Code 10 Authorization Calls - Fraud Prevention
Most of the anti-fraud tools available to merchants are designed to work automatically according to cold machine logic, using algorithms to block fraudulent transactions behind the scenes. In the card-present environment, however, merchants and their employees must sometimes make very human decisions to stop fraud while it is taking place. This may involve placing a Code 10 call to alert the issuing bank to possible fraud without tipping off the suspicious customer. How can merchants know when it’s the right time to call in a Code 10?
To the customer in the store, the Code 10 call sounds like a normal voice authorization request, with the merchant not saying much beyond answering “yes” or “no” questions. To the issuing bank, however, “Code 10” signifies that the merchant suspects possible fraud: either that the payment card has been stolen or tampered with, or that the customer is not who they claim to be.
For merchants and their employees, it can be difficult to make a confident decision about when and if to make a Code 10 call. It can also be nerve-wracking, as the call may have to be made in front of a person possibly engaged in criminal activity. Of course, merchants and workers must put their own safety first, but if they do not believe that placing the call will put them in danger, the decision should be made based on whether reliable indicators of fraud are present. Note that you can place a Code 10 call after the fact, but it will be too late to stop the transaction.
When Should Merchants Place a Code 10 Call?
Card-present fraud, perpetrated in a face-to-face transaction, is rare relative to ecommerce fraud. Nevertheless, it does happen, in situations ranging from the casual theft of a family member’s card to organized fraud operations. The Code 10 call gives merchants a chance to bring possible fraud to the card issuer’s attention and receive instructions from them about how to proceed with the transaction. The format of the Code 10 call is designed to be discreet, so that it can be made in front of the customer, but they can be lengthy.
You should place a Code 10 call when you have reason to believe that a customer is using a credit card fraudulently. There are various reasons and indicators that may lead you to this conclusion:
- One clear and objective indicator is when your point-of-sale terminal displays a message associated with fraud, such as “Lost or Stolen Card” or “Pick Up Card” after the card is swiped or inserted.
- Visual inspection of a payment card may also reveal signs of fraud or tampering. You might see alterations to the security features or signature, for example.
It is often the customer’s behavior that leads merchants to suspect fraud, but you must be careful about following this subjective indicator. When a customer is behaving in a bizarre or threatening manner, the safety of your workers and customers must come first. It is also not at all uncommon to misinterpret anxious or culturally unfamiliar behavior as “suspicious.” However, there are some actions the customer may take that can be more reliable signs of possible fraud. These could include signing the receipt with a different signature than what appears on the card, or asking to swipe the card instead of using the EMV chip.
Sometimes, of course, your suspicion won’t match any predetermined criteria, but your gut instinct will tell you something is wrong. There’s no simple guideline for knowing when to act on these feelings, but experience may teach you how to recognize the signs of fraud that are specific to your type of business.
What Happens on a Code 10 Call?
To place a Code 10 call, tell the customer that you must make a phone call to authorize the transaction. Take the card and dial the number you call for voice authorizations. When an operator answers the call, you say: “I have a Code 10 authorization request.” You should have the card in hand when placing the call. Since you will usually be placing these calls in front of the customer, you should maintain a calm and professional demeanor while speaking.
The operator will ask you for some information and details about the transaction, most of which you should be able to answer with “yes” or “no.” The operator should not ask you anything that will require you to answer in a way that would cause the customer to realize that you suspect them of fraud.
The operator will instruct you how to proceed. They may have already been alerted to fraud on the account, or if the card was reported lost or stolen. They may be able to validate the transaction by texting the customer’s number on file for confirmation, or they may determine that this is new fraud on the account.
In a scenario where the issuer is certain of fraud, you may be instructed to retain possession of the card, call law enforcement, or both. Here again, you should follow these instructions as long as your own personal safety is not compromised. If you feel that the safest course of action is to finish processing the transaction and allow the customer to leave without a confrontation, do that, and call law enforcement and your payment processor as soon as they leave.
Placing a Code 10 call may feel intimidating, but these calls do have the potential to prevent yourself from being victimized by fraud, stop a fraudster in the act, and spare other merchants from future fraud. If you have reason to safely place a Code 10 call but decline to do so, it’s extremely likely that the transaction will come back to bite you as a true fraud chargeback that you won’t be able to fight.
These calls require some quick judgment calls and risk assessment in the heat of the moment, so don’t add logistical difficulties to the mix. Make sure the numbers you need to call are clearly identified and posted near the phone. Covertly calling out fraudsters with a Code 10 may be a big responsibility, but it can do a lot to stop fraud and prevent chargebacks.