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ARLINGTON, Va. – Credit card fraudsters have begun to pass themselves off as cardholders with good credit ratings while perpetrating the latest type of credit card fraud, fraud experts have said. In so-called “bust out” frauds, perpetrators inflate established credit card balances with bogus payments, and then either use or withdraw the falsely inflated balance before the institution realizes that the balances have been falsely inflated. Although this type of fraud has been around since the late 1980′s it has only recently started to become more popular in the United States, according to Visa law enforcement experts and other fraud fighting firms. Visa has identified two types of this fraud. In the first type, a legitimate cardholder will have a legitimate account or accounts and run into some financial trouble, often with bank debts or other types of debt to loan sharks. In exchange for canceling the debt, the cardholder will give his or her accounts to the loan shark who will build up the balance and then bust out the cards. The cardholder derives no benefit from the fraud other than a cancelled debt to the loan shark, whereas the loan shark could have busted out the cards themselves or, more likely, sold them to rings of thieves that specialize in cards. The second type of bust out fraud involves the perpetrators actually establishing the accounts and boosting the credit card available balances then busting out the cards, although there are variations on both types of fraudulent scheme. Visa cited a recent fraud case in Virginia, where the FBI and local police have alleged a ring of immigrants, primarily from Pakistan, used a bust out fraud to take area banks and credit card companies for more than $5 million. The alleged ring leader of the scheme has fled to Pakistan, along with others, while other members were captured and await deportation or sentencing, Visa reported. In this case the perpetrators approached people to take open card accounts which the ring then purchased from the openers for a fee. Before making fraudulent charges on the credit cards, the ring established a strong credit history and higher credit limit over a period of time by making purchases using the cards and then making payments to the credit card companies. The ring continued this process until the credit limit for each card was maximized and the card could be busted out. In a variation, fraudsters bring the cards to collusive merchants who are willing to participate in the scheme in exchange for a portion of the fraud proceeds. These merchants process the credit cards through their respective terminals to make it appear as if goods or services are being purchased on the cards. The merchants run up the fraudulent charges on the cards until the credit lines are exhausted. The merchant banks settle up by wiring funds to the merchants as reimbursement for the transactions, unaware that the credit card charges are bogus. When the merchants receive payment from the credit card companies, they retain their 10% and pay the remaining 90% to the brokers. Sometimes the brokers pay a portion of the proceeds to cardholders for allowing their credit cards to be used in the scheme. In some cases, the cardholders obtained credit cards under fake names and Social Security numbers, Visa reported.

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