There has been an alarming increase in bust-out fraud cases affecting merchant processors and financial institutions. This sophisticated scheme has become one of the most prevalent and damaging forms of fraud in the payment industry, costing businesses billions annually. As a leading merchant processing litigation firm, the Sigal Law Group understands how insidious these cases are and will work tirelessly to ensure your business is protected.
Understanding Bust-Out Fraud
Bust-out fraud is a calculated scam where fraudsters establish seemingly legitimate accounts, build credit over time, and then “bust out” by maxing out credit lines with no intention of repayment. This scheme involves:
- Opening multiple credit accounts under false or stolen identities.
- Building a credit history through normal usage and timely payments.
- Rapidly maxing out credit limits and disappearing.
The impact on merchant processors can be severe, with potential losses reaching hundreds of thousands of dollars per incident. Additionally, the consequences extend beyond immediate financial losses to include:
- Operational strain on merchants and acquirers.
- Increased chargeback rates and fees.
- Damaged relationships with financial partners and regulators.
- Potential loss of processing privileges.
For merchant processors, even a single large-scale bust-out fraud attack can jeopardize partnerships with sponsor banks and payment networks.
How Sigal Law Group Can Help
As a merchant processing litigation firm, the Sigal Law Group has seen firsthand the legal challenges that arise from bust-out fraud. In these cases, merchants and processors can face:
- Breach of contract disputes.
- Compliance issues with PCI DSS and PA-DSS standards.
- Potential fines and penalties from card networks.
To mitigate these risks, Sigal Law Group recommends implementing a robust fraud detection system, conducting thorough due diligence on new accounts, monitoring for suspicious activity patterns, and maintaining strict compliance with industry regulations. However, even after committing to these steps, businesses can still fall victim to bust-out fraud.
When this happens, the experienced team at Sigal Law Group will help you navigate the complex landscape of merchant processing. Our attorneys offer expert representation in fraud-related litigation, assistance with regulatory compliance, and guidance on implementing fraud prevention measures.
If you are a merchant processor facing challenges related to bust-out fraud, contact our office today for a free consultation. Our skilled merchant processing litigators will ensure you receive the best possible outcome and protect your business interests in this ever-evolving threat landscape.
