Credit Card Scams Target Nonprofits, Too
by James Shankland, Senior Associate
Posted on August 20, 2014
Last fall, retail giant Target was affected by a major data breach that involved millions of customer credit and debit card holders. While most fraudsters probably aren’t rushing to make a donation to their favorite nonprofit, it may surprise you to find out that nonprofit organizations are actually frequent targets for online credit card fraud, putting both you and your donors at risk.
Fraudsters target nonprofits for a number of reasons. First, victims of credit card fraud are statistically less likely to dispute charges to a credit card company if a nonprofit organization is listed on the transaction. Perhaps they think the donation was made by a spouse, or that they accidentally agreed to make a donation when prompted by a cashier at the grocery store. Second, nonprofit organizations are often small, with unsophisticated IT systems not designed to detect fraud. Finally, and perhaps most importantly, many nonprofit organizations use a blank donation form, allowing fraudsters to make small charges – usually just two or three dollars. If the charges aren’t noticed and disputed, the fraudster then moves on to more extravagant purchases.
Organizations are usually required to return phony donations. Even worse, complicated scams are often used to prey on nonprofit organizations. Take, for example, the “overpayment” scam: a donation will be made using a stolen card credit, usually for a large amount, such as $5,000. The perpetrator will then contact the nonprofit directly, pretending to be a legitimate donor, claiming that part of the donation was made in error. Finally, they will request that the overpayment be refunded, sometimes to a different card (usually by claiming that the original card has since been closed).
Nonprofit organizations can take several steps to address these risks:
- Use secure, reputable payment options such as PayPal.
- Never issue a donation refund to anything other than the original card used.
- Report any suspicious activity to the Internet Crime Complaint Center at www.ic3.gov.
- watch out for warning signs of the “overpayment” scam such as poorly worded refund requests (this scam often originates overseas in non-English speaking countries) and donors who are unfamiliar with your programs or services.
- Require a minimum donation amount to deter fraudsters from using your organization to “test” stolen credit cards.