FTC Cracks Down On Porn Site Billing Scams

smagruder writes "From MSNBC: 'In the Federal Trade Commission's first attempt to halt fraudulent or deceptive billing practices by online porn sites, a major provider of sexually explicit material on the Internet has agreed to provide refunds to consumers whose credit cards were charged without authorization ...' For the rest of the story, go here.

This story perhaps should hit home with many Internet wonks, not just in terms of getting illegitimate charges on our credit cards from porn sites, but from any web site, or from having our card numbers lifted while we are online. I have been fighting with my bank for at least a couple years trying to dispute one illegitimate charge after another. In my opinion, the problem doesn't just lie with the companies making the fraudulent charges, but also with the banks, who are too cheap to create a security process for credit card utilization that 1) blocks particular merchants chosen by the cardholder (I call it "merchant block"), and 2) disallows usage without a password that the cardholder chooses and can change at any time."

Those both sound like reasonable ideas; would any credit card companies like to "add stockholder value" by implementing them? Maybe providing a list of "merchants our customers frequently ask to have blocked" as a default would be a good start.

Comments

Grr! what about the gak factor?

[Chairboy]

The biggest threat to profits in online porn industry right now isn't fraud from people who steal numbers, it's what's known as the 'Gak factor'.

Typically, this works like this:
1. Guy visits goatporn website.
2. Guy pays for goatporn.com on his credit card.
3. Guy gets off and loves the website.
(camera pans, one month later)
4. Wife opens credit card bill and sees charge to goatporn.com.
5. Wife confronts husband while weeping, convinced she's not satisfying him and that the marriage is about to end.
6. Guy decides that (after a quick 'GAK!') rather then explain that he loves his wife and just needs some goatporn once in a while, instead claims 'Gosh, I never made those charges!'
7.Under her watchful eye, he calls the bank and disputes the charges.

I doubt there's a real industry wide problem with fraudulent charges. In actuality, I suspect it's almost 100% legit charges that get reported as fraud because the significant other is flipping out.

"oh, we'll give you a refund now"

[kevin805]

How generous, offering to give a refund.

Imagine you have been operating a car theft ring for several years. Then you get caught. So you offer to return all the cars which you borrowed without authorization to their owners.

Pardon me, but isn't charging someone's credit card without authorization a felony? I'm thinking "federal wire fraud".

Here is what I don't understand

[codejnki]

I work in customer service for a very large ISP. At least once a week I have to deal with a call from an irate person who has found a charge on their credit card that they never expected to be there. Normally I post a refund to the credit card and get the person off the phone. If it was a hacked account submit it to the fraud department.

Here is where I begin to loose track of the situation. In the case of one individual, 17 monthly charges had been posted before they decided to call in and discuss the situation. It is obvious by looking at the usage that the account was never used, but 17 monthly charges before it ever clicked to me seems idiotic. I calmly inform the individual that I am only able to refund two months back. The next thing said is usually "I'll get my credit card company in on this." To which I respond that "As far as credit cards are concerened, all charges are valid unless disputed within the fist 60 days."

Read the fine print on your credit card statements. If you don't dispute that charge within 60 days the credit card company isn't going to do anything for you. Consumers seem to forget all that legal mumbo jumbo they sign when they sign up for credit cards. You are legealy and financially responsible for that card. Every single charge. If you were an idiot and didn't read your monthly statements for the past 17 months, PLEASE do not yell at me telling me that we've been stealing your money.

I think truthfully that credit cards are a much bigger and deeper problem in this country (the US) than just hacked cards being used on the internet. It strikes right at the heart of consumerism in America. I like to say this country was built on the backs of plastic.

Ok enough preaching.
----
"War doesn't determine who's right, just who's left"

Dear Mr and Mrs Cardholder

[caveman]

Thankyou for contacting us regarding the incorrect charges to your credit card from Porn-O-Matic Inc.

According to the new code of conduct aggreed to by the internet sex industry, you should only have been charged for six hours viewing, and not the seven hours charged.

We trust that the matter has been resolved to your expectations.

May we also take this oppertunity to inform you of our member discounts from Grabbit, Floggit, and Leggit partners, Divorce lawyers.

I worked in the industry

[MOMOCROME]

back in the early 90's I was a bill collector for 900 and 976 phone sex companies. we represented several of those co's, and it was common knowledge that they'd gouge the prices like this, usually with a $2.99/minute ad, and $2.99 a minute front end msg, then a disclaimer 'subject to change', then the menu of chat rooms, then the addendum latest price of $4.99/minute (which was the maximum allowable price). Hundreds of phone sex lines followed this practice, and suckered them in by the 10,000's.

It gets worse, see. First, usage of the service automatically signed you up for a credit account, and half the charges were applied to that account, to obfuscate the scam. nearly everyone was shocked to recieve a bill from the phone sex company, some paid withouta peep, others tried to complain in vain.

Also, early on it was realized that there was enormous latitude in the collection process, with the outfit I was involved in acting as a 'first party' collection agency to circumvent normal FTC regulations, plus the looming threat of exposure to friends and family and reportings to Trans Union and TRW.

I was young and impressionable, this activity was all couched in phrases that suggested legitimacy and legality, but once I realized the full extent of the evil, I fled forthwith. These guys are bad, bad people. My prediction is that they will pull a stunt like the one mentioned in 'Lock, Stock and Two Smoking Barrels' and send refund checks with an account name like 'Dildo Lovin' Ass Sluts Incorporated', which nobody in they're right mind will cash. Toooooo sad...

-=(V)0(V)0cr0(V)=-

Blocking specific merchants

[milkman1]

I am not sure about the value of blocking specific merchants.
1) It would seem that few merchants would accept future charges from a customer who had disputed charges.
2) Most bad merchants will be fined heavily and probably lose their merchant acounts.
3) It would seem to create oportunities to rip off legitamate merchants. Forinstance merchants who verified credit cards at purchase but didn't bill them until the product shipped. (a bad customer could simply ban the merchant between the two acount accesses)

IMHO a system which banned most merchants in problem catagories but allowed specific merchants to be quickly unbaned

I would propose a system as follows:
1) Allow banning of certain types of business (or all busniess) (Porn, Ebusiness, Mail order, 1-800 number, ALL, etc.)
1a) require a one day waiting period for this to prevent scam in (3) above
2) Allow banning of merchants who you had contested charges with instantly.
3) Allow banning of other specific merchants with a 7 day waiting period to help prevent problem 3.

4) Allow instant unbanning of any merchant or catagory by calling an 800 number or by going to a website and entering a password.
5) Allow a customer to set a price threshold below which authoriztion is not required (in some or all catagories).

They rely on the embarrassment factor.

[evilj]

Most of these porn companies rely on the embarrassment factor to be able to get away with this.

In other words, most of their customer are too embarrassed to complain either to the company in question, or to the their own card company.

The dialogue might go something like this:-

Card company: What is the nature of your complaint, sir?

Customer: I was billed without my authorisation by a company called "Wank-o-matic"

Card company: [stifles giggle] I see. Do you know how they obtained your card details.

Customer: Yes. I gave my card details to them to get a free preview of their "Jugs-o-rama" web site, but I cancelled my membership before the deadline.

Card company: [explodes into laughter] but did you have a good wank, sir?
Mass Debate

A Little Information on Credit Card Fraud

[The-Bus]

I worked in credit card fraud for one of the biggest issuing bans a few years ago, and saw every kind of charge on user's accounts.

To put the most important part of the post here, by federal law, you do NOT have to pay any more than $50 of fraud whenever your card or credit card is compromised. Most banks are smart enough to absorb the first $50 of fraud anyways and not charge the consumer. Otherwise there'd be thousands of people a month having to pay $19.95 to Plymouth Phone (an adult phone company that was... popular).
This means, then, that the financial responsibility for covering fraud falls on banks, not consumers. Even if consumers wereto pay the first $50 in fraud charges to their account, a bank still has to provide the personnel to investigate fraud. Fraud / Loss Control is a very important part of the agenda of most banks.

Now, mind you, it is going to be rather difficult for banks to institute a 'merchant-blocking' system in your account. This is because of several reasons:

• Legacy systems The software these banks use is, for the most part, ancient, unnecessarily complex, and misdesigned. It's not surprising to have to access anywhere from three to five different systems just to work one account. Overhauling something this size to implement a charge-blocking mechanism is going to be cost-prohibitive, at least until a new system is set up.
• Credit card users There's enough confusion with users about their credit cards. I've received calls from people wanting to talk directly to "Mr. Visa" and people who have a Gas Card with Exxon, not a MasterCard with First National Example Bank. Blacklisting merchants adds to this, and whitelisting merchants would be a nightmare. It's hard enough for some of them to remember their address, let alone which merchants they allow to charge their account.

Currently, the system really isn't all that bad. There's a lot of nightmares, certainly, with the major credit reporting bureaus (TransUnion, etc.), but the average national, well-established credit card bank is on yourside when it comes to fraud, mainly because essentially it's their money and their business that's being affected.

The best thing you can do to prevent fraud to your account is basic common sense: Guard your number. Don't trust every merchant online (for the same reasons you wouldn't trust every offline merchant). And, if you are the victim of fraud, report it as soon as possibe to the bank and, for your sake, write down and save everything. Amounts, dates, times, names of people you talked to. The more informed you are as a consumer the easier it is for the banks to help you.

Finally, remember that there are a lot of reputable adult merchants out there. One time we had an older woman call in saying that there were $150 in calls to an adult service. She said she lived alone and would not make such calls. Sure enough, it wasn't her. We called the adult service, they still had the caller's number on record, as well as the time of the call. It happened one time while her 12-yr old grandson was visiting for a few days.