Montrose restaurant owner loses thousands to tap-to-pay fraud as local BBB warns small businesses
HOUSTON - A new Montrose restaurant owner is warning local business owners after losing thousands of dollars to a mobile payment scam targeting small businesses.
A significant financial ripple effect
The backstory:
Leighton Dickson, owner of Leighton’s in Montrose, said fraudsters are loading stolen credit and debit card numbers onto mobile wallets, such as Apple Pay, to purchase expensive meals using tap-to-pay. Because digital wallet transactions do not require physical card verification or signatures at the counter, actual cardholders discover the unauthorized charges on their statements and file bank disputes.
Dickson estimated his restaurant has absorbed 30 to 40 chargebacks totaling between $5,000 and $6,000 since opening on Mother’s Day.
An uptick in card-not-present and mobile payment scams
Why you should care:
"What they're doing is they're loading someone else's debit card onto their phone. And they're able to tap and pay for things that they purchase with no signatures, no ID verification," Dickson said. "The actual cardholder who owns the card wakes up and sees that they didn't eat at Leighton's. So they're disputing those charges."
For small business owners operating in high-rent districts like Montrose, those disputed charges create a significant financial ripple effect.
"You're not only losing what the customer pays, but you're losing the payment that will go to your server, you're losing a payment that will go for purchasing food," Dickson said. "Every table is considered real estate."
The Better Business Bureau of Greater Houston confirmed it is tracking an uptick in card-not-present and mobile payment scams targeting area businesses.
Leah Napoliello, Vice President of Investigations and Public Affairs for the Better Business Bureau of Greater Houston, said digital wallets have become an attractive vector for fraudsters looking to bypass basic identity checks.
"Because identification is not necessarily required during the transaction, the scammers can get away with it more easily with the digital wallet," Napoliello said. "So that's why they're using that more and more compared to an actual physical card being presented for a transaction."
When cardholders file disputes, banks typically side with the victim unless the merchant can produce proof of a physical card swipe or a signed receipt.
"If they don't have an actual card that was presented to them, as well as a signature from the card owner, then they will lose that transaction, that dispute with the credit company, unfortunately," Napoliello said.
A new policy requiring ID
What you can do:
To curb ongoing losses, Leighton’s implemented a new policy requiring guests who pay with mobile wallets or cards to present a photo ID matching the name on the digital account. Dickson said customer reaction over the past week has been largely supportive, with only a few patrons lacking identification turning away.
"We do still accept tap, but you have to show your ID that matches that card that you have loaded on your phone," Dickson said. "We've got to protect what we have to, and that's our brand and our investment."
The BBB recommends small businesses consider adding extra verification steps for card transactions and file reports at BBB.org if they encounter similar payment scams.
The Source: Leah Napoliello, vice president of investigations and public affairs for the BBB of Greater Houston, Leighton Dickson, owner of Leighton’s in Montrose