A credit card scam is sweeping through the flooring retail community, in some instances successfully stealing thousands of dollars from unsuspecting dealers in lost revenue and materials.
While this scam is not new, its frequency has accelerated in recent months, according to retailers. And in some cases, despite safeguards in place, retailers report they have still been hoodwinked. “This scam is rampant across the industry right now—it’s a huge issue,” said Kelby Frederick, owner of My Flooring America, based in Denton, Texas.
Frederick said his business was burned by the scam in the past and almost got hit again. As he explained, “On my weekly manager call I was told that one of our salespeople took an order just yesterday. Luckily, our operations people intervened because they recognized some of our standards were not met. This way we caught it before we got burned. At the end of the day, if the salesperson takes the order and processes it, then it’s too late. Since our industry is antiquated in this area, the scammers know we are an easy target.”
How it works
Although there are different variations to how the scam might be executed, here is one familiar scenario: A potential “customer” contacts the retailer and orders products over the phone requesting a will-call pickup. The customer is usually in a hurry and needs the product right away. They provide the retailer with a credit card or ACH payment over the phone that goes through.
After that, the “customer” will say something to the effect of: “I’m sending my guy (or my installer) to come and pick up the order.” Sometime later, usually after the order has been picked up, the credit card company will alert the retailer that a stolen credit card was used in the transaction and will then charge the retailer back for the purchase. Because the retailer accepted the stolen card they have no recourse with the processor, nor with the bank, nor with Visa/American Express. In many cases, the dealer is out thousands of dollars.
This scam is a threat to all flooring dealers taking credit card or ACH payments over the phone in a cash-and-carry situation, industry experts agree. “We actually had this happen to us,” said Sheldon Yoder, owner of Budget Carpet and Flooring, Columbus, Ohio. “Credit card scams are a real issue in flooring for cash-and-carry orders with over-the-phone orders as well as emailed payment links. We have implemented that any cash-and-carry order must be processed in person in the store or be a repeat customer.”
For other retailers, the scam worked even with precautions in place. “We were aware of the scam and sent out emails to our managers and sales staff,” said John Taylor, owner of Taylor’s Carpet One Floor & Home, Fort Myers, Fla. “We also discussed it in detail with our management team to get the word out. Sadly, one of our salespeople did not listen or understand the scam and we became a victim, which cost us a good amount of money. We did follow much of our standard policies, but it didn’t matter in the end as it was not enough to protect us.”
What retailers can do
Anti-fraud experts say there are a few things dealers can do to reduce the chances of being ripped off:
• Be very cautious if someone is not ordering in person, can’t come into your store and you don’t know who they are. If they can’t come into your store, try to visit their home address. If it is a scam, they will either live in another city or won’t want you to come to their address. For a $15,000 cash-and-carry deal, you should be willing to drive 30 miles to ensure you get the deal and protect yourself.
• Connect with them over Facetime, Zoom or some other video conferencing app, and have them show you their credit card and photo ID. Or have them text your store manager or owner a photo ID and a picture of the credit card (in separate texts). Make sure the name on the card matches the name on the photo ID.
• Make sure the zip code for the credit card is in the same city. Often stolen credit cards come from cities that are far away.
• Have the customer sign an electronic contract, through a service like DocuSign. This will require the customer to have a valid email address.
• Call the issuing bank of the credit card and have them verify that the person is legitimate. That way, the bank can try to contact and authenticate the customer directly.
• Check the ID and license plate number of the person picking up the order.
• Never use ACH/e-checks with cash-and-carry deals. It usually takes a few days to find out if the account information has been stolen, and there is no address verification with ACH accounts.
• For in-person transactions, make sure the credit card contains a chip. Most banks have replaced their magnetic swipe cards with chip cards. If it doesn’t have a chip, it’s likely a fake credit card that’s been cloned.
Bottom line: Stay vigilant and don’t let your guard down. Credit card scams, in all their permutations, are not going away.
Retailers fight back
Retailers who have been scammed—and even those who haven’t—have implemented policies and procedures to prevent scams from occurring or to at least minimize the risk.
Jerry Kelly, president of Cove Carpet One Floor & Home in Summit, N.J., said their policy is simple but firm: they do not to take credit cards over the phone, period.
My Flooring America’s Frederick now requires the customer to physically be present in the store to process a credit card transaction using the actual card so they can match the ID to the card. “This step alone shuts down the scammers as they will rarely, if ever, show up to a store,” Frederick said. “We continue to process credit card transactions over the phone or digitally when dealing with customers we know are legitimate. As a strategy, we regularly train our people to be alert to obvious scams. The most common thread in this scam is the caller doesn’t debate or attempt to negotiate the price. We all know that’s abnormal in our industry. Second, it should be obvious when a customer is out of market wanting to buy from us when there are plenty of local businesses they could buy from. Lastly, it’s illogical to pay the high cost of freight to move flooring materials across the county. Ultimately, when it feels too good to be true in this industry, it is.”
Steve Weisberg, president of Crest Flooring in Allentown, Pa., said the scam scenarios happened a few years ago, prompting him to put some protocols in place, which his credit card processor provided. “We don’t take credit cards over the phone for any cash-and-carry orders—especially when it’s being paid in full,” Weisberg said. “We require photo ID. We are all now aware of how the scam works and our red flag goes off when something remotely suspicious comes up. Nothing like losing $8,500 in revenue—not to mention the inventory—to wake you up.”
Carpet One Floor & Home’s Taylor changed his policy on cash-and-carry jobs and now requires the customer to come into the store to make a purchase. Furthermore, the store will not take multiple credit cards for payment. “If they are paying by credit card, it must be in their possession and it must be run on our credit card machine in the store, or it must be a cashier’s check or cash. We require a copy of their driver’s license as well. The same day we implemented these new policies, we had another attempted scam purchase by telephone, but when we told them they had to come into the store—and we would not take their credit card over the phone—the caller immediately hung up and did not ever come in. It’s sad that we must go through these precautions because there are people out there who want to hurt us at any cost.”