Package rerouting fraud is when a fraudster uses a stolen credit card to make a physical goods purchased. When the package is shipped they change the address.
Package rerouting fraud is one way that fraudster can steal physical goods merchandise while using a stolen credit card. This type of fraud leaves merchants with a true fraud dispute and the loss of merchandise.
What is Package Rerouting Fraud?
Package rerouting fraud is when a fraudster uses a stolen credit card to make a physical goods purchased. The fraudster will use the legitimate cardholder’s address to make sure the purchase gets past the front end fraud filters, but when the package is shipped they change the address. This means that the fraudster now has the goods and the merchant will get hit with a true fraud dispute.
True fraud is when a fraudster uses a stolen card to make a purchase which then the actual cardholder disputes the charge. True fraud disputes are not winnable by the merchant. This is because merchants are liable for true fraud charges through Zero Liability Policies. For example, Visa’s Zero Liability Policy is:
“Visa's Zero Liability Policy is our guarantee that you won't be held responsible for unauthorized charges made with your account or account information. You're protected if your Visa credit or debit card is lost, stolen or fraudulently used, online or offline.”
It is important to be aware of the causes of true fraud because it is an automatic fraud loss merchants.
Should I Block Rerouting?
It may seem like blocking the option to reroute all shipments is the best option to prevent rerouting fraud, but it may not be. Customer experience may take a hit if you choose to prevent all rerouting of packages. There are legitimate customers that may need to route shipments for various reasons. This could range from wanting to change the address to accommodate delivery times, wanting a package delivered to a work address because its a present, etc.
Beyond customer experience, fraudsters have been able to reroute their shipment without having to contact the merchant at all. So preventing your customer service from helping reroute a shipment may not deter these fraudsters.
But for merchants that want to retain maximum customer experience and prevent this type of fraud there are some methods to do so:
Create a process of communication with your shipment company. This way if a customer reaches out to your customer service or to your shipment company to change the address of their shipment, the new address can be run through your front end fraud filters again. If your front end fraud filters comes back saying that it is not safe address than the merchant can intervene the shipment.
If your shipping company is unable to communicate efficiently, then you need to look at your companies current situation with rerouting fraud. If your company is suffering constantly from fraudsters using rerouting to their advantage than it may be better to shut off rerouting all together. If your company does not lose a noticeable amount of revenue to this fraud then it may be better to keep the customer experience of being able to reroute shipments. But continue to track this fraud in case it increases.
Why Stay on Top of Shipments
Staying on top of shipments can help prevent merchandise loss when it comes to all types of fraud. There are three types of fraud when it comes to disputes. The first is true fraud which rerouting fraud is a part of. The next is chargeback fraud which is where a customer is disputing out of malicious intent. This could be because of buyers remorse or the plan on reselling the goods for profit. Lastly, there is friendly fraud which is when a customer dispute a charge out of a misunderstanding or forgetfulness. Although all these types of fraud have different motives, the shipment should be stopped from being delivered if possible.