Credit Card Fraud: Know about the Penal Provisions & Ways to deal with it (2024)

This article is written by Abhinav Rana, from University School of Law and Legal Studies, GGSIPU Dwarka. This article deals with Credit Card Fraud.

A credit card is a plastic card that represents the line of credit. It allows the cardholder to buy goods and services on credit based on the cardholder’s promise to pay back the money. Globalization and increased use of the internet for online shopping have led to excessive use of credit cards. It has a limit of a certain amount to the extent the owner can spend which is known as Credit Limit. At the end of the month, the owner can pay either the whole amount he owes or some proportion of the bill by the due date.

It allows you to buy anything of the high amount now and settle it later. It is a very flexible source of money. Also, it allows you to purchase even abroad without worrying about local currency as the credit cards are now spread worldwide.

It is rightly said that something with a lot of benefits has its limitations too. Nowadays, credit card frauds are increasing rapidly. While many of us have never experienced credit card fraud, this happens every day. Credit card fraud means a transaction done with your account for which you didn’t authorize. It can be done when someone has stolen your credit card or also when that person has stolen your personal card details to make an unauthorized transaction without your card physically.

The person can also do so by installing a credit card skimmer to steal your account details. A credit card skimmer is a small tool that the person can install anywhere you swipe your card. So, preventive measures should be taken every time before using your card.

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1. Application fraud

This type of fraud happens at the time of applying for a card. Some people issue cards in your name. They usually first steal your personal information and then use them as the supporting documents to open an account in your name. Banks can play a major role in minimizing this type of fraud by accepting the only original form of documents and ID proofs. They can also do so by confirming the identity of the owner through telephonic confirmation.

2. Electronic card imprints

The second kind of credit card fraud is done through stealing the card imprints. Someone skims the information placed on the credit card magnetic strip. Then this information is used to make fake cards.

3. CNP (card not present) fraud

If someone knows the details of your card they can easily commit CNP fraud against you. Details like account number and expiry date are enough to make international payments. Although most of the companies make it essential to enter the PIN of the card. But there are chances if a person knows your card number he/she might know your PIN too.

4. Counterfeit card fraud

Counterfeit card fraud is a form of fraud which is most commonly done through skimming. In this, a small fake magnetic tool holds up your card. Afterwards, this strip is used to make a fake card. It is an exact copy of your card which the fraudulent can swipe anywhere to purchase the goods. Prevention should be taken before putting your card in the machine. Always check the chip reader in which you insert your card, try to pull it outwards if it comes out directly report to the guard and the nearest police station.

5. Lost and stolen card

This type of fraud is committed when your credit card is out of your possession i.e been stolen or lost. Now it is easy for frauds to make payments through your card. Although it will not be possible at machines as it requires a PIN number of the card. But online payments can be made through the cards without the requirement of a PIN number.

6. Mail not receipt card fraud

It simply means “card never arrived fraud”. This means your card has never reached you after being dispatched from the bank. This can happen when you applied for a new credit card or replacement of an older one. Now the fraudulent can make use of your card for his own purposes.

It’s important to monitor all your credit card accounts regularly, which will keep you updated because this type of fraud can happen even when your card is safely present in your wallet. In 2015, global credit, debit and prepaid card fraud amounted to $21.84 billion in losses, according to the Nilson report. Keeping the consumer informed about what they can do if they are stuck up in a situation is a crucial measure which has been evolved in this new era of cybercrime.

Always remember to keep a track on each and every transaction relating to your account and if any unauthorised transaction is seen or any transaction not done by you is done in your account report it to the bank and police immediately.

1. Practice vigilance

First, you should try to protect yourself and safeguard your details from being scammed or at least set yourself up with the proper tools to detect a scam early on. Vigilance is key. Mark Hamrick said. “One painless strategy is to download your bank’s mobile apps that help us keep track of all credit and debit card transactions,” Hamrick said, adding that you should avoid third-party apps. Set up mobile alerts for your transactions.

2. Inform the card issuer

Immediately inform the card issuer, the moment you come to know that a transaction has been made on your credit card. It is generally advisable that one should inform the bank maximum within 3 days. It is also essential that the victim should lodge a formal complaint with the bank and ask them to block the card so that further unauthorized transactions could be prevented. But, before filing a written complaint, one should have the following documents with him/her-

• Bank statement of the concerned bank.
• Keep your ID and address proof as shown in the bank records.
• Make FIR under Section 154 Code of Criminal Procedure, 1973 and give a copy of FIR to the bank also.

The banks and police both play an active role and immediately take action to track the unauthorised transaction and also, in America under the guidelines of federal trade commission you are not liable for the transactions you didn’t authorise.

3. Change your passwords and PINs

To prevent fraudsters from doing any further damage, you can request the bank to allow you to change your password or PIN.

4. Closely monitor account activity

Next, you can keep an eye on the activities of the account and can check its status regularly. But if you notice some signs of fraud, you must notify the bank immediately.

5. Contact the credit bureaus and FTC

Creditcards.com recommends that if you are a victim of identity theft and someone is using your personal details as his own to commit fraud then you need to alert the credit bureaus and place a complaint as ‘Fraud Alert’, on your credit reports before informing the bank. “Fraud alerts will be very beneficial to you as it will prevent the fraud doer to open a new bank account in your name.

1. Read the account statement carefully

When your account summary arrives at your place don’t just pay the amount stated in it. Instead, first, read and analyze the statement carefully and if any transaction is done which is not in your knowledge inform the bank instantly. Even better to always check your transactions online and don’t wait for the statement to arrive.

2. Always remember to log out

Whenever you log in to your account, don’t leave your account open and remember to log out every time you use it.

3. Don’t fall for phone call scams

You may receive calls from fraud people saying they are from your card provider and ask for your account details. Remember, the banks never ask for your account details.

4. Check your credit report

Always check your credit report which contains all the loans in your name. New loans may be taken by thieves in your name. If any new loan has been taken then contact your bank instantly.

5. Beware of a phishing scam

People may receive emails from thieves pretending themselves to be from television services, or any other internet site asking your account details for continuation of the services. Don’t fall for such scams they are run by hackers to steal your account information.

6. Report lost of card

If your card has been lost or stolen inform the bank immediately and also visit a nearby police station to make an FIR. After this, the bank will block your account and now the thief cannot make any transaction anymore.

7. Go paperless

Access your account statement online and stop receiving the paper statement. This will reduce the chances of thieves receiving the paper which contains your account details.

8. Check the encryption software

Before entering your account details on a site, make sure you check the encryption software it uses.

9. Make a strong password

Keep your password strong and safe. Do not share it with anyone else.

Section 66C and 66D of IT ACT, 2000 and also the provision of section 468/471 IPC,1860 may be attracted to whoever tries to commit credit card fraud.

Section 66C IT Act, 2000

Section 66C says “Whoever tries to make use of any electronic password fraudulently or dishonestly shall be punished with imprisonment up to three years and a fine up to one lakh rupees.”

Section 66D IT Act, 2000

Section 66D says “Whoever by any device tries to do cheating by personation shall be punished with imprisonment up to three years and a fine up to one lakh rupees”

Section 468 of IPC

Section 468 says “Whoever commits forgery for the purpose of cheating shall be punished with imprisonment up to seven years and shall also be liable to fine.”

Section 471

Section 471 says “Whoever by fraudulently or dishonestly uses a document which he knows to be false shall be punished with the same punishment as if he has forged such document.”

If anyone’s credit card has been lost/stolen and someone makes any transactions he’ll be liable under these sections. The person has to file an FIR in the nearby police station. The evidence, in this case, would be the account statement. Rest of the evidence like the IP address of the fraud doer will be collected by the police in its investigation. The bank has the log details of the credit card transactions which help the police in its investigation. Based on the log details (IP address), it would trace the criminals.

Credit card fraud is an act done with dishonest intention. In India, these frauds have become more prevalent from 2010. This is due to the reason that there’s a lack of awareness in some states and also, among some banks. But there are different measures for detecting and preventing credit card fraud, some of them are as follows-

• Expertise: The responsibilities on the members of the team of managing the infrastructure, handling the verification, analysing the transactions etc, have been increased and they are required to ensure that the technology is well managed or not.
• Collaboration: The whole industry is to work in collaboration so as to prevent fraud.
• Biometrics: This is the most recent technology to prevent credit card frauds. It records unique characteristics of the cardholder like fingerprints, voice, signature and other biological components so that the computer can read it.

Hence, some anti-fraud strategies can be adopted by the banks to prevent the unauthorized use of credit cards and to avoid banks from great losses and reduce risk.

• https://devgan.in/ipc/chapter_18.php#s471
• https://indiankanoon.org/doc/1569253/
• https://economictimes.indiatimes.com/wealth/spend/how-to-report-a-net-banking-debit-or-credit-card-fraud/articleshow/66967421.cms?from=mdr
• https://economictimes.indiatimes.com/wealth/spend/how-to-report-a-net-banking-debit-or-credit-card-fraud/articleshow/66967421.cms?from=mdr
• https://newsroom.mastercard.com/asia-pacific/2014/10/28/8-different-types-card-fraud/
• https://brex.com/learn/fraud-security/who-is-liable-credit-card-fraud/
• https://www.nerdwallet.com/blog/credit-cards/credit-card-theft-fraud-serious-crime-penalty/
• https://www.creditcards.com/credit-card-news/privacy-security-suite-tips.php

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