identity theft are committed due to a drug addiction, psychological issue, or gambling addiction. If you are suffering from an addiction or a mental issue, we may be able to argue for a lesser charge.
Other possible defenses include:
- Lack of knowledge
- Lack of intent
- Duress (being coerced to perform a crime that you otherwise would not perform)
- Age (being a minor may lessen the penalty imposed)
If you are facing charges of credit card theft or any other type of fraud anywhere within the state of Texas, we will:
- Investigate the case against you
- Investigate possible defenses and options
- Work with you and explain your options
- Communicate all charges and information clearly to you
- Prepare the best defense case for your situation
When you hire an experienced Houston Criminal Defense Attorney regarding theft charges you face, we may be able to get your charges lessened or see that you get alternative sentencing for your crime.
Penalties and Sentences
There are various punishments for different types of fraud. The sentences normally depend on the nature of the fraud committed. A few of the penalties that could be assessed under Texas law include:
- Jail or prison time
- Fines and restitution
- Loss of a professional license
- Seizure of property or wage garnishment
It is extremely important that you contact Houston Credit Card Fraud Lawyer Charles Johnson as soon as you are aware of an investigation. Prosecutors often attempt to intimidate ordinary citizens into thinking the state of Texas has a clear cut case against them. Investigators often apply for search warrants in order to look for evidence that a fraud has taken place. These search warrants limit the type of evidence that may be seized, but those who are unfamiliar with how this process works may nonetheless allow law enforcement officers to overstep their bounds when serving one of these warrants.
Hire the Best Houston White Collar Crime Lawyer: The Charles Johnson Law Firm
Don’t make the mistake of waiting until it is too late to do something about it. Just because you have been charged with a theft crime in Texas does not mean that you will get the maximum punishment for that charge. You have a legal right to hire a lawyer who has experience in criminal proceedings who can help represent you and get you the best possible outcome.
Experienced Houston White Collar Crimes Lawyer Charles Johnson represents people on theft and fraud charges including robbery, burglary, petty theft, credit card theft, grand theft, embezzlement, shoplifting, forgery, passing bad checks, and obtaining money by false pretenses. There are many possible defenses for your case. Allow us the time to discuss your case with you and investigate the matter.
The Charles Johnson Law Firm will investigate your case, interview witnesses and present the best possible defense. Don’t let a mistake that you made affect the rest of your life. You may contact Houston Credit Card Fraud Lawyer Charles Johnson at (713) 222-7577 and speak with him directly anytime night or day, 7 days/ week to discuss your case.