Point of Sale Efforts to Stop ID Theft and Credit Fraud

Identity Theft, Account Takeover, Unauthorized Use, Misuse, Apparent Authority, Authorized Use.
David A. Szwak

Point of Sale Efforts to Stop ID Theft and Credit Fraud

Postby David A. Szwak » Mon Oct 17, 2005 8:37 pm

POINT OF SALE [POS]:

1. THE BASIC STANDARD:

Courts have ruled that retailers have a duty to exercise reasonable care to inquire about the identity of a purchaser using a charge card. Union Oil Co. v. Lull, 349 P.2d 243 (Or. 1960).

Also, merchants must examine the charge card or template and only extend credit as the card or template authorizes. Gulf Ref. Co. v. Williams Roofing Co., 186 S.W.2d 790 (Ark. 1945).

2. IDENTIFICATION AT THE POINT OF SALE:

One can only wonder why retailers and other merchants do not verify the identity of credit card users at the point of sale. Some have suggested a myth created this problem. It is a myth that it is illegal to ask a card bearer to present identification at the point of sale. It is outright reckless conduct to tender merchandise to a card bearer without any verification of personal identification. David Szwak, "Credit Cards in America," John Marshall Journal of Computer & Information Law, John Marshall Law School Law Review, Chicago, Illinois, Vol. XIII, Issue 4, pp.573-584 (Summer, 1995) [see appendix "B"]; David Szwak, "Credit Cards, Credit Reports and Fraud: Enforcing Consumer Rights," The Colorado Lawyer, Colorado Bar Association, Vol.25, No.4, pp.23-28 (April, 1996).

3. DIGITAL SIGNATURE CAPTURE AND FINGERPRINT CAPTURE:

Companies have begun capturing consumer's signatures. Matching signatures at the point of sale may prove valuable depending upon the sophistication and flexibility of the verification device.

Companies have also begun capturing consumer's fingerprints. Matching the consumer's fingerprint at the point of sale to a stored, digital comparison or a pre-stored holographically designed fingerprint on the card. Special optical processing technology will make this available in the near future.

4. BIOMETRICS AT THE POINT OF SALE:

Use of biometrics at the point of sale should enhance the ability to combat low tech fraud which comes in high volume. Again, the success of the program will depend upon the sophistication and flexibility of the verification device.

5. PHOTO CARDS:

Citibank instituted and took a lead role in issuing photo cards to try and combat credit fraud. This solution has good points: emphasizes identification at point of sale; warning to fraudsters, particularly lost/stolen cases; gives merchant some means of verifying the use. It also give Citibank a way to insure merchant liability. If the card is misused, the photo card is a better means of resolving the matter.

6. RESTRICT USE OF THE CARD AT THE POINT OF SALE:

Creditors might consider restricting use a card at the point of sale to only cardholders. Negative impact might be avoided by having the cardholder request additional cards if he/she anticipates the need for family members to have access to the account. What law requires creditors to allow a third person to use the cardholder's credit card?

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