Credit Card Sales : Fewer Charges Now Require a Signature
A hotel in Richmond, Va., discovers some telephone charges after a guest has checked out. No problem. An employee telephones the guest and tells him the hotel will simply put the charges on his credit card.
A restaurant in Washington demands a credit card number when taking reservations. If the guests fail to show, a $15 charge is placed on the credit card.
A busy professional spots an appealing item in a catalogue, dials an 800 number and says, “Ship it and put it on my credit card.”
These transactions, like millions of others in today’s charge-it world, have one thing in common: A charge was recorded on a credit card but no signed document changed hands.
The signature, in fact, is rapidly becoming obsolete in credit card transactions.
Having a customer sign a slip when he or she buys something is already “less significant than it was” in the past, said Dan Brigham of Visa International. Credit cards today are evolving into “a national payment system,” said Spencer Nilson, publisher of the Nilson Report, a California-based newsletter that tracks the credit card industry.
Signatures Not Required
“It allows you to do things you cannot do with cash,” such as make long-distance transactions, Nilson said. “That is what people pay interest for, what they pay fees for,” and as the system becomes increasingly electronic “the trend is for more transactions to be without signatures,” he added.
“Nothing in the law specifically requires a signature” in a credit card transaction, said Elgie Holstein of Bankcard Holders of America, a Virginia-based consumer group.
“The issue is positive identification of the card member,” said Philip Riese of American Express. This can be done several ways--by comparing the signature on the back of the card to the one on the charge slip, by using a personal identification number similar to those for automated teller machines, and by “what is known generically as ‘signature on file,’ ” Riese said.
In the third case, which arises mostly in telephone transactions, the burden is on the merchant to ascertain the cardholder’s identity, though American Express helps by providing an address-verification system that matches the cardholder’s address against the one to which merchandise is to be sent.
In some cases signatures are being dropped for in-person transactions, especially where signing a slip may be viewed as an impediment to a speedy sale.
For example, Visa and Arby’s, the roast beef chain, are experimenting with putting fast food on plastic. In an effort to keep the fast food fast, they require no signature for purchases under $25.
The clerk merely “swipes” the customer’s Visa card through a magnetic stripe reader, which checks a “hot sheet” to see if the card is OK. If it is, then the customer is on his way.
The experiment promises to put fast food where mail order and other forms of remote marketing have been for years. The appeal to these marketers is obvious. Customers enjoy the convenience and merchants find they are able to capture more impulse business--sales that would be lost if the buyer had to write out a check and mail it in.
While acknowledging the convenience, however, many customers feel just a bit nervous at this “loosey goosey” system, as Holstein termed it, of telephone and other signatureless transactions.
But lawyers and others who follow the industry agree that it is the merchant and the card issuer that bear the bulk of the risk.
Under the Truth in Lending Act, consumers are generally protected from losses of more than $50 due to unauthorized use of their credit card. And in practice, said Holstein, the customer’s chance of successfully disputing a charge “is in fact enhanced when they don’t have your signature.”
The law specifically states that if a card issuer seeks to collect a disputed charge, “the burden of proof is upon the card issuer to show that the use (of the card) was authorized” by the cardholder, he added.
Visa’s Brigham said that, if a cardholder swears in an affidavit that he did not authorize a disputed transaction, “that’s generally the end of it.”
This does not mean, however, that there is no risk for the cardholder.
Scams Aimed at Consumers
Nilson noted that fraud by “telemarketing” is increasing rapidly and that these thieves prey particularly on those who are not aware of their rights or who may for some reason be unwilling to assert them.
Many of these scams are aimed at merchants by crooks who collect card numbers, run up a lot of charges and quickly skip before the cardholders begin to complain.
But others are aimed at the cardholders themselves.
Nilson said purchasers of pornography offer a fertile field for such scams. Some thieves even make deals with pornography sellers to buy the right to collect their credit card accounts. They then run up phony charges with the numbers.
Often, he said, cardholders pay up for fear that any dispute would reveal what they had been involved with.
In other cases, cardholders may find the issuer willing to go to court with even marginal cases if the amount involved is large enough.
In addition to being a payment system, credit cards are on their way to becoming a national identity card system, as anyone who has tried to check in to a hotel recently can attest.
Businesses that use credit cards as identification are “trying to confirm who you are, that you’re not a phony,” Nilson said. They regard the credit card “as sort of a monitor. If you don’t have one it doesn’t mean you’re rejected but it triggers something else,” such as requirement for further identification.
