The news is full of stories of small businesses and individuals harmed by online fraud and identity theft. Most people associate fraud protection as only applicable to individuals but many of the same defenses are available to small business owners.
The Truth in Lending Act (TILA) provides protection for both consumers and small businesses. When it comes to business transactions, you are only liable for fraudulent activity up to $50. The small business owner needs to take the same steps as an individual consumer when fraudulent activity is suspected. First, immediately report the issue to the credit card company. Second, dispute any unauthorized charges immediately. And do not forget to follow up the dispute with a certified letter detailing your concerns and evidence as to why the transaction was fraudulent.
However, it is important to know that there are several circumstances unique where these protections may not apply to a small business owner:
- You issue a credit card to more than 10 employees. In this case, your card issuer has the right to change its liability policy removing you from some of the TILA protections.
- You allowed someone else to use the card. In this case, you will be liable if you allow someone else to use the card and he or she causes the unauthorized charges.
- You fail to report the fraud. Any fraudulent activity reported more than 60 days after the unauthorized purchases were made may not be protected and you could be held liable.
Protecting your identity and credit is crucial when starting and/or maintaining a small business. If you have any questions about fraudulent charges to your personal or business account, credit reports, identity theft, or your small business, please contact us.