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CHANAKYA NATIONAL LAW

UNIVERSITY

BANKING LAWS

PROJECT Topic

CREDIT CARD

SUBMITTEDTO: SUBMITTEDBY:

Dr. AJAY KUMAR Amit Kumar

B.B.A.LL.B. (Hons.),

8TH Semester,

Roll no.-1007
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CONTENTS

ACKNOWLEDGEMENT

1. INTRODUCTION

I. AIMS AND OBJECTIVE

II. SOURCES OF DATA

III. HYPOTHESIS

IV. RESEARCH METHDOLOGY

2. FEATURES OF CREDIT CARD

3. CLASSIFICATION OF CREDIT CARD

4. CREDIT CARD FRAUD

5. CONCLUSION AND SUGGESTIONS

BIBLIOGRAPHY
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ACKNOWLEDGEMENT
Its a fact that any research work prepared, compiled or formulated in isolation
is inexplicable to an extent. This research work, although prepared by me, is a
culmination of efforts of a lot of people.

Firstly, I would like to thank our teacher for the subject of BANKING LAWS ,
Dr.AJAY KUMAR for giving such a topic i.e. CREDIT CARD for the
project work which assisted me in acquiring further knowledge in the field of
civil law. I would like to thank him for his valuable suggestions towards the
making of this project.

Thereafter, I would also like to express my gratitude towards our seniors who
played a vital role in the compilation of this project work.

I cannot ignore the contributions made by my classmates and friends towards

the completion of this project work. And I would also like to express my
gratitude towards the library staff of my college which assisted me in acquiring
the sources necessary for the compilation of my project.

Last, but not the least, I would like to thank the Almighty for obvious reasons.

---

Amit Kumar
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CHAPTER-1

INTRODUCTION
Oxford Dictionary and Thesaurus defines credit card authorizing purchase of goods on
credit. Credit cards are innovative instruments in the area of financial services offered by
commercial banks. The concept of credit cards was first developed by Diners club founder
Frank McNamara, an American businessman who found himself without cash at a weekend
resort founded Diners card in 1950.1 American Express issued their first credit card in 1958.
Bank of America issued the Bank Americard (now Visa) bank credit card later in 1958. Right
from that time, the commercial banks and non-banking companies in the USA adopted the
concept of credit cards to develop their business. Barclays Bank was the first bank to
introduce credit card in 1966 in Britain.

The credit card business got momentum in the sixties and a number of banks entered the field
in a big way. Credit card culture is an old hat in western countries. In India, it is relatively a
new concept that is fast catching on. Credit has become an important vehicle of trade
promotion. Credit cards provide convenience and safety to the buying process. One of the
important reasons for the popularity of credit cards is the sea change witnessed in consumer
behaviour. Credit cards enable an individual to purchase products or services without paying
immediately. The buyer only needs to present the credit cards at the cash counter and sign the
bill. Credit card can, therefore, be considered as a good substitute for cash or cheques.

A Credit card is a card or mechanism which enables cardholders to purchase goods, travel
and dine in a hotel without making immediate payments. The holders can use the cards to get
credit from banks up to 50 days free of cost. The credit card relieves the consumers from
botheration of the carrying cash and ensures safety. It is a convenience of extended credit
without formality. Thus credit card is a passport to, safety, convenience, prestige and
credit. A credit card is a plastic card having a magnetic strip, issued by a bank or business
authorizing the holder to buy goods or services on credit. Any card, plate or coupon book that
may be used repeatedly to borrow money or buy goods and services on credit is called credit
card.

1
www.dinersclub.com
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A credit card is a card establishing the privilege of the person to whom it is issued to charge
bills. Credit cards allow consumers to make purchases without paying cash immediately or
establishing credit with individual stores. They eliminate the need to check credit ratings and
to collect cash from individual customers. The issuing institution establishes the cards terms,
including the interest rate, annual fees, penalties, the grace period, and other features. Credit
card debt is typically an unsecured debt. Repossession is not easily accomplished by the
lender to ensure payment. Banks have often priced the product assuming maximum risk
exposure.

A credit card is a device which enables the holder to obtain goods on credit from specified
supplies. The holder of the card, in some cases, has to pay the yearly subscription and the
suppliers also have to pay commission on sales to the bank or the body issuing the card. The
suppliers are paid promptly and so are protected against bad debts, while the holder makes a
single monthly payment to cover all his purchases for that period. Credit cards are issued only
after the applicants credit worthiness has been accepted as satisfactory. According to credit
rating, holder of the credit card may be allowed a specified amount of credit from one month
to another.

1. AIMS AND OBJECTIVE

i. To understand the concept of credit card.
ii. To analyse the importance of credit card.
iii. To analyse the instances of credit card fraud.

2. SOURCES OF DATA
The researcher will look into various primary sources which would include statutes,
legislations, articles and recommendations etc. and would also rely on secondary
sources such as books, Bare Acts, Web Sources etc.

3. HYPOTHESIS
The researcher hypotheses that credit card is fast growing on in India. However,
to maintain growth, frauds has to be reduced.
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4. RESEARCH METHODOLOGY

This project report is based on analytical and descriptive Research Methodology.

Secondary and Electronic resources have been largely used to gather information and
data about the topic. Books and other reference as guided by Faculty have been
primarily helpful in giving this project a firm structure. Websites, dictionaries and
articles have also been referred.
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CHAPTER- 2
FEATURES OF CREDIT CARD
The features of modern credit cards such as owner identification, credit limit for its
cardholders and floor limit for its merchant establishments, convenience and safety to add
value of cards, wider usage or popularity all over the world and dependence on technology to
keep operating cost to the minimum, have been a runaway success for credit cards.2

Along with convenient, accessible credit, credit cards offer consumers an easy way to track
expenses, which is necessary for both monitoring personal expenditures and the tracking of
work-related expenses for taxation and reimbursement. Credit cards are accepted worldwide,
and are available with a large variety of credit limits, repayment arrangement, and other perks
(such as rewards schemes in which points earned by purchasing goods with the card can be
redeemed for further goods and services or credit card cash back). Some countries, such as
the United States, the United Kingdom, and France, limit the amount for which a consumer
can be held liable due to fraudulent transactions as a result of a consumer's credit card being
lost or stolen. A credit card is part of a system of payments named after the small plastic card
issued to users of the system. The issuer of the card grants a line of credit to the consumer (or
the user) from which the user can borrow money for payment to a merchant or as a cash
advance to the user. A credit card is different from a charge card, which requires the balance
to be paid in full each month. In contrast, credit cards allow the consumers to 'revolve' their
balance, at the cost of having interest charged. Most credit cards are issued by local banks or
credit unions, and have the same shape and size, as specified by the ISO 7810 standard.

2
Priya Ranjan Dash. Your credit card under watch. Financial Chronicle. Chennai, (April 17, 2008), p.16.
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CHAPTER- 3

CLASSIFICATION OF CREDIT CARD

Before we apply for a credit card it is always better to know what type of credit card is best
suited to our profile. Catering to different types of consumer needs, credit card companies
issue several types of credit cards. Each type has its own benefits. They can be classified as
follows:

Based on Franchise / Tie-up

i. Proprietary Card: Cards that are issued by the banks themselves without any tie-up,
are called proprietary cards. A bank issues such cards under its own brand. Examples include
SBI Card, CanCard of Canara Bank, Citicard.

ii. Master Card: This is a type of credit card issued under the umbrella of MasterCard
International. The issuing bank has to obtain a franchise from the MasterCard Corporation of
the USA. The franchised cards will be honoured in the MasterCard network.3

iii. VISA Card: This type of credit card can be issued by any bank having tie-up with
VISA International Corporation, USA. The banks that issue such cards are said to have a
franchise of VISA International. The advantage of a VISA franchise is that one can avail the
facility of the VISA network for transactions.4

iv. Domestic tie-up Card: These cards are issued by a bank having a tie-up with
domestic card brands such as CanCard and Indcard are called Domestic cards

Based on geographical validity

i. Domestic Card: Cards that are valid only in India and Nepal are called domestic
cards. They are issued by most of the banks in India all transactions will be in rupees.

3
www.mastercards.com
4
http://www.corporate.visa.com
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ii. International and Global Card: Credit cards with international validity are called
international cards. They are issued to people who travel abroad frequently. They are
honoured in every part of the world except India and Nepal. The cardholder can make
purchases in foreign currencies subject to RBI sanction and FERA rules and regulations.

Based on the issuer category

1. Individual Card: These are the non-corporate credit cards that are issued to
individuals. Generally, all brands of credit cards are issued to individuals.
ii. Corporate Card: They are credit cards issued to corporate and business
firms. The executives and top officials of the firms use them. They bear the names of the
firms, and the bills are paid by the firms.

Based on mode of credit recovery

i. Revolving Card: This type of credit card is based on the revolving credit principle. A
credit limit is fixed on the amount of money one can spend on the card for a particular period.
The cardholder has to pay a minimum percentage of the outstanding credit which may vary
from 5 to 10 percent at the end of a particular period. Interest varying from 30 to 36 percent
per annum is charged on the outstanding amount.

ii. Charge Card: A charge card is not a credit instrument, it is a convenient mode of
making payment. This facility gives a consolidated for a specific periods and bills are payable
in full on presentation. There is neither interest liability nor no per-set spending limits.

Based on status of Card

i. Standard Card: Credit cards that are regularly issued by all card-issuing banks are
called standard cards. With these cards, it is possible for a cardholder to make purchases
without having to pay cash immediately. They however, offer only limited privileges to
cardholders. Some banks issue standard cards under the Brand name Classic cards, which
are generally issued to salaried people.
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ii. Business Card: Business cards also known as Executive cards, are issued to small
partnership firms, solicitors, firms of chartered accountants, tax consultants and others, for
use by executives on their business trips. They enjoy higher credit limits and more privileges
than the standard cards.

iii. Gold Card: The gold card offers high value credit for elite. It offers many additional
benefits and facilities such as higher credit limits, more cash advance limits that are not
available with the standard or the executive cards.

Innovative card
In addition, credit cards which have evolved into a variety of innovative cards over the years
are also issued by banks.

i. ATM Card: ATM cards allow customers to access their accounts at any time-24 hours
a day, every day of the year, through Automated Teller Machines. 5 Customers can withdraw
cash, transfer funds, find out their account balance and perform other banking and financial
transactions with the help of ATMs.

ii. Debit Card: A debit card, like an ATM card, directly accesses a customers account. It
is a hybrid of ATM and credit card. The card directly debits a designated savings bank
account. Whereas in the case of credit cards, a grace credit period of 20 to 50 days for making
the payment is available, no such credit period is allowed under debit cards. These cards can
be used either at merchant locations who have this facility to buy goods and services or at
ATMs. Presently, ATM-Cum Debit cards issued by Indian banks are in use.

iii. Prepaid Card: Prepaid cards are also known as Stored Value Cards. These cards are
with stored value paid in advance by the holder. The card issuer and the service provider are
identical. They are also called Limited Purpose Prepaid Cards which can be used for a limited
number of well -defined purposes. Its use is often restricted to a number of identified points
of sales within a specified location.

5
S. Gurusamy (2007). Merchant Banking and Financial Services. Chennai: Vijay Nicole
Imprints Private Limited, p.344.
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iv. Private Label Card: These cards are uniquely tied to the retailer issuing the card and
can be used only in that retailers stores. A bank, on the basis of a contractual agreement with
the retailer extends credit under this type of card.

v. Affinity Group Card: These are credit cards designed for a collection of individuals
with some form of common interest or relationship, such as professional, alumni, retired
persons organizations, sports teams, schools, or service organizations. This credit card
carries the logo of the affiliated organization on the card design and brings special benefits
and discounts on products from that company. In case the affiliated company is a charity or
non-profit organization, a part of the credit card expenses go into the affiliate organization's
account. For example: The Help Age India Credit Card issued by ICICI bank.

vi. Smart Card: A smart card is a credit card sized plastic card with an embedded
computer chip. The chip allows the card to carry a much greater amount of information than a
magnetic strip card. The telecom industry, was perhaps the pioneer in smart cards, the most
prominent being Subscriber Identity Module (SIM) cards in the GMS digital cellular
network. Using special terminals designated to interact with the embedded chip, the card can
perform special functions. This is essentially a prepaid card.

vii. Chip Card: A chip card is a plastic card with an embedded integrated circuit or as
microchip as opposed to magnetic strips on a conventional card. The chip can be used on
existing debit and credit cards as well as on emerging products like stored value cards.
Inserting the card in a pin-pad effects the transaction, and the value on it reduces accordingly.
It is re-loadable and disposable. The idea is to do away with the trouble of carrying cash. The
chip card also scores over the magnetic card, in that it can retain 50 to 60 of the latest
transactions, which can be produced on demand.6 It is also considered more durable and
secure since the cardholder alone can access it through a Personal Identification Number
(PIN).

viii. Co-branded card: The Times Card, a co-branded credit card, is the first of its kind,
from a publishing house in the Asian subcontinent. This is a cobranded credit card of Times

6
www.creditcard.india.com
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of India Group and Citibank MasterCard. The co-branding concept caught the credit card
industry the world over during the last five years.

Other types of credit card

i. Special purpose Card: The eighties saw the development of special purpose
cards. A host of special purpose cards were issued by departmental stores, airlines, oil
companies. For instance, the International Bank of Asia in Hong Kong launched the first
women only card, My card in the year 1988.7 A highly encouraging membership and
increasing potential of such special purpose cards are called Ladys card in Malaysia. In
1990, the Green card was launched in the U.K and Europe to promote contributions towards
the protection of the environment. HDFC issued My City credit cards used in particular city
with special discount offer for oil and petrol and also an offer for cash back. AXIS Bank also
offers special purpose credit cards like Gift card, Travel currency card and Remittance card.

ii. Add-on card: An add-on card is more of an additional Credit card that the customer
can apply in the name of their family members (father, mother, sister, brother, spouse,
children), within the overall credit limit. Family members applying for Add-on cards have to
be 18 years and above. All the payments for the services made from Add-on card(s) is done
by the original cardholders. Most banks allow for at least two Add-on cards.

iii. Photo card: If a card comes with the imprinted photo, then it is a Photo card. This type
of card is considered safer as it is easier to identify the credit card user. It also serves as more
identity card.

iv. Power card: It is a comprehensive credit card product that enables banks and financial
industry to enter into issuing and acquiring business of Credit Cards. The basic advantage of
this efficient tool is to improve productivity and control the risks involved in day-to-day
activities of any financial institutions in credit cards. The product is 24 x 7, multi language,
multi currency, multi-bank and multi country.

7
E. Gordon and K. Natarajan (2006). Financial Markets and Services. New Delhi: Himalaya
Publishing House, pp.414.
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v. Regular credit card: This is the most basic type of credit card. It has a low credit limit
and the most basic status among various credit cards. Credit card companies can club various
other reward programs like travel rewards, cash back offers to enhance its value and appeal to
customers.

vi. Silver credit card: Silver credit cards have higher eligibility criteria than regular credit
cards. They bring more benefits to the customers, and have higher credit limits than regular
credit cards.

vii. Gold credit card: Gold credit cards have a higher status and credit limits than silver
credit cards. Needless to say these types of credit cards have higher income requirements as
their eligibility criteria. In addition to the regular benefits, banks extend special privileges to
their gold credit card holders.

viii. Platinum or Titanium credit card: These types of credit cards bring more benefits to
credit card holders than regular, silver or gold card. These credit cards generally have
platinum or titanium hue and are issued to a select class of clients who have excellent
financial background and good income levels. Platinum credit cards have personal concierge
services, in addition to exclusive platinum benefits.

ix. Signature credit card: A league of its own, the Signature Credit Cards usually have no
pre-set spending limits, personal concierge service, signature travel, and lounge and
membership benefits. Offered to a very elite group these credit cards, requires an excellent
financial status. On June 9, 2007 ICICI bank introduced the Visa Signature Card and became
the first credit card issuer in India to launch a premium credit card. This has a joining fee of
Rs.25,000/- and an annual fee of Rs.2,500/-. The exclusivity of this signature card is
exemplified by the statement.

x. Credit cards by invitation only: The earliest of the elite, no one can apply for these
card. For example, the American Express Black Credit Card, popularly called the Centurion
Card, is issued by invitation to the most exclusive and elite, to those who spend a certain
minimum amount (which can run into crores of rupees). These cards have huge annual fees
and minimum spending levels. In fact, these credit cards are so exclusive, that they have an
aura of mystery surrounding them and are considered status symbols.
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xi. Reward card: There are cards which offer rewards for specific kinds of purchases. For
example, the Airline Reward Card offer rewards on air travel, Cash back card offer cash
rewards on every card purchases, Fuel Reward Card offer rebates on petroleum and other fuel
purchases from specified outlets and preferred partners. Similarly, Hotel Reward Card give
rebates on hotel stay and related expenses and Health Rewards Card give benefits on medical
expenses, health treatments and related activities. The rewards offered by credit card
companies in alliance with various brands and stores, make them more attractive for the
credit card holders.

xii. Student credit card: As the name implies, these credit cards are especially designed
for students and help them start their credit card journey. These bring lots of rewards
especially suited for students, which help them save time, money and enjoy their student life.
They are a first step towards building credit history. A good credit history goes a long way in
creating a relationship with banks helping to secure much needed loans and credit in the
future.

xiii. Special feature credit card: Credit cards can also be grouped on the basis of their
features. For example, based on their introductory interest rates, credit cards can be low
introductory interest credit cards, or 0 (zero) Interest credit cards. The Zero introductory
interest credit cards provide interest free credit (0%) for a specified time period, which is
called the introductory period. Similar is the case with credit cards that come without any
annual fee what so ever and are called no annual fee credit cards.

xiv. Balance transfer credit card: Credit card companies provide lucrative offers with 0 per
cent introductory interest or low introductory interest charges on balance transfers. This
allows credit card holders to transfer the outstanding balances on their existing credit cards to
a credit card with low or zero interest on balance transfers. This brings them a lot of savings
in the interest rates. The balance transfer credit cards may charge a balance transfer fees for
every such operation.132

xv. Kisan Credit Card (KCC): The Kisan Credit Card Scheme aims at providing need
based and timely credit support to the farmers for their cultivation needs as well as non-farm
activities and cost effective manner to bring about flexibility and operational freedom in
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credit utilization. The Kisan Card is for a period of 3 years subject to an annual review. It was
launched in 1998-99 by the Government of India in consultation with the Reserve Bank of
India and National Bank for Agricultural and Rural Development is a huge hit with the
farmers in India. According to the RBI, presently there are about 66.56 million Kisan Credit
Cards in use across India, which have been issued by various banks.

xvi. Secured credit card: Secured credit card is a type of credit card secured by a deposit
account owned by the cardholder. This deposit is held in a special savings account. The
cardholder of a secured credit card is still expected to make regular payments, as with a
regular card, but should they default on a payment, the card issuer has the option of
recovering the cost of the purchases paid to the merchants out of the deposit. The advantage
of the secured card for an individual with negative or no credit history is that most companies
report regularly to the major credit bureaus. This allows for building of positive credit
history.
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CHAPTER- 4

CREDIT CARDS FRAUD

Credit card fraud is a wide-ranging term for theft or fraud committed using a credit card or
any similar payment mechanism as a fraudulent source of funds in a transaction. The purpose
may be to obtain goods without paying, or to obtain unauthorized funds from an account.
Credit card fraud is also an adjunct to identity theft. The cost of credit card fraud reaches into
billions of dollars annually.

Stolen cards can be reported quickly by cardholders, but a compromised account can be
hoarded by a thief for weeks or months before any fraudulent use, making it difficult to
identify the source of the compromise. The card holder may not discover fraudulent use until
receiving a billing statement, which may be delivered infrequently.

Types of card fraud

Cardholders fraud
The most common type of fraud against credit cards is cardholders falsifying applications to
get higher credit limits than they can afford to pay, or to get multiple cards that they cannot
afford to pay off. Those who intend to defraud generally use the multiple-card approach.
They give false names and financial data on several (sometimes as many as hundreds) of
applications. Often, the address of a vacant house that the criminal has access to is given,
making it difficult to track the criminal's real identity.

Third party frauds

The simplest way for a third party to commit fraud is for them to get their hands on a
legitimate card. There is a large black market for credit cards obtained from hold-ups, break-
ins and muggings. Perhaps one of the cruelest methods of getting a card is a Good
Samaritan scams. In such a scam, credit cards are stolen by pick-pockets, purse-snatchers.
The same day, someone looks up cardholders number in the phone book and calls up. If such
thing happens to us as if you can come and pick the cards up immediately.

Merchants fraud
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There are many urban rumours of merchants imprinting a card multiple times while the
cardholder is not looking, and then running through a bunch of charges after the cardholder
leaves. We do not know of any case where this is an official policy of a merchant, but this is
certainly one technique a dishonest cashier could use. The cashier can then take home a
bunch of merchandise charged to his account. Although some people are afraid of this
happening in a restaurant, where a waiter takes our card away for a while, it's actually less
likely there, since there is not anything the waiter can charge against our card and take home.

Acquirer and issuer fraud

The place to make really big bucks in fraud is at the acquirer or issuer, since this is where we
can get access to large amounts of money.8 Fortunately, it's also fairly easy to control things
here with audit procedures and dual control. People working in the back offices, processing
credit slips, bills have a big opportunity to "lose" things, introduce false things, artificially
delay things, and temporarily divert things. Most of the control is standard banking staff, and
has been proven effective for decades, so this isn't a big problem. A bigger potential problem
to the consumer is the possibility of an employee at the issuer or acquirer selling PANs to
crooks.

This would be very hard to track down, and could compromise a large part of the card base.

Stolen card fraud

When a credit card is lost or stolen, it remains usable until the holder notifies the bank that
the card is lost most banks have toll-free telephone numbers with 24-hour support to
encourage prompt reporting. Still, it is possible for a thief to make unauthorized purchases on
that card up until the card is cancelled. In the absence of other security measures, a thief
could potentially purchase thousands of dollars or rupees in merchandise or services before
the card holder or the bank realize that the card is in the wrong hands.

Compromised accounts

Card account information is stored in a number of formats. Account numbers are often
embossed or imprinted on the card, and a magnetic stripe on the back contains the data in

8
C.J. Woelfel (1994). Encyclopedia of Banking and Finance. New Delhi: S. Chand and
Company Limited, pp.267.
 P a g e | 17

machine readable format. Fields can vary, but the most common include Name of card
holder, Account number, Expiration date, Verification/CVV code. Many Websites have been
compromised in the past and theft of credit card data is a major concern for banks. Data
obtained in a theft, like addresses or phone numbers, can be highly useful to a thief as
additional card holder verification.

Mail/Internet order fraud

The mail and the Internet are major routes for fraud against merchants who sell and ship
products as well as Internet merchants who provide online services. The industry term for
catalog order and similar transactions is Card Not Present (CNP), meaning that the card is
not physically available for the merchant to inspect. The merchant must rely on the holder to
present the information on the card by indirect means, whether by mail, telephone or over the
Internet when the cardholder is not present at the point of sale.

Identity theft
There are two types of fraud within the identity theft category - application fraud and account
takeover. Application fraud occurs when criminals use stolen or fake documents to open an
account in someone elses name. Criminals may try to steal documents such as utility bills and
bank statements to build up useful personal information. Alternatively, they may create
counterfeit documents.

Account takeover involves a criminal trying to take over another person's account, first by
gathering information about the intended victim, then contacting their bank or credit issuer
masquerading as the genuine cardholder asking for mail to be redirected to a new address.
The criminal then reports the card lost and asks for a replacement to be sent. The replacement
card is then used fraudulently.

Skimming

Skimming is the theft of credit card information used in an otherwise legitimate transaction.
It is typically an "inside job" by a dishonest employee of a legitimate merchant, and can be as
simple as photo copying of receipts. Common scenarios for skimming are restaurants or bars
where the skimmer has possession of the victim's credit card out of their immediate view.
 P a g e | 18

The skimmer will typically use a small keypad to unobtrusively transcribe the 3 or 4 digits
Card Security Code which is not present on the magnetic strip.

Carding
Carding is a term used for a process to verify the validity of stolen card data. The thief
presents the card information on a website that has real-time transaction processing. If the
card is processed successfully, the thief knows that the card is still good. The specific item
purchased is immaterial, and the thief does not need to purchase an actual product; a Website
subscription or charitable donation would be sufficient. The purchase is usually for a small
monetary amount, both to avoid using the card's credit limit, and also to avoid attracting the
bank's attention. A website known to be susceptible to carding is known as a cardable
website.9

Credit Card Hijacking

Credit Card Hijacking is the term used when a persons credit card information is used for
undesired charges for goods or services where the credit card owner has trouble reasserting
control. This can be occur in the following are the three major forms.10

(i) The first form of credit card hijacking is basically identity theft, which is the
deliberate assumption of another person's identity.

(ii) The second form of credit card hijacking, which most people have fallen victim to, is the
continued charging of a persons credit card for a subscription to goods or services no longer
desired by the credit card owner.

(iii) Third form of hijacking is negative option billing is a business practice of sending goods
automatically and billing the recipient unless the recipient is proactive in declining the goods
before they are sent.

Friendly fraud
Friendly fraud has been widespread on the internet, affecting both the sale of physical
products and digital transactions. To combat digital transaction fraud, prepaid cards have

9
S. Gurusamy (2007). op. cit., p.343.
10
www.rbi.org.in
 P a g e | 19

been offered as an effective alternative to ensure customer payment. South Korean software
developers such as Nexon implemented a prepaid system in 2007 to combat friendly fraud,
selling prepaid cards in stores such as Target.

Internet fraud
The term "Internet fraud" generally refers to any type of fraud scheme that uses one or more
online services - such as chat rooms, e-mail, message boards, or Web sites - to present
fraudulent solicitations to prospective victims, to conduct fraudulent transactions, or to
transmit the proceeds of fraud to financial institutions or to others connected with the scheme.

Phishing
Phishing is the criminally fraudulent process of attempting to acquire sensitive information
such as usernames, passwords and credit card details by masquerading as a trustworthy entity
in an electronic communication. Communications purporting to be from popular social web
sites. Phishing is typically carried out by e-mail or instant messaging, and it often directs
users to enter details at a fake website whose URL and look and feel are almost identical to
the legitimate one. Phishing is an example of social engineering techniques used to fool users,
and exploits the poor usability of current web security technologies.
 P a g e | 20

CHAPTER- 5
CONCLUSION

The Central Bank has finally woken up and has recommended measures to prevent Credit
Card Frauds or at least minimize the same. RBI has recommended the following measures to
be taken by every credit card issuers.11

(i) Mandatory SMS facility for Online Transactions over Rs 5,000 [However, some
banks like ICICI are sending the SMS for every Online Transaction and it is a good move]
with effect from 1st September, 2009.
(ii) Separate Password protection for all Online Transaction. CVV is not enough; the
hacker will need a password as well. [Recall we have already written about this feature with
effect from HDFC Bank Cards
- MasterCard Secure Code for Online Transactions]
(iii) Secured Transaction mechanism for customers doing business on IVR
- Interactive Voice Response Systems.
(iv) RBI measure in internet security.
All these measures have to be fully implemented by each and every credit card company
operational in India under the guidelines of RBI.

11
RBI (1994). Report of the Committee on Technology Issues Relating to Payment System,
Cheque Clearing and Security Settlement in the Banking Industry, Mumbai: RBI, pp.75.
 P a g e | 21

BIBLIOGRAPHY

BOOKS:-

Dr. S R Myneni, Law of Banking, (Asia Law House; 2 edition, 2014)

M.L. Tannan, Banking Law Student Edition, (LexisNexis; 1st edition, 2014)

M.L. Tannan, Tannan's Banking Law and Practice in India, (LexisNexis; 23 rd

edition, 2010)

Ravi Shinde, Lectures on Law of Banking, (Asia Law House; 1st edition, 2011)

Banking Awareness, (Arihant, 6th edition, 30 June 2014)

B.M. Prasad, Khergamvala on the Negotiable Instruments Act, (LexisNexis; 21 st

edition, 2013)

INTERNET LINKS:-

www.manupatra.com

www.jstor.org

www.westlaw.in

www.icsi.edu