TAMPA, Fla. — Velera has released a new playbook it said is designed to help credit unions investigate consumer-engaged fraud, determine whether to file claims and reduce chargeback risks as the form of fraud becomes an increasing source of losses for financial institutions.
The payments credit union service organization said its Consumer-Engaged Fraud Case Management Playbook provides a framework for credit unions handling cases in which legitimate cardholders may have been manipulated into participating in fraudulent transactions or may have intentionally misused their accounts.
More than two-thirds of financial institutions have reported an increase in consumer-engaged fraud, or CEF, while 35% experience more than 1,000 fraud attempts annually, according to Alloy data cited by Velera.
Unlike traditional third-party fraud, consumer-engaged fraud can involve transactions conducted or authorized by legitimate account holders, complicating efforts by financial institutions to determine whether a consumer was a victim or participated knowingly in the transaction.
Builds on Prior Release
The new playbook builds on Velera’s previously released Consumer-Engaged Fraud Classification Guide, which identifies categories of CEF that include misuse, persuaded fraud and what the company describes as a newly identified “collusive merchant fraud” sub-classification.
Velera said the new resource shifts the focus from identifying types of fraud to managing individual cases.
Areas Addressed
Among the areas addressed in the playbook are:
- Case management: A step-by-step process and core investigative elements intended to help credit unions make consistent decisions.
- Filing practices: Guidance on when institutions should and should not file cases, with a focus on reducing chargeback risks and complying with payment network requirements.
- Case examples: Real-world scenarios involving different forms of consumer-engaged fraud.
- Investigation tools: A case management checklist and other resources for fraud, risk and dispute teams.
“As consumer-engaged fraud continues to evolve, credit unions can’t rely on the same signals and assumptions they use to evaluate traditional fraud,” Nicole Reyes, Velera’s managing vice president of risk operations, said in a statement.
‘Where Context Becomes Critical’
Reyes said the fact that a transaction was authorized does not necessarily mean a credit union member knowingly participated in fraud, just as disputing a transaction does not necessarily establish that the member was a victim.
“This is where context becomes critical,” Reyes said. “Credit unions need to understand what happened around the transaction, not just what happened during it, so they can protect members, manage losses and make decisions they can stand behind.”
Velera said the playbook is intended to give credit unions a more consistent approach to evaluating evidence and determining when and how fraud-related cases should be filed.
