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Credit Card Fraud

Credit card fraud is a crime associated with the theft of a credit or debit card. It involves the unauthorized taking of another's credit card or credit card information in order to charge purchases to the account for the offender to keep. The theft can occur physically when the actual credit card is taken. Or the theft can occur when the offender steals the credit card numbers from an unprotected website, card reader, or otherwise. If the card is a debit or credit card that can work like an ATM card and provide cash withdrawals, the offender may use it to steal funds from the victim's account.

This article will discuss the types of credit card fraud and the federal and state laws that apply to the offense. It will also address the possible penalties available for an offender convicted of this crime.

Types of Credit Card Fraud

It's in the back of your mind. You swipe or tap or insert your credit/debit card and wait for approval. What if your card is declined? What does that mean? Everyone has a story, whether it's happened to them or someone they know. It can be devastating to learn that someone has racked up debt on your credit or debit card to commit theft. As a result, credit card companies look for unusual purchases and may alert you or seek to confirm that you made a particular purchase.

Credit or debit card fraud represents a common form of identity theft. Offenders can commit credit card fraud in many ways. Here are some common ways an offender commits the crime:

  1. Fraudulently obtains, uses, signs, takes, forges, sells, or buys someone else's debit card or credit card or the card information (numbers, security code, PIN);
  2. Uses their own card with the knowledge that it is expired or revoked or that there aren't sufficient funds to pay for the items charged; or
  3. Sells goods or services to another person with knowledge that the debit card or credit card is being used without authorization or was illegally obtained

State and Federal Laws

Credit and debit card fraud has become a huge problem. Both state and federal governments have passed laws to address the problem.

State Laws

Each state has credit card fraud laws that prohibit the illegal possession and use of a credit or debit card. They have statutes for the physical possession and use of a stolen card. There are also laws that cover when only the account number is stolen. These crimes are often referred to as identity theft. For instance, Alabama Code § 13A-9-14 punishes credit or debit card theft, while § 13A-8-192 punishes identity theft or the illegal use or possession of identifying information.

Some states have passed more protections than other states. California has been on the forefront of updating credit card fraud charges to prevent credit card and identity theft. The state also provides helpful tips for citizens who dispute charges on their bill, whether based on theft or otherwise. They also provide direction for victims of identity theft.

The California Penal Code provides a comprehensive approach. It includes several related credit card theft crimes in the same section. Offenders that commit credit card fraud have often committed related crimes such as forgery and theft. Below you will find key sections of California's credit card fraud crimes:

Federal Law

Certain federal credit or debit card fraud laws focus on interstate and foreign commerce. These federal crimes make it illegal to use a stolen or fraudulently obtained credit or debit card. These are felony charges, and the penalties may include up to 10 years in prison and fines of up to $10,000. You can find these federal statutes here:

Other federal credit or debit card fraud laws may be more broadly applicable to citizens who would commit fraud crimes of various types. These laws cover fraud directed at identification documents and access devices. They also address fraud conducted by the U.S. Mail, computers, or through wire transfers. Identity documents include passports. Access devices include counterfeit credit cards, expired credit cards, and even social security numbers. Penalties will vary, but these federal offenses may include substantial prison sentences and or fines. You can find such statutes here:

Types of Credit Card Fraud

Credit fraud is a broad term for the use of a credit card (or any comparable type of credit) to buy goods or services with the intention of evading payment. While it is simple to understand the physical theft of a credit or debit card from a wallet or purse, today, it is much more common just to have information stolen and not the card itself. There are several forms of credit card fraud, with new and ingenious methods being devised almost daily. The most common credit card fraud cases include:

  • Opening new accounts with stolen identification
  • Taking over an existing account
  • Making purchases without the presence of the card
  • Using a counterfeit card
  • Using a fake card
  • Using a lost or stolen card

Identity Theft

One of the most damaging forms of credit card fraud is identity theft. Once personally identifying information is taken, it can be used for numerous fraudulent activities. Several types of credit card fraud depend on identity theft. If a bad actor steals a person's identifying information, they can open new accounts. They can also contact credit card companies, impersonating the cardholder. They may change the address associated with the card to take over an existing account.

Identity theft can also cause problems with law enforcement. A person who has stolen your identifying information and who gets pulled over for a DUI may give the police officer your name and information instead of their own. If the police have not properly verified the offender's identity, they may issue a warrant for you when the offender does not appear in court. Down the road, these types of incidents can make it appear that you have a criminal record when you do not.

Data Breach

Sometimes identity theft falls short of stealing a person's complete identity. The thief may just get the number from one card. This can happen when a company has its customer information hacked in a data breach. Companies that store a customer's credit card information sometimes have that information stolen. The thief can then use the credit card number to make telephone or online purchases without the presence of the credit card.

Stolen Credit Card Imprints and Skimmers

When you used a credit card in the past, an impression of the card was made on carbon paper. When the carbon paper was discarded, the credit card numbers could be stolen. That does not happen very often these days. A modern-day version of the same type of offense involves electronic credit card skimmers that can read the credit card information from the magnetic strip on the credit card.

There are a couple of forms of electronic card skimmers. One type is a portable reader that can read cards carried in pockets and purses of people as they walk down the street. Another type is a reader affixed to a stationary location, such as an ATM or a gas station pump. The credit or debit card imprint can then be used to make a counterfeit or fake credit card that will function just like the real thing.

Phishing

Sometimes credit card theft occurs through phishing. An offender engages in phishing when they send emails or other communications through the internet to a victim. The email looks legitimate and requests sensitive data from the victim. This could include a credit or debit card number, along with the expiration date and security code number. For example, an email appears in your inbox and looks like it's your credit card issuer notifying you of a security breach. The email tells you to click here and verify your credit card information. You think you are diligently responding to a valid request, but you are really providing information to a criminal.

Stolen Credit or Debit Card

Of course, there is the old standby for credit card fraud—the physical stealing of the card itself. A purse or wallet can be stolen, or the card can be simply lost. There are many ways a card can be stolen. They can be taken from mailboxes or as part of a house burglary or a car break-in. A server can take in the information at a restaurant. Often, this type of theft will result in a fraud spree, where the perpetrator racks up charges as quickly as possible before the victim has a chance to report the card lost or stolen.

Defenses to Credit Card Fraud

The state and federal laws state that the offender must have a criminal intent to defraud or steal to be guilty of credit card fraud. Mistakenly using someone else's card or unintentionally using a canceled or expired card is not grounds to hold someone criminally liable for credit card fraud. Therefore, a criminal defense lawyer will assess intent issues when advising a client.

There may also be defenses based on who was using the card. When theft occurs through online activity, there is no eyewitness to report the crime. The state must show that they have the right person through circumstantial evidence. So, who had access and opportunity to commit the crime will be important as well.

Penalties for Credit Card Fraud

The penalties for credit card fraud depend on the facts of the crime and the severity of the offense. If a credit card is stolen but not used, it may be treated as a misdemeanor or a felony. Misdemeanor convictions may result in jail time but often result in probation and orders to make restitution.

The more sophisticated the crime (e.g., with counterfeit cards), the more likely it will be a felony offense. Credit card fraud over $1,000 (or other specified amount) involving the theft of the card or the credit card numbers may lead to a prison sentence of one to five years. Identity theft can be treated more harshly, with prison sentences over five years. Also, if the thief has the tools of the trade (e.g., credit card skimmers) on them when they are caught, they can face additional prison time.

Federal penalties may include increased prison sentences. Federal authorities usually file charges against offenders who have caused substantial financial damage or engaged in widespread schemes.

Each state has its own take on these crimes. They may set different aggregate dollar thresholds for felony offenses. The degree of the crime and the penalties may increase as well if the offender has a criminal record that includes similar convictions.

If You Think You Are a Victim, Take Action

If you believe that you have been a victim of credit or debit card fraud, you can take action to prevent financial harm. You should immediately contact the company that issued the card. Have your statement handy for the call. Let them know if your card was lost or stolen and the approximate time this happened. Even if you still have the card and suspect someone stole the numbers, report what you know. Most often, the company can cancel the card and send you a new one. They can forgive the illegal charges.

You may also want to contact local law enforcement to report the crime. They may investigate the incident and bring criminal charges if they can determine the identity of the thief. They can refer the case to federal authorities when appropriate.

It's often a good idea to check your credit report and alert the major credit reporting companies of the theft of your credit card or information. There is a process where you can dispute any negative findings on your report. Often, these companies (and others) provide free or fee-based identity protection services that may benefit you in the future.

Finally, you can report the incident to the Federal Trade Commission (FTC), which investigates frauds and non-banks that market credit cards. Or you can report it to the Consumer Financial Protection Bureau (CFPB), which enforces federal consumer financial protection laws.

Concerned About Charges of Debit or Credit Card Fraud? Talk to an Attorney Right Away

If you or someone you know is facing allegations of debit or credit card fraud, you likely need to obtain legal advice so you can understand the government's case against you and consider any legal defenses. Consider reaching out to an experienced, local criminal defense attorney to discuss your situation.

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