JPMorgan JPMorgan

Commercial Card SolutionsCommercial Card SolutionsCommercial Card SolutionsCommercial Card Solutions

Arizona State University d d iFraud and Disputes

Transfers, Credits and ChargebacksMarch 12, 2009March 12, 2009

Patricia Larkin Green

VP, Relationship Manager

J.P.Morgan, Wholesale Card & Procurement Services

AGENDAAGENDA

Definition of Fraud and DisputeDefinition of Fraud and Dispute

Fraud Detection and Prevention

Fraud Investigations and Recovery

Transfers Credits and ChargebacksTransfers, Credits and Chargebacks

Minimize Your Risk; Best Practices

Disputes

Q estions/Disc ssion

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Questions/Discussion

Fraud and Disputes DefinedFraud and Disputes Defined

Fraud

Fraud is defined as unauthorized transaction(s) made with a lost, stolen, compromised or counterfeit card/number

Lost/Stolen Recoverability varies depending on circumstancesLost/Stolen- Recoverability varies depending on circumstances

A h t t ti bill d t dh ld ’ t t tDispute

A merchant transaction billed to a cardholder’s statement.

Lost/Stolen- Recoverability varies depending on circumstances

Single unauthorized / does not recognize transactionsSingle unauthorized / does not recognize transactionsMerchant Billing ErrorsProcessing ErrorsCardholder Dispute

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FraudFraud

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Types of FraudTypes of Fraud

LostLost

Stolen

Non-receipt

Internet

Counterfeit/skimming

Stolen/compromised number

Account takeover/true name fraud

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Evolving History of FraudEvolving History of Fraud

$120

Counterfeit fraud was the fastest growing fraud type in 2005Counterfeit fraud was the fastest growing fraud type in 2005

$80

$100

Card Not

$60

$80 Not Present

$20

$40Lost

Counterfeit

Stolen

NRI

3Q96 3Q97 3Q98 3Q99 3Q00 3Q01 3Q02 3Q03

$0Acct Takeover

Fraud Apps

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3Q02 3Q03 3Q04 3Q05Credit and Debit Card

Fraud by Type 4Q06 Fraud by Type 4Q06 –– 3Q073Q07

$15

Counterfeit and Card Not Present Fraud are the fastest growing fraud type todayCounterfeit and Card Not Present Fraud are the fastest growing fraud type today

$10

$13 Card Not

Present

$5

$8

$

Counterfeit

$3

$5

Acct TakeoverSt l

Lost

NRI

SeptJan

MaySept

$0Acct Takeover

MiscStolen

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pConsumer Credit and

Commercial Card

Fraud TypesFraud Types

Fraud types change and continue to evolve

Lost/Stolen- Recoverability varies depending on circumstancesLost/Stolen- Recoverability varies depending on circumstances

NRI- Non-receipt

Card Not Present- Mail Order Telephone Order/Internet- Recoverability is Card Not Present- Mail Order Telephone Order/Internet- Recoverability is very good

Counterfeit- Card present- Recovery through chargeback process not likely

Account takeover-true name fraud

*Bolded items are the greatest drivers for JPMC Commercial Card fraud.

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What is JPMC Doing for You?What is JPMC Doing for You?

1. Unique designed credit card

HologramHologram

Tamper-evident signature panel

Unique Magnetic strip encoding

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What is JPMC Doing for You?What is JPMC Doing for You?

2. Partner with Visa

E-mail alerts are generated from Visa notifying of account number compromiseE mail alerts are generated from Visa notifying of account number compromise

JPMC security representatives review accounts and make proper contact with cardholders or administrators based on information obtained from Visa alerts

JPMC security representatives contacts appropriate agency – FBI, Secret Service, or other law enforcement agencies with pertinent fraud information based on requirements within the Visa alert

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What is JPMC Doing for You?What is JPMC Doing for You?

3. Cardholder and client awareness

JPMC works with program administrators to develop proper card control (i e JPMC works with program administrators to develop proper card control (i.e.. MCC codes, credit limits, purchase velocity limits, etc) to reduce risk

Participate at conferences and forums to educate cardholders and clients on current trends and fraud prevention current trends and fraud prevention

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What is JPMC Doing for You?What is JPMC Doing for You?

4. Fraud detection systems

Fraud detection systems are flexible and are used that provides the ability to target both general fraud trends as well as specific trends

Criteria/rules are defined based on analysis of fraud data providing us with current fraud trends

Fraud patterns

Specific MCC

Dollar amounts

Geographic location

Specific merchantsSpecific merchants

When authorizations meet these pre-defined criteria, the account is sent to queue

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What is JPMC Doing for You?What is JPMC Doing for You?

4. Fraud detection systems (cont)

JPMC security representatives analyze account and determine if contact with JPMC security representatives analyze account and determine if contact with cardholder and/or program administrator is needed

Merchant referral status put on account if appropriate

5. Validate your identity when you call JPMC

E h dh ld id d i i f id tifi ti th t lid t Each cardholder was provided a unique piece of identification that validates your identity

Employee ID, SSN, or other unique information that would have been communicated to you by your Program Administratorcommunicated to you by your Program Administrator

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Fraud Department StructureFraud Department Structure

Fraud Investigations and Recovery

Partner with Program Coordinators on potential misuse in escalation to Program Partner with Program Coordinators on potential misuse in escalation to Program Administrators.

Initiate recommendations to Clients on strategic opportunities related to improved authorization controlsauthorization controls.

Open Fraud Cases

Fraud Report to the Associations

Send Affidavit

Request and initiate chargeback for recoveries via Association regulations

Investigate High Risk Merchant Category Codes to identify potential suspectvest gate g s Me c a t Catego y Codes to de t y pote t al suspect

Analyze for account history for potential point of compromise

Work with various law enforcement agencies

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Fraud Chargeback ProcessFraud Chargeback ProcessJPMC puts temporary credit on account

Orders copy of sales draft-30 days

Affidavit sent and customer to return within 30 days

SALE

Customer calls to report fraud

Representment of charge to merchant

Merchant can dispute-45 days

If merchant contests, case in arbitration with Visa-30 days

Settlement of decision by VisaSettlement of decision by Visa

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Second representment of charge to merchant-30 days

Fraud Department StructureFraud Department StructureFraud Investigations and Recovery

Recovery Investigations

When the Fraud case is opened the unauthorized transaction(s) is moved off of the new account by issuing credit with a description of “XFRD Merchant Name” along with the amount of the transaction(s) “$” to the old account number that was closed (lost/stolen)( )

Transact Post Employee Last Employee First

Transaction Departm Account Merchan

Trans ID ion Date Date Namep y

Name Merchant Name Amountp

ent Number Orig Merchant Name t ID

886202 5/9/2008 5/9/2008 LUDWIG NATHANIEL XFRD/STAPLES/5557 -$627.17 2406************9866 XFRD/STAPLES/5557 78856

886201 5/9/2008 5/9/2008 LUDWIG NATHANIEL XFRD/SPORTS CHALET/5557 -$214.87 2406************9866 XFRD/SPORTS CHALET/5557 78854

886200 5/9/2008 5/9/2008 LUDWIG NATHANIEL XFRD/STAPLES/9866 $627 17 2406************5557 XFRD/STAPLES/9866 78857886200 5/9/2008 5/9/2008 LUDWIG NATHANIEL XFRD/STAPLES/9866 $627.17 2406 57 XFRD/STAPLES/9866 78857

886199 5/9/2008 5/9/2008 LUDWIG NATHANIEL XFRD/SPORTS CHALET/9866 $214.87 2406************5557 XFRD/SPORTS CHALET/9866 78855

884341 5/5/2008 5/7/2008 LUDWIG NATHANIEL STAPLES 00107151 $627.17 2406************5557 STAPLES 00107151 60659

883952 5/5/2008 5/6/2008 LUDWIG NATHANIEL SPORT CHALET 00000620 $214.87 2406************5557 SPORT CHALET 00000620 78699

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Fraud Department StructureFraud Department StructureFraud Investigations and RecoveryFraud Investigations and Recovery

Fraud case opened and the unauthorized transaction(s) is moved off of the new account by issuing credit with a description of “XFRD Merchant Name” along with the amount of the transaction(s) “$” to the old account number that was closed ( ) $(lost/stolen)

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Fraud Department StructureFraud Department StructureFraud Investigations and RecoveryFraud Investigations and Recovery

A debit with a description of “XFRD Merchant Name” along with the amount of the transaction(s) “$”

Note if viewing via PaymentNet both the old or closed (lost/stolen) account and the new account number transactional activity is displayed

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Fraud Department StructureFraud Department Structure

Fraud Investigations and RecoveryContinued:

Recovery Investigations

Upon receipt of the signed affidavit the Recovery Investigator will initiate request to the merchant(s) to obtain documentation on the fraud transaction(s) request to the merchant(s) to obtain documentation on the fraud transaction(s) (This process takes approximately 45-90 days)

If JPMorgan Chase recovers the loss via the Association Regulations the Recovery Investigator will issue credit(s) for the fraud dollars to the old (lost/stolen) account to offset the initial debit that was placed on the old account when the case was initially opened.

The credits you then see are the final, permanent credits for the fraud that occurred occurred.

If we didn't issue those fraud chargeback credits, then the fraud balance would be sitting on the old account indefinitely and we want to avoid that.

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Minimize RiskMinimize Risk--Your RoleYour Role

1. Protect your credit cardsKnow where your credit card is at all times

Anticipate on receiving a new card just prior to expiration of your current card

Be aware of when your statements should arrive

If l t t t dit d If late, contact your credit card company

Sign the back of your card immediately upon arrival-even prior to activation

Keep record of your credit card number in a secure place, separate from your Keep record of your credit card number in a secure place, separate from your card. Include in that record the toll free number for JPMC

Always get your credit card back promptly from salesclerk, waiter, etc.

Review your statements closely

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Minimize RiskMinimize Risk--Your RoleYour Role

2. Guard your credit card numberDo not give your credit card number over the phone unless you know you are dealing with a reputable companydealing with a reputable company

If you have ATM cash access, memorize your PIN number and do not keep it with your credit card

Never give out information in an email; your card provider will not ask you to provide personal information such as your password, social security number, bank account and credit card numbers

Be aware of phishing by phone and mail as well

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Minimize RiskMinimize Risk--Your RoleYour Role3. Safety tips when using your credit card

Destroy carbons and voided receipts immediately when no longer needed

Check your statement promptly against receipts that have been kept in a secure place

If you no longer need your company credit card, destroy it immediately and y g y p y , y ynotify your company’s program administrator

Safeguard this card as if it were your own; report lost or stolen cards immediatelyy

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Minimize RiskMinimize Risk--Your RoleYour Role4 R ti l d f d4. Reporting losses and fraud

If you lose your commercial card or if you realize it has been lost or stolen, immediately call JPMC toll free number (800) 270-7760

JPMC’ it t ti ill fi t ti ti it ith t JPMC’s security representatives will confirm transaction activity with you to ensure that no fraudulent activity has occurred

Your card will be terminated immediately and you will be sent a replacementreplacement

If you suspect fraudulent activity on your account, immediately call JPMC at (800) 270-7760. Your card will be terminated immediately and you will be sent a replacementa replacement

You may be asked to sign an affidavit stating that you did not make the purchase(s) in question

JPMC’ S it D t t ill i iti t i ti ti d ff tJPMC’s Security Department will initiate investigations and recovery efforts

Make sure your credit card companies have your updated contact information

We are required to follow Visa’s requirements when disputing fraud charges

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We are required to follow Visa s requirements when disputing fraud charges

Since fraud charges are different from disputed charges, fraud charges are not to be disputed via PaymentNet

DisputesDisputesDisputesDisputes

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What Do I Do to File a Dispute?What Do I Do to File a Dispute?Step 1:

Contact the merchant

Most situations can be easily resolved with the merchant

Step 2:File through PaymentNetg y

You will receive a confirmation email immediately upon clicking the submit button

Dispute is automatically routed to Dispute Department for processing and Dispute is automatically routed to Dispute Department for processing and will let you know if you need additional documentation

Another email will be generated once the dispute is resolved

Can send via fax or mail

Notification must be received within 60 days from the statement cycle date that the disputed charge appears

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Documentation NeededDocumentation Needed

Dispute ReasonAdditional Documentation Needed

I have been billed for an Copy of receipt that shows correct incorrect amount

Merchant was to issue credit for merchandise returned to

Copy of receipt that shows correct amount

Copy of credit receipt received at store

the store

I have been charged for a purchase that was paid for by

store

Copy of documentation showing the other method of payment: cash receipt, copy of check, copy of other

other means

Merchandise/Service received damaged or not as described

receipt, copy of check, copy of other credit card statement, etc

Copy of returned mail receipt from returning the merchandisereturning the merchandise

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Typical Dispute Chargeback ProcessTypical Dispute Chargeback ProcessJPMC puts into dispute status

Orders copy of sales draft-30 days

If not resolved, customer files a dispute within 60 days of the billing date cycle for which the charge appears

SALE

Customer calls merchant

Representment of charge to merchant

Merchant can dispute-45 days

If merchant contests, case in arbitration with Visa-30 days

Settlement of decision by Visa

Second representment of charge

Settlement of decision by Visa

Credit would appear if ruled in CH favor

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p gto merchant-30 days

Other Important InformationOther Important InformationDispute regarding tax

Cardholder’s responsibility to provide tax exempt ID# at time of the purchase

If it was provided, the cardholder needs to detail this in their dispute notification

Third partyThird party

If travel agency is at error, must dispute with travel agency

If it is airline/hotel/etc error we can dispute chargeIf it is airline/hotel/etc error, we can dispute charge

Reoccurring chargesI i ibili l i h h ld d b It is your responsibility to cancel any reoccurring charges should your card be canceled (i.e.. Internet, cell phone, etc)

Floor limits

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Not all charges require an authorization

You can still dispute charges on a closed account

Department CardDepartment CardAccounts set up under Department or Company names do not qualify for

fraud related recoveries from Visa or MasterCard

Clients will still have other dispute rights not categorized by Visa or Clients will still have other dispute rights not categorized by Visa or MasterCard as “Fraud”. Below are examples of non-fraud related dispute clients can exercise:

ViVisa

Services Not Provided or Merchandise Not Received

Cancelled Recurring Transaction

Not as Described or Defective Merchandise

Cardholder Does Not Recognize Transaction

Incorrect Transaction Code (ie: credit posted as a debit)( p )

Incorrect Transaction Amount

Duplicate Processing

Credit Not Processed

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Credit Not Processed

Paid by Other Means

Services Not Rendered – ATM funds not received

QuestionsQuestionsQuestionsQuestions

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