HOUSTON -- As a result of an 11 News Defenders investigation, Sears and Kmart stores will “immediately” begin retraining their employees at more than 2,000 combined stores nationwide in techniques for preventing credit card fraud.
The announcement comes after KHOU-TV repeatedly visited cashiers at multiple Sears stores and made purchases with credit cards that belonged to other people. Time and again, KHOU was never asked to show photo identification. In addition, store employees did not verify that the signature on the card matched the one signed at the cash register.
Sears and Kmart are owned by the same parent company.
“Our policy states that cashiers should match the signature on the sales receipt with that on the back of the credit card,” Sears and Kmart spokesperson Kimberly Freely said. “If the card is not signed, a picture ID is required. We are disappointed that these policies were not adhered to recently in the Houston market. As a result, all of Sears' store associates, in Houston and nationally, will begin a retraining of our credit card transaction policies immediately to ensure each associate understands this policy.”
For now, that retraining will take place at more than 850 Sears locations and more than 1,300 Kmart stores.
The owner of a Houston-area insurance business, Phil Raskin, initially became concerned about corporate policies at the cash register when he became the victim of credit card fraud.
“I said, how's this possible,” Raskin said. “I got a notice that said my account was overdrawn. I took a look and (found a) half a dozen charges I didn't recognize.”
It turns out, someone was on a shopping spree across town, to all sorts of stores, courtesy of Phil Raskin and his stolen credit/debit card. (Note: The stores visited did NOT include Sears or Kmart.)
“I’ve lost a tremendous amount of money (and time) over this” said Raskin.
Soon though, Raskin discovered an even bigger surprise. Investigators with local law enforcement e-mailed him pictures of the suspected thief shopping at a local Hobby Lobby store, a national chain of arts-and-crafts shops. It turned out the suspect was a woman who had allegedly been using his card, with his name on it. Raskin says he was flabbergasted.
“All it would have taken is 'Hi ma'am. You don't look like a man. Oh by the way, your signature doesn't match,'” he said.
To say the least, Raskin wasn't happy.
“I'm totally incensed because it would have taken a few seconds of prevention,” he said. “At the very least they should have said 'Can we look at your ID?'"
However, while looking at an ID may seem like such a simple way to slow down credit thieves at any checkout line, KHOU has discovered many large retailers across the nation are not doing it. Surprising to many, though, is that it turns out these retailers are intentionally not checking IDs. In fact, we’ve confirmed they have developed actual corporate policies against the practice.
KHOU set out to see the end result of corporate policies like that. We asked KHOU operations manager Art Murray to help us out. We gave Murray, an African-American man, an American Express card belonging to a white man, who is an employee of KHOU. The credit card had a photo of the other employee right on the back of it.
Still, that didn't stop Murray from walking in, with a hidden camera following him, to a Houston-area Target on Sawyer Street. He picked out a new television and purchased it with the card belonging to someone else.
However, KHOU didn’t stop there. We made purchases at multiple stores and visited multiple store chains -- all the while using someone else’s credit card.
For example, we continued with Target, this time going to the location at Memorial City in Houston. That's where we picked up a popular Xbox gaming system and, once again, walked away with it after buying it with someone else’s card. Even though the Xbox cost more than $300, we were never questioned about our identity.
KHOU also tested multiple Sears stores. At the one located in Memorial City Mall, we went after a brand-new GPS system, locked behind glass doors.
Here, we not only used someone else’s card, but we went so far as actually signing the credit receipt “Not my card.” The cashier never appeared to look at the receipt signature, much less comparing it to the signature on the card.
In separate purchases, 11 News would buy expensive tool sets, digital photo frames and more from Sears, using other people’s credit cards. Not once were asked to show ID. Not once did an employee attempt to verify the signature on our card matched what we signed at the register.
That is the case, even though KHOU has confirmed that Visa, Mastercard, American Express and Discover Card all have rules telling merchants they should verify and compare signatures made at the point of sale to signatures on the back of a credit card. If there is any discrepancy, the cashier is supposed to call for help. That never happened once at any store where KHOU made a purchase.
“It's kind of astounding to me,” Lt. Jeff Stauber of the Harris County Sheriff’s Office said. Stauber oversees the Financial Crimes Unit.
“We're just making it too easy for criminals to walk in and use these credit cards,” he said. “I'm kind of shocked.”
But our story took another turn when we visited a local Hobby Lobby and bought cart after cart of goods, once again walking out without a hitch.
Still undercover, we asked to speak with store management.
KHOU: How come you guys don’t ID?
Hobby Lobby: The credit card companies have stipulated in our agreements we are not to invade the privacy of their clients by asking for ID.
It turns out, that’s not quite right.
“There's nothing in our merchant operating regs that prohibits merchants for asking for ID where legally permitted, so the merchant's statement…would not apply to Discover Network cards,” said Discover spokesperson Laura Gingiss in a written statement.
Visa and MasterCard also directly say their rules they do not preclude a merchant from asking for ID.
American Express Spokesperson Lisa Anselmo says their company’s card rules require merchants to, among other items:
- Obtain signature and verify that the signature is identical to the name on the card
- Compare the signature on the charge record with the signature on the card
- Ensure the name that prints on the charge record matches the name on the front of the card (except for prepaid cards that may not show a name on their face
- Match the card number (on the front, and if present on the back of the card) and expiration date to the same information on the charge record
- Verify the card’s valid date
- Verify that the customer is the cardmember
Still, that didn’t stop Sears from having a similar policy to what we found at Hobby Lobby. An operations manager at one Houston-area Sears store explained the company’s policy to us, when we asked with a hidden camera.
KHOU: How come you guys don't ask for ID?
SEARS: It's actually within our policy not to. We don't ask for ID, as far as any customers, as long as you have your card, we just validate you have the card and slide it.
KHOU: So you don't look at ID or anything?
SEARS: mmm-mmm (Shakes head ‘no’.)
And when we took our regular cameras out? Her boss, store manager Richard Trevino, made similar statements to what we heard at Hobby Lobby as to who was responsible for the lack of certain practices.
SEARS: The credit card company. Their policies… do not require Sears to ask for ID.
KHOU: But they allow you to.
SEARS: Sure. I mean they would allow you to…
A corporate spokesperson for Sears and Kmart confirmed they don’t, by policy, ask for photo ID in most cases, unless the back of a credit card is not signed. Other national chains, like Target, also have corporate policies to not ask for additional ID at the time of a purchase in most instances. However, we discovered Target goes even farther, telling us they also stopped checking if the signature on the back of your card matches what was signed at the register.
“Target stopped signature comparison,” Target spokesperson Sara Moore confirmed in an e-mail statement, adding that “it has been at least five years” since the company verified signatures.
In a previous statement, Moore told KHOU that Target’s new policy of not asking for ID or checking for signatures “has helped control industry-wide fraud losses more effectively than signature comparison.” The statement also said, “This system allows for fast and accurate transactions without the need to check for photo ID and is the system preferred by credit card companies.”
Randy Betts, the vice president for store operations at Hobby Lobby, did not respond directly to KHOU’s questions about if its corporate policy of not checking for ID further enabled fraud. But he did say this: “Credit card companies protect both the individual and the retailer by reimbursing the individual if fraud occurs and by not requiring reimbursement from the retailer. As an added measure of safety, Hobby Lobby complies with the Payment Card Industry Data Security Standard to maintain payment account security throughout the transaction process.”
Betts added, “We follow what we believe are the best procedures for our customers in terms of convenience and protection.”
Local law enforcement has a different take.
“I'm just really amazed,” said Lt. Stauber. “We were unaware that these policies were out there.”
Stauber and representatives from other local law enforcement agencies were also unaware of something else we discovered: In some cases, the credit card companies themselves have policies that are also now drawing criticism. For instance, both Visa and Mastercard each confirm their own rules prohibit a merchant from denying a purchase if someone refuses to show an ID. Visa goes so far as to recommend to merchants in writing that they do not ask for ID at the point of sale.
“I really think that these merchants have to take a look at the policy,” Stauber said, adding that he hopes they reverse the policy.
However, companies such as Discover Card have what appear to be very different policies from Visa and Mastercard. Discover Card sent KHOU a manual called “Best Practices For Transaction Processing and Fraud Prevention.” In the “fraud prevention basics” section of the book, it tells merchants to ask for government-issued ID to verify the cardholder is really the person he or she claims to be. The manual also tells merchants to verify signatures.
Businessman Phil Raskin says the companies who do not want merchants to check IDs are more concerned about their bottom line then they are their customers.
“They are incentivized to do the wrong thing,” he said, referring to the fact that most merchants get to keep the money from a fraudulent transaction, since they are typically reimbursed by the bank that issued the credit card.
In Raskin’s opinion, “In truth they are insured against theft and so they are motivated to help the crook steal.”
Again, American Express, Visa, MasterCard and Discover Card all require merchants to verify that signatures on credit cards match those given at the point of sale. American Express also asks stores to verify the identity of the person presenting the card.
Sears says comparing signatures at checkout is one of its important policies. They say they're "disappointed" at what this report has uncovered, and as a result will order employees at more than 2,000 Sears and Kmart stores across the nation to immediately begin retraining.
Tuesday at 10 p.m. 11 News continues this series of reports, getting reaction from a former FBI agent who also served as the global security chief for one of the big four credit card companies. We’ll also tell you about actions one major bank took against some merchants it identified as a high-fraud risk.
