BUSTOUTS

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BUSTOUTS

• Nicole Katona Giguere
• Fraud Prevention Strategy
• May 28th, 2007

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Background

• A Bust-Out occurs when a cardholder manipulates
  their payment / purchase activity in order to
  extend their balance owing far beyond their
  credit limit with no intention of ultimately
  paying off their balance.
• Often time the cardholder has established history
  with the card issuer. Therefore has built a
  level of trust based on prior customer behavior.

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Background

• The cardholder can act alone or in conjunction
  with a collusive merchant
• The cardholder makes a series of large purchases
  and cheque payments over a short timeframe.
• Ultimately the cheques are returned NSF but by
  the time the first one comes back, the account
  balance can be 2 to 3 times the credit limit.
• When a collusive merchant is involved, no
  merchandise is actually exchanged.
• Fictitious purchases are put through the system
  and the merchant and cardholder split the
  settlement made to the merchant.

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Case Study
John Smith Open date 6/10/2003
Interesting fact CTFS authorization declined
because of Warning status after unusual payment
behavior.
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Case Study
Mary Customer Marie A Customers Open
date 6/10/2003 6/3/2003
Interesting fact Two separate accounts, same
address, slightly different name (middle initial)
and slight variation in First and last name and
opened just days apart.
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Case Study
Chris Someone Open date 6/17/2005
Interesting fact Newer customer with, multiple
cheque payments within one billing cycle..
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Case Study
Robert Jones Open date 4/8/1996
Interesting fact Established customer, converted
from Retail to our Mastercard in 2000
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Spider Net payments
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Spider Net payments
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Industry actions

• Canadian tire is not alone in observing a rapid
  increase in Bustouts
• Some Canadian issuers estimate that their Bustout
  losses are 5 to 10 times their fraud losses
• Some issuers are considering Bustout as first
  party fraud and are reporting their Bustouts
  to the credit bureau with a unique identifier
• A pilot between some banks was conducted in
  Summer 2004
• The sharing of information allowed us to shut
  down some high risk accounts and or merchants

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Industry actions

• Trans Union has developed a Bustout product that
  will enable the issuers to share confirmed
  Bustout accounts
• Only participating issuers will benefit. A
  narrative will be entered on to the consumers
  credit bureau file and TU daily will send a
  secure e-mail to participating at risk issuers
  if their trade line has been associated with the
  narrative previously entered by another issuer
• Once the issuer receives the notification, the
  issuer may decide to freeze the available
  pending investigation results.

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In Conclusion

• Canadian Tire next steps is to implement the
  Trans Union Bustout product
• Continue to improve our internal model to further
  reduce our Bustout losses
• Continue to add bad microline information to
  existing internal negative cheque database