Written by Ray Rogers Property Claims Director
Fraudulent credit card purchases are a continuing problem for lumber businesses. Often in these incidents, perpetrators will use stolen or fake credit card numbers to order mass quantities of building materials from a business. Unknowingly, the lumber company will then have the product delivered to the business. Several days later, when the business owner runs the purchase through to a fraudster’s card company, the card company will call and alert them the credit card number is fraudulent. To recoup their losses, the lumber business owner will then put a claim in for reimbursement. Unfortunately, because they accepted the payment, the business owner is often left on the hook for the charge, with no opportunity for recourse.
We’ve seen a noticeable upward trend in these claims: 10 in 2023, a slight dip to 8 in 2024, and now a sharp jump to 14 in 2025, and we are just now entering the start of the 4th Quarter. Please note that these losses are specifically excluded under both the Commercial Property and Commercial Crime policies as follows:
- Commercial Property Exclusion: Voluntary parting with any property by you or anyone else to whom you have entrusted the property if induced to do so by any fraudulent scheme, trick, device or false pretense.
- Commercial Crime Exclusion: Loss resulting from your, or anyone else acting on your express or implied authority, being induced by any fraudulent or dishonest act to voluntarily part with title to or possession of any property.
We frequently see companies with losses of around $10,000 to $50,000 from scams of this nature. While this sort of loss may not force an operation to close, over time these losses can be difficult to manage. Here at PLM, we recommend that the businesses we insure require customer signatures and identification at the point of delivery to ensure the transaction is legitimate. We also recommend drivers make handwritten notes on the receipt with the name on the driver’s license, and if possible, take a photo of either their license or signature. This small practice can greatly curb any potential incidents of false payments. It is important to stay one step ahead of the fraudsters by using verification techniques to help minimize the chances this happens to you. There is also the 3D Secure Authentication method, which works as follows:
- A shopper starts the checkout process.
- They enter their payment details on the checkout page.
- Before the payment can go through, the site redirects the shopper to their card issuer’s 3D security page.
- The shopper enters the password for their online banking account.
- The bank sends a one-time passcode to the shopper’s phone number or email address, or the shopper is asked to answer a security question.
- If the shopper’s information is correct, the bank will verify the transaction.
- The shopper is redirected back to the website where they can complete their checkout process.
The system also works by sharing a large amount of data—over 150 data points, such as the customer’s IP address, device type, and purchase history—between the merchant, the payment network, and the card issuer. Based on this information, the card issuer performs a real-time risk assessment which could trigger the “challenge” process above. Note that the issuers all have branded versions of the protocol e.g. Visa Secure, Mastercard Identity Check, or American Express SafeKey. While in Europe it is mandatory, in the US merchants must work with their payment service provider or payment gateway to enable it.
