Credit Card Fraud?

This Q is with specific reference to Canadian laws though I imagine the standard in the states is likely comparable:

Got a call today from a rather irritable merchant whose services I used a few weeks ago. Essentially their problem was that they just found that the credit card I gave them (weeks ago) currently has no available credit (i.e. has been completed used up until paid down). So they seem to be unable to charge me. Although I prompty agreed to give them another card, they still mentioned that should this ever happen again they won’t hesitate to call the police :frowning:

Now the reason for the discrepency in time is that they do not use a digital Visa machine, they have the old fashioned plastic thing. Most merchants that use that will still call visa and get authorization, but for some reason, these guys don’t. So my question is this: did I do anything illegal by giving them a credit card which was maxed out? Is it my responsibility to know my balance or is it the merchant’s responsibility to check the card?


lil help plz?

IANAL but the way I see it, you agreed to pay said amount with a credit card with insufficient credit left on the card. You basically “bounced a cheque” if you want to put it another way.

I would guess this sort of thing is illegal but very minor. The police wouldn’t do more than make sure you paid off the debt.

Writing a bad check is a crime if there is an intent to defraud. I can’t imagine how trying to pay with a maxed out credit card could constitute a crime, unless you intended to defraud the merchant.

You can say “oops” once or twice, but if you develop a habit of using maxxed out cards, it is fraud. You are responsible for knowing your balance and paying your installments when due. The statement you get from your bank is for convenience only. Try missing a few payments with the excuse that you never got your statement in the mail and see how quickly you’ll be reminded of these facts.

Wait, I thought the entire point of a credit card is that the merchant calls up Visa (or whoever) and says “this guy wants to charge $x on your card” and Visa says “yes, we authorize a payment of that much, here’s an authorization number”, and the merchant lets you have the merchandise, based on the knowledge that he’s assured payment.

If the merchant just looks at your credit card and assumes it’s good, isn’t that his fault? That’s not to say you should try to stiff him or anything, since that would be dishonest, but it’s my impression that the credit authorization system is designed to prevent the situation you’ve described, and if it doesn’t, it’s not your fault.

Am I wrong?

That was my understanding, but I’m still not sure.

Furthering the check analogy… If they run your check through chexsystems (or some similar system) and get no red flags, and your check bounces anyway, you’re still responsible.

IANAL either but it seems to me that unless some unknown circumstance (like a fraudulent purchase someone made on your account) made you max out, it’d be your responsibility.

Just my opinion.

it sounds like part of the original poster’s question is based on the fact that the merchant didn’t process the charge promptly (maybe not for “weeks” after the purchase). if he had credit available at the time of the purchase, and maxed out the card later, i’m not sure that he can be accused of misconduct. it certainly doesn’t sound comparable to passing a bad check. (and even a check will “go stale” if you don’t cash/deposit it promptly.) the merchant is still owed the money, but he shouldn’t be threatening a customer for his own sloppy business practices. i wouldn’t shop there again either–i would wonder what else he isn’t doing right (maintaining fresh stock, honoring warranties etc.).

Galt, you’re referring to the “floor limit”. For some merchants, this is $0, meaning the contract they have with the bank says they need to call the bank with the card details and purchase and get a clearance for it, regardless of the cost of the purchase. Other merchants, it might be $100 or something. For small businesses, they’ll start you on $0, make you call for every transaction. Later on, they loosen up a bit, once they feel you are a reliable merchant.

I’d have to find my merchant agreements, but i think the bank says that if you call and get an auth number, and you have a signature, the bank will guarentee the payment to you as a merchant.

If you’re sloppy like the OP’s merchant was, the bank might not be so helpful. It’s in everyone’s interests to see the transaction closed successfully. Personally, I think it was dumb of him to threaten police action so soon (assuming this was the first time he tried to contact you? I have had customers that have seemed to have skipped town with my goods and a bad credit card, turns out they had moved or whatever. I am pretty pissed when I find them, but never threatened police action!).

(web merchant)

Responsible, yes, but criminally liable, no. You’ll have to pay some bank fee, most likely, but unless you had some intent to defraud, there is no crime.

Let me tell you I dealt with credit cards for most of my life and in your merchant agreements it is the merchandiser’s responsiblity to obtain an authorization each time the card is presented.

He is scaring you. This is what happened. He took your credit card. He needs to OBTAIN AN AUTHORIZATION at the time of THE SALE. He did OK. But authorizations are only good for 3 to 10 days depending on your agreement. This guy probably got an OK on the card waited three weeks to bill you and then couldn’t get it. The original authorization was expired. So what happened he’s screwed.

So he threatens you.

Did you buy a service. I ask this cause I deal in hotels. Let’s say you hold a room with a credit card. MOST (but not all, for instance special rate rooms bill upfront) will not bill you unless you are a no show. Well people have learned this so they simply call in the card as stolen. I go to bill it and can’t do it. Oh well the hotel loses money.

So what I do is if we are in a sold out situation I go ahead an authorize the credit card two days prior to arrival. I always find at least 10 reservations. I cancel the reservations and we aren’t oversold and you don’t have a room. Cause we require a valid credit card.

The only exceptions to the AUTHORIZATION rule are as follows. If the lines are down you have an automatic amount you are covered for. In our case our VISA limit is 500.00. So let’s say our line is down and I don’t get a authorization for your card. If the lines are down and we report it, I’m cleared for any charges you make up to $500.00. Any higher charges I have to call in via an 800 and get an OK.

If I don’t call it in well we are in violation of our merchant agreement and we lose.

Of course the merchant can say you “stole” the merchandise, but that means filing a police report and having them search your home for being in possesion of goods from a store that you don’t own. The check to credit card is not a valid analogy.

The merchant was pretty dumb. He should have done a force thru. What that is, let’s say a desk clerk screws up doesn’t get the code, or fails to write it down. I ask did you get it. He says yes. I simply put the transaction thru with a forced code as "OKNC31804. This will charge the transaction to your account BUT if you dispute it I automatically lose as I have no back up.

But now you say wait…what if it would push me over my limit. The credit card company doesn’t care. As long as you didn’t dispute it, the company would bill you and charge you an “over the limit” fee. Check your agreement, most people fail to realize virtually all credit cards will charge you this fee.

Here is another tip. The average chargeback to a VISA or MasterCard is 15.00. At the last hotel I worked for it was $25.00. That is what the credit card company charges us for an investigation of a charge. If a customer were to complain and said they would charge back the item AND their charge was less than $25.00 I automatically took it off as it would cost us MORE to have the credit card company investigate us.

The only risk you would have is if the credit card company finds in the merchant’s favour the merchant can report this on your credit report as a nussance(sp?) chargeback. But that is very unlikely to ever happen.