Credit card scam hitting local businesses costing them thousands of dollars

BAKERSFIELD, Calif. - A national credit card scam has hit some local businesses for tens of thousands of dollars.

The scam works by utilizing a fake authorization code.

A criminal will go into a business and make a purchase. The clerk will run the credit card for the sale. When the sale is declined, the scammer will say there must be a mistake and pretend to call his bank. The scammer will then provide a fake authorization code to the clerk or hand his cell phone to the clerk to speak to his alleged financial institution to provide a fake authorization code.

The retailer would  then enter the code into the credit card terminal and the transaction would then go through.

Criminals exploit a relatively obscure loophole in retailers' debit and credit card authorization process.

Credit card terminals are set up so merchants can force a sale if there is a complication with the terminal.

"Scammers are utilizing that loophole in the process to fool merchants into running these transactions," said Brian Hill, Payment Systems Worldwide.

Hill says other local retailers have been hit by the same scam, being victimized for $20,000.

To force the sale, or override the decline, some criminals have found the key to authorize a declined transaction. The authorization code apparently can be any combination of numbers, as long as the code contains the correct number of digits that the computer accepts.

Recently Star Furniture became a victim of this fraud when a scammer used this method and got away with over $6,000 in merchandise. The retailer contacted 23ABC because they wanted to alert other retailers the scam is active locally.

"It was an elaborate scheme of false credit cards and false IDs that milked us out of merchandise." said Steven Kandel, Star Furniture owner.

Financial experts say the best way to avoid being taken by this scam is to avoid accepting authorization codes from anyone for declined cards.

"This was an unfortunate circumstance, I think most importantly, this really highlights the need all merchants to get a better understanding how to protect themselves, now that I've been unfortunately, part of those statistics," said   Kandel.

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