We were alerted by one of our customers about a credit card refund scam. The typical scenario for this scam is as follows:
• A fraudster posing as a donor makes a large donation (say $5000) to an organization, typically made by credit card via an online donation form.
• The fraudster then calls the organization and claims the donation amount was entered incorrectly, so instead of donating $5,000, they intended to donate $50.
• They ask for $4,550 to be refunded to a different credit card or issued by check.
• The credit card used to make the original donation is a stolen card, which the nonprofit organization does not know.
• The nonprofit agrees to the fraudster’s request and issues a refund to a credit card owned by the fraudster instead of the original (stolen) card. Unfortunately, this makes the nonprofit responsible for the $4,550 "refunded" to the fraudster.
We talked with one of our strategic partners, iATS Payments (a payment processing service provider to the nonprofit community) and they've seen that nonprofits are the target of this scam. Please see their blog with their easy recommendation to prevent falling victim to this scam.
Please note that ALL refunds, whether it's a donation, an event registration or a purchase through your online store, should follow the recommendation to refund ONLY to the original method of payment. Any refund requests that involve issuing a refund to a separate card or by a different payment method should be regarded as highly suspicious. This is standard practice in the retail industry where many stores have a refund policy that states that refunds will only be made in the same method of payment as used in the original transaction.