Credit cards are ubiquitous. Together with debit cards, they represent most of the payments made to merchants in the United States [1]. Unfortunately, credit and debit cards are fraud-prone [2]. They are far too easily compromised, and although consumers are afforded financial protection from Federal Regulations Z and E, they impose significant financial and practical burdens on both consumers and merchants. 

Over 50 years ago, Ralph Nader authored “Unsafe at Any Speed: The Designed-In Dangers of the American Automobile “. Its central theme is that car manufacturers resisted the introduction of safety features, and they were generally reluctant to spend money on improving safety. Unfortunately, much the same can be said about today’s credit and debit cards.

I recently experienced an incident of fraud on one of my credit cards firsthand. The accumulated fraud exceeded $5,000. Although I reported the incident to the card issuer, (it involved multiple transactions occurring over a 6-month period), my time and effort consisted of nearly 100 hours. Aside from the time and effort required by consumers to deal with instances of unauthorized transactions on their card accounts, consumers are forced to deal with an ongoing barrage of illicit efforts by criminals on the Internet and by telephone aimed at gaining access to their private information. No doubt, a substantial percentage of this activity, if successful, would result in card fraud.

My fraud experience began when I inspected the monthly statement from one of my credit card accounts. After first noticing that my purchases were out of line with my expectations, I began examining the individual purchases, where I identified several questionable transactions. This effort resulted in a closer examination of previous transactions displayed on older statements. More questionable transactions were noted.

Since both my wife and I were issued cards on the same account, I did not personally recall conducting many of the questionable transactions. Unfortunately, neither did my wife. I started investigating individual purchases by calling the merchants and quickly discovered that, with a few exceptions, most appeared to be unauthorized. There were some common threads. Merchant representatives were helpful and concerned. Several reported that my card number was used to purchase lottery tickets, CBD products, and weight loss gadgets. Many purchases were made at eBay, a retailer that neither of us had used for over a year.

After completing my research, I contacted the customer service department at my card-issuing financial institution. Eventually, my complaint was referred to the  PR team, where a representative worked diligently with me to chronicle the many purchases that I believed were fraudulent. She then turned over her record of my unauthorized purchases to the fraud team. Several weeks passed, after which I was informed that the issuer had accepted most of my unauthorized purchases and reimbursed me accordingly. Unfortunately, the fraud team did not reimburse me for over $1,000 of purchases and cited me as having received and used the purchases.

After appealing to my PR team contact, I registered an online complaint against the card issuer to the Federal Reserve. The Fed responded by transferring my complaint to the CFPB, which promptly informed the issuer of my complaint. Within a few days, the issuer informed me that it had accepted the remainder of the purchases as fraudulent, and they reimbursed me accordingly.

This entire experience required a significant effort on my part, which I estimated resulted in over 50 phone calls and 100 hours of my time and effort. I can only imagine how much more time and effort would have been required by someone less experienced in payments, regulations, and related matters. Ultimately, the soft costs of this experience were borne by me, but I expect the hard costs were borne by the unsuspecting merchants, which likely ended up with the chargebacks that ensued from this matter. 

It’s high time the card industry and responsible merchants adopted more stringent fraud controls to protect unsuspecting consumers. The industry appears to have little interest in efforts that would add friction to the checkout process, but fraud has reached levels that are unsustainable for merchants. It’s time merchants insisted that the card industry adopt multi-function authentication. In contrast to the rollout of EMV, this time the issuers need to foot the bill.

“Unsafe at Any Speed” forced the car makers to build safer cars. Card issuers should be forced to build safer payments! 

By Mark Horwedel

[1] Upgraded Points, “The Most Popular Payment Methods in the U.S. 2024”, Alex Miller

[2] CardRates.com, Credit Card Fraud Statistics 12/10/24