Credit card frauds in India

In today’s digital era, credit card frauds in India have become a growing concern as cybercriminals continue to find innovative ways to exploit financial systems. With the rapid increase in online transactions and digital payments, credit card fraud cases have surged, leading to significant financial losses for individuals and banks alike. Fraudsters employ various deceptive techniques such as phishing, skimming, identity theft, and counterfeit cards to conduct unauthorized transactions, leaving victims in distress.

This blog aims to provide a comprehensive understanding of credit card frauds in India, covering the different types of fraud, detection methods, legal frameworks, and best practices to prevent such financial crimes. By staying informed and adopting security measures, consumers and financial institutions can work together to mitigate risks and enhance the safety of digital payments. Read on to learn how to protect yourself from credit card fraud and ensure a secure financial future.

Understand The Meaning Of Credit Card Fraud

Credit Card Fraud is a nonconsensual illegal transaction made by an anonymous person by using your credit card number, PIN or even physical theft of the card. By accessing your details, they can purchase, transfer, or withdraw from your account leading to financial repercussions and damage to your credit score.

What Constitutes Credit Card Fraud

Various ways are there which constitute credit card fraud:

• CNP Fraud: In this kind of fraud online transaction takes place in the absence of the cardholder and the fraudster uses the information for mala fide practice.
• Lost or Card Stolen: If the card has been stolen or lost, it becomes easy for the fraudster to use.
• Phishing: Fraudsters pretend to be any employee of a renowned company inducing the cardholder to disclose his personal details like credit card numbers.
• Skimming: By installing a “skimmer“ at ATM’s or any payment area, fraudsters tend to capture card details during legitimate transactions.
• Counterfeit Cards: Criminals conduct an unauthorised transactions by using fake cards through this process.

Importance Of Addressing Credit Card Fraud

Addressing credit card fraud is important to make people aware, especially in India where the number of credit card users is rapidly increasing. Taking effective measures is important to save yourself from significant financial losses and unauthorized transactions which can severely impact the credit score and future borrowings. Moreover, by tackling frauds various financial institutes build consumer confidence in digital payment systems and also comply with regulatory requirements to avoid penalties while driving technological advancements in security measures.

Credit Card Fraud Statistics in India

In India, credit card frauds have emerged rapidly increasing to 425% to Rs 1,457 crore FY24 from Rs 277 crores in a year. The number of such frauds has risen 334% to 29,082 during the same period.

Online Fraud Through Credit Card (Phishing)

Online credit card fraud, often through phishing, is a growing threat, as evidenced by the dramatic rise in internet fraud cases from ₹155 Crore in FY22 to a staggering ₹1457 Crore in FY24, alongside a significant increase in online payment transactions.

• Online Payment:

FY 22 it rose to 101L Crore

FY 23 it rose to 161L Crore

FY 24 it rose to 224L Crore

• Internet Fraud:

FY 22 it rose to 155 Crore

FY 23 it rose to 277 Crore

FY 24 it rose to 1457 Crore

Legal Framework Governing Credit Card Frauds In India

The legal frameworks that govern credit card frauds in India are as follows:

RBI Regulation

RBI issues comprehensive guidelines to ensure fair practices in credit card issuance and usage. Through these guidelines, RBI mandates banks to provide clear T&C and some requirements like:

• Credit Card Issuance: The bank issues credit cards to persons having satisfied the eligibility criteria such as good credit history, major, and no bankruptcy.
• Credit Limit: Every person gets a credit card based on his income, credit score and debt history. If the credit limit is to be increased bank needs the cardholder’s permission
• Interest Rates and Charges: The bank needs to be transparent about the APR and other fees associated with credit cards. Further, any charges should not exceed a certain limit set by the RBI.
• Fair Price Code: Cardholders need to make a minimum payment toward their outstanding balance each month.
• Transparency in Terms and Conditions: T&C for issuing a credit card must be explained to the cardholder in the most simplified way for his better understanding.
• Sending Statements: A cardholder must receive a monthly billing statement from the bank which includes its outstanding balance, interest charges and due date and must be sent 15 days before the due date.
• Compliance with KYC: While issuing credit cards, banks must strictly adhere to KYC norms and anti-money laundering (AML) standards.
• Grievance Redressal and Customer Support: A proper mechanism must be maintained by the banks to solve customers' grievances and support them by solving their issues.

Information Technology Act, 2000

This act mainly tries to protect and secure customers' sensitive personal data and information and provides strict action if it is violated. Majorly Section 66C and 66D and also Section 468/471 IPC, 1860 may be attracted to whoever tries to commit this fraud.

The Banking Regulation Act, 1949

This act empowers RBI to observe all the banks and enforce fraud prevention measures. The RBI guidelines and this act protect consumers and ensure that banks are responsible for fraudster activity.

Consumer Protection Act, 2019

This act empowers consumers to file complaints against any unfair practice like false charges regarding credit cards. This act provides a way for grievance redressal at various levels by ensuring justice for consumers from fraudsters.

Credit Information Companies Act, 2005

This act majorly focuses on consumers details and information is secured and safe. The act regulates the credit information of companies and mandates them to adopt privacy principles and policies.

Also Read : Indian Laws To Prevent Financial Fraud In India

Types of Credit Card Frauds

Credit holders certainly enjoy more rewards than debit card users. They can swipe it for international payments that come with an abundance of benefits. However, it also catches the attention of scammers.

Stolen Cards

The age-old trick of credit card fraud was physically stealing it from a person’s pocket. Often common in crowdy places like busy railway stations, bus stations, and public gatherings. The owner doesn’t even realize his cards are lost until he checks. The credit cards are usable until the owner reports to the bank and blocks the card.

Phishing emails

Another common form of fraud in the digital spectrum is phishing emails. It can be just regular mail in your inbox. Most common are those asking for donations for charity or the famous “You’ve been the lucky winner” emails. We must refrain from providing credit card details like credit card numbers to these emails.

Over the years, Gmail and other emailing apps have come up with their filters that more or less alert the users. Yet, with the arrival of more innovative hacking systems, phishing email frauds are still prevalent.

SMS and calls

The OTP fraud is very fresh in the arena. Jamtara, the famous web series on Netflix, showed how people commit credit card fraud by asking for OTP and credit card details.It is essential to realize that we should never give away or disclose our OTP to anyone else.

Application Fraud

Application fraud is a more established method where fraudsters use random people’s application forms and other forms to make fake credit cards and misuse them. We should stay clear of such fraudulent activities.

Also Read : Common Types of Banking Frauds in India

Techniques For Detecting Credit Card Fraud

For the safety and protection of various financial institutions, detecting credit card fraud is crucial, and some of the techniques for same are:

• Monitoring Real-Time Transaction
• Tracking Geolocation
• Machine Learning Algorithms
• Behavioral Analytics:
• Multi-Factor Authentications (MFA)
• Encryption
• Tokenization
• Device Fingerprinting
• Step-Up Authentication
• Rule-based System

Advantages Of Credit Card Fraud Detection

• Credit card fraud detection techniques are significant for both consumers and financial institutions. Some of the advantages are:
• Higher Accuracy
• Improved Efficiency
• Customer Trust and Satisfaction
• Faster Detection
• Cost Saving
• Regulatory Compliance
• Enhanced Security

How to Report Credit Card Frauds in India

For reporting Credit Card Fraud, the following steps to be followed:

1. As soon as you suspect any fraud happening immediately contact your bank’s customer service or helpline, provide details of the unauthorized transaction and request to block your card.
2. Documentation of every detail of communication that happened with the bank is important as it is helpful to escalate the issue later.
3. Once a telephonic report to the bank has been done, write a formal complaint to the bank inclusive of every detail of fraud with supporting evidence if any.
4. Once a formal complaint has been made, ensure to receive back an acknowledgement of it from the bank for tracking the progress of your matter.
5. Continue to follow up on the matter because according to RBI guidelines, banks are required to solve the complaint within 90 days.
6. If the bank fails to perform its duty or a significantly higher amount is involved in fraud, the cardholder can consider filing a police report for strict and speedy investigations.
7. To avoid any kind of negative impact on your credit score, inform the matter to credit bureaus which can help monitor your report.

Best Practices For Credit Card Fraud Prevention

As fraud is something that cannot be stopped but can be prevented, so here are some prevention methods to follow to prevent ourselves from credit card fraud:

For Consumers

• Make sure to keep your login details, and PIN passwords secure and to use strong unique passwords that can’t be easily tracked.
• Check your credit card statement daily for any unauthorized transactions and if happens report immediately.
• Be aware of scams like phishing and avoid sharing any personal details to anyone through calls, messages or emails, as the legitimate won’t ask for such information.
• Use other modes of payment that require tokenization which can be more secure rather than credit card if possible to avoid any chance of fraud.
• Enable notifications for every transaction made through credit card for real-time update

For Financial Institutions

• For an extra purpose of security add a MFA for online transactions.
• Review the payment system occasionally and regular security audits to avoid any exploitations.
• By using advanced fraud detection technologies they can keep an eye on everything happening through credit cards.
• Educating the customers on various forms of fraud and scams that could happen through illegitimate disclosure of credit card details.
• Establishing a redressal mechanism so that customers can easily report fraud and receive timely updates on it.

Also Read : Safety Tips to Prevent Online Banking From Frauds

Steps To Take If You Are A Victim Of Credit Card Fraud

If you have been a victim of credit card fraud here are the steps to take quickly for further damage or minimize potential damage:

Notify to Lender: If you notice any suspect of fraud immediately contact the bank or issuer for the matter and report the unauthorized transaction and request to block the card.

Account Lock: A lot of credit card offers a lock feature that temporarily disables your card to avoid further damage.

Report to Law Enforcement: There is a department Federal Trade Commission (FTC) where cardholders can file a report and they can provide you with a recovery plan.

Credit Bureaus: If any unauthorized accounts or enquiries are there, report it to the credit bureaus to have them removed.

Proper Documentation: Maintaining detailed records of everything that happened before and after fraud happened is important for further issuance of matters.

Punishment For Credit Card Fraud In India

In India, punishment for Credit Card Fraud is governed primarily by Information Technology Act, 2000. Under section 66C of the IT act, anyone who fraudulently uses an electronic password will be liable for 3 years imprisonment and/or a fine upto one lakh rupees. Also, section 66D addresses cheating by personation using any device would be punishable with imprisonment upto 3 years and/or a fine upto one lakh rupees.

Real-life Examples Of Credit Card Fraud Cases In India

Boda Srikanth vs The State Of Telangana on 11 April, 2023

In this case, the Telangana High Court addressed issues related to credit card fraud, causing the misuse of credit card information for unauthorized transactions. The court examined the evidence presented against the accused, who was implicated in a scheme involving the fraudulent use of credit card details obtained through phishing and other deceptive practices. The ruling emphasized the importance of stringent measures to combat cybercrime and protect consumers from financial fraud, reinforcing the legal framework surrounding credit card misuse in India.

Priya Biswa Kumar vs The Director General Of Police on 8 August, 2024

In this case, the court addressed the issue of credit card fraud, focusing on the procedural lapses in the investigation conducted by the police. The petitioner, Priya Biswa Kumar, alleged that her complaints regarding unauthorized transactions on her credit card were not adequately addressed by the police, leading to significant financial losses. The court emphasized the need for law enforcement agencies to take such complaints seriously and to follow proper investigative protocols to protect consumers from financial fraud and ensure accountability in handling such cases.

Follow These Safety Measures in Case You Get Credit Card Defrauded

Digital education is the only way users can tackle this card fraud. Nobody can deceive you as long as you follow these suggested measures in regular transactions.

Check and cross-check all transactions

Firstly, recall past transactions as soon as you get a message stating that you’ve been debited a certain amount. Ask family members if they’ve been using credit cards recently. Once it is made sure that it is indeed a fraud message, move on to the next step.

Contact your card issuer

Immediately contact the bank authorities when you spot the fraud. Confirm with the bank about the irregular transactions. Banks can track the exact location and other details with information; hence contacting them should be primary. All stolen cards must be blocked as soon as possible so that no further transactions can be done.

Check other accounts

Simultaneously it is highly prudent to check all other bank accounts that one might have. Review for any irregularities and change passwords immediately. Review all the details and ensure enough security.

Contact the authorities:

National credit bureaus have toll-free numbers that you can contact to inform about your form. You can deter any further damages by immediately placing a fraud alert with these bureaus. It saves you from additional chaos and even helps you recoup some amount back. Once you raise an alert, you will be notified if there are any other transactional attempts made.

Equifax: 866-349-5191

Experian: 888-397-3742

TransUnion: 800-916-8800

Credit card misuse can also hamper your credit score, so it is advisable to report them.

File a police complaint

If you’re unaware of who has committed the fraud, filing a report with your local police station can save you some long-term stress. While they may not necessarily be able to find the perpetrator across the globe, your frustrations could be caused by someone in your area. Plus, identity theft is not a joke, so it’s best to be sure you’re protected. On the other hand, if there is a history of credit card fraud, it is advised to tell the police to open an investigation to figure out who is behind the crime.

File a complaint with the FTC

The FTC serves as a helping hand to victims of identity theft. Listening to complaints, providing relevant information, and referring complaints to the police and credit reporting agencies are a few responsibilities the committee oversees. The FTC may also refer the case to another government agency or a company for further action if necessary. For increased ease of access, the FTC's online form is available.

Monitor credit card reports frequently

Once bitten, twice shy

This proverb is to be strictly followed in credit card fraud. Note past mistakes, regularly keep track of transactions, and share details in the future to ensure that no such scams occur again.

Tips to Prevent Credit Card Fraud

Some quick tips that you can use while engaging with credit card transactions.

• Never share your credit card details with anyone except those highly trusted.
• Never share your OTP with others
• Never use weak passwords consisting of characters, alphabets, and numbers.
• Never keep written passwords carelessly.
• Never maintain the same passwords for a long time.
• Never keep your device's anti-virus spyware free.

Conclusion

As the digital payment landscape continues to evolve, so do the risks associated with credit card frauds in India. From phishing scams to card skimming, fraudsters are constantly finding new ways to exploit security loopholes. However, by staying vigilant, adopting secure payment practices, and leveraging advanced fraud detection technologies, individuals and financial institutions can significantly reduce the chances of falling victim to such crimes.

Understanding the legal framework, reporting fraudulent activities promptly, and following best practices like using multi-factor authentication, monitoring transactions, and never sharing sensitive information are crucial steps in fraud prevention. Additionally, financial institutions must continue to educate consumers and enhance security measures to foster a safer digital payment ecosystem.

With the rising number of credit card frauds in India, awareness and proactive measures are the best defenses against financial threats. Stay informed, stay secure, and take control of your financial safety to prevent unauthorized access and financial loss.

Disclaimer: The information in this article is for educational purposes only and should not be considered legal advice. Please consult a qualified attorney for specific legal concerns.

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Author: Shweta Singh