DENVER — We all know when scammers steal your credit or debit card, it's a headache to get those fraudulent charges refunded. What you may not know is, the refund comes directly from the business itself.
This problem is costing Colorado small businesses big time.
The staff atLuke & Company Fine Pet Supply & Outfitter have had a busy last few months, but so have scammers.
"There's more chargebacks during the holiday season," founder and CEO Luke Johnson said.
When scammers use a stolen credit card, it's the business that reimburses the original cardholder.
"I think in most people's minds, they think, 'Oh, the bank's paying for this, right?' In actuality, the customer doesn't pay for it, the bank doesn't pay for it, the business that it was processed at ends up paying for it. Even though we have no control over that happening," Johnson said.
Recently a nearly $700 order was made online for pick up at Luke & Company.
"The person came in and we interacted with him. We talked about all manner of things, including dog training and pet food. They seemed like a great person. Then a couple of weeks later, we got a letter that it was a fraudulent claim," Johnson said.
Like any other small business that this type of crime would happen at, Luke & Company had to take the hit and refund the true cardholder the cost of the scammer's shopping spree.
"We do get hit twice," Johnson explained. "Because we pay for the product that left the store, and we also have to repay whatever money was charged. That doesn't include the fact that you're also paying for labor, your overhead, and all the other business expenses that go into running a business."
It's cost the store nearly $10,000 to complete the requested reimbursements this year. That doesn't include the cost of the inventory taken by the scammers.
Johnson said that amount of money could have been used to pay for about four months of health care for his staff or possibly a few weeks of payroll.
The store has posted signs, limited certain transactions, and required IDs with all credit card purchases, but Johnson said he hopes more is done by people with the power to make a change.
"It would be great if there was some sort of legislative action taken on fraud in general. As a nation, not just here in Colorado, not just here in Denver, but how does the banking system function? And how does it protect small businesses?"Johnson said.