What are rogue websites and how can they be tackled? 

How do these scammers operate?

When thinking about these rogue websites it helps to differentiate between merchants and merchant acquirers. In a nutshell, merchants sell goods and services while merchant acquirers are the payment facilitators who process those payments – such as banks.

The merchant acquirer oversees merchant accounts, sending and settling payment requests on behalf of merchants. And it’s through merchant acquirers that businesses process credit and debit card payments. 

The people behind these rogue websites set up what appear to be legitimate businesses that are able to pass an acquirer’s compliance guidelines. Then, they push for high traffic to their website in a short period of time, which shows no immediate sign of poor behaviour and consumers are none the wiser. However, the scammers will then either not send products, or send different products leaving customers out of pocket. 

While customers are able to request a refund from their banks because of the rules that cover debit and credit card payments, less than 30% of people actually do so and the scammers are able to keep the majority of the money spent through the website.

Essentially, then, these scammers rely on the fact that they may have to pay some level of refunds. But by the time the acquirers catch on to the scam, the website is shut down and the scammers go off grid – taking with them the remainder of the cash undisputed by customers. Worryingly, over the last twelve months, Lloyds Banking Group has seen a 211% increase in the volume of disputes raised by both credit and debit customers.

How rogue websites operate

Last year, one rogue website flagged by the Group targeted consumers via social media with fake websites purporting to be for trustworthy and well-known companies such as House of Fraser, Office, Superdrug, Mountain Warehouse and Sports Direct. In this case, just 38% of customers contacted the bank to dispute their purchases, meaning that only 14,654 transactions of a potential 36,635 were disputed as of the 7th of May. And the vast majority of disputes the Group has received were for ‘goods not received’ and the rest for ‘goods are not as described’.  

This translated to around 2,000 hours of work for our telephony team around the Christmas period. They helped customers to resolve these disputes and, once we raised our concerns with the merchant, the account was then suspended with immediate effect.

How Lloyds Banking Group is tackling the problem

Working directly with acquirers, we’ve closed around 88 rogue merchants so far this year. And our relationship with Checkout.com in particular has seen them implement additional checks as part of their ongoing internal monitoring, and we’ve closed down 30 rogue merchants with them in the process.

In addition, our work with acquirer Nuvei led to them implementing a restriction of three URL’s for each merchant they acquire. In essence, this means that because there’s less websites for Nuvei to monitor, it should be easier to spot and shut down scam websites. This is something we’d like to see adopted industry-wide, as it limits the pace at which rogue merchants can set up scam websites.

Some acquirers have started to open up and maintain bespoke communication channels to improve delivery timeframes with merchants, which otherwise would not have happened without us flagging.

Moreover, we’ve implemented a ‘Scam Merchant Escalation’ framework which includes daily monitoring of our daily digital disputes dashboards, as well as close scrutiny of behavioural and purchasing trends. Thanks to this framework, we’re in a strong position to spot rogue websites before they leave our customers out-of-pocket.

What’s next?

Working with Chargebacks911, we’ve been able to establish an industry network comprising of other major financial service providers who recognise the seriousness of the problem and are taking steps to prevent these scams from happening. Thankfully, this has led to the sharing of rogue merchants across the industry so everyone is protected.

It’s also imperative that major social media companies take concrete steps to ensure these scams do not continue, and tighten their controls. This should involve putting stricter guidelines in place, improving compliance checks and constant monitoring of the kind of sites that operate via their channels.

In the meantime we will continue to work closely with acquirers in order to flag and close these dishonest websites, as well as put extra pressure on those acquirers with high dispute volumes.