Answer:
"Secure debit" more commonly known by either MasterCard Secure Code, or Verified by VISA, are the card brands' programs designed to reduce the amount of Internet-related fraud. Cardholders can register their cards using personal information including card number, name, address, Card Verification Codes, and one other piece of information such as the last 4 digits of the checking account number attached to the card. Once successfully registered, the cardholder creates a password to use when making purchases online. Participating merchants are exempt from fraud related chargebacks.
However, these transactions are not exempt from Regulation E or from Zero Liability protections offered by VISA and MasterCard. Further, the information needed to create an online password, or the password itself, can be stolen, hacked, phished, etc. What this means for your claim is that you must investigate under Reg E, and if you determine that your cardholder did not actually make the purchase, you must reimburse your customer and absorb the loss.
First published on BankersOnline.com 10/17/11
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