Scam Targeting Small Businesses: How Thieves Are Draining Bank Accounts

Do you own a small business?  Imagine if a seemingly ordinary customer calls in, places a large order, and pays with a credit card. The payment clears, you release the goods, and everything seems fine, right?  Absolutely nothing about the transaction raises any red flags – until weeks later, when you’re hit with a chargeback. Turns out? The credit card was stolen, the thief is long gone, and your business is left holding the bill.

This exact scenario played out for two flooring companies—one in Georgia and one in Florida—and they’re not alone. As credit card fraud becomes more sophisticated, small businesses are increasingly vulnerable to scams that exploit gaps in payment verification. Here’s how the scheme works, why businesses struggle to recover their losses, and what you can do to avoid becoming the next victim.

How the Scam Works

It follows a calculated pattern:

1. A caller contacts a business and places a large order, often for high-value goods like flooring, appliances, or electronics.
2. The scammer pays with a stolen credit card, and the transaction initially clears.
3. The thief (or an accomplice) picks up the order, sometimes on the same day, before the fraud is detected.
4. Weeks later, the legitimate cardholder disputes the charge, and the business receives a chargeback, meaning the payment is reversed.

This was the exact experience of Buddy Wofford, an operations manager at a Georgia flooring company, who unknowingly processed two fraudulent transactions for a customer claiming to be building a home in Atlanta.

Similarly, Scott Perron, a Florida flooring business owner, later discovered that the credit card used in a major sale belonged to an elderly Sarasota woman whose bank account had been systematically drained over a weekend. By the time the fraud was detected, the scammer—and the products—were long gone.

Why Small Businesses Are Easy Targets

Stolen credit card fraud has been around for years, but with the rise of remote payments and curbside pickups, scammers have found new ways to exploit businesses that don’t have strict verification measures in place.  Specifically, these nefarious types take advantage of three system weaknesses:  limited fraud alerts, delayed chargebacks, and legal liabilities.

Fraud alerts are disappointingly unreliable in these situations. Businesses typically aren’t notified if multiple stolen cards are attempted during a transaction. If one card is declined, scammers quickly move to the next, often going undetected.  As for the chargebacks, it can take 30 to 60 days for a bank to flag fraudulent transactions.  Plenty of time for the scammer to disappear.  And the payment liability?  Well, it falls on the businesses. Credit card companies and payment processors often side with the cardholder in disputes, making it nearly impossible for businesses to recover losses. 

In his experience, Perron puts it bluntly:

“It’s very rare that they reverse a chargeback, no matter what the reason,”

In 2024 alone, the Federal Trade Commission (FTC) received 6.5 million reports of fraud, the top three categories including credit bureau cons, identity theft, and imposter scams.  Stolen credit cards came in as the most reported type of identity theft.  And guess which two states hold the gold and silver medals for most reported cases of fraud?  Florida and Georgia. Worse yet, many businesses find out too late that they have little recourse once fraud occurs.

How to Protect Your Business

While law enforcement struggles to catch these scammers, businesses can take proactive steps to minimize their risk:

• Verify the Customer’s Identity: If a customer places a large remote order, request additional verification, such as a copy of their driver’s license or a phone call to confirm details.
• Be Wary of Urgent Requests: Scammers often create a sense of urgency, claiming they need the product immediately. Take time to verify payments before releasing goods.
• Watch for Multiple Payment Attempts: If several credit cards are declined in quick succession, it’s a red flag that someone is testing stolen card numbers.
• Use Address Verification Systems (AVS): Require billing addresses to match the cardholder’s address on file. If there’s a mismatch, consider declining the transaction.
• Implement Delayed Pickup Policies: If possible, require a waiting period between payment and pickup, giving banks time to detect fraud.
• Partner with Your Payment Processor: Some payment processors offer enhanced fraud detection tools. Ask about options for monitoring unusual transactions.

Final Thoughts

For small business owners, a single fraudulent transaction can mean thousands of dollars in lost revenue—not to mention the cost of lost inventory. While payment processing companies should take more responsibility, the reality is that businesses have to take their own precautions.  By implementing stricter verification measures and staying vigilant for red flags, you can protect your business from falling victim to these costly scams. 

Have you or someone you know been affected by payment fraud? Share your experience in the comments below and how you think we can all try and stay one step ahead. If you’re interested in browsing the FTC’s 2024 fraud report in its entirety, you can find it here.

For more consumer protection insights and trusted business recommendations, visit TrustDALE.com.