Fraud Prevention Guidelines For Car Rental Companies

Fraud Prevention Guidelines For Car Rental Companies

Car rental companies are among the highest-risk companies, as far as card payment processing is concerned. Statistical data show that they generate higher than average levels of customer disputes and chargebacks. Yet, there are certain payment processing procedures that, if implemented correctly and consistently, will substantially reduce processing risk. The following best practices will help your car rental company prevent fraudulent transactions:

• Obtain incremental authorization approval if the car rental period is extended. Whenever a customer wants to extend a rental period, you need to obtain a new authorization approval for the additional transaction amount that the extension will generate. Standard authorization procedures should be followed for the extension period. If authorization is declined, you should contact the customer and request an alternative payment method.
• If authorization for the extension period is declined, you should only settle the amount that was originally authorized. This will help merchants reduce chargebacks and processing costs. When the card issuer declines authorization, you should submit a settlement transaction for the total approved authorization amount and should not include the declined amount. Then contact your customer and request an alternative payment method.
• Submit an authorization reversal if the originally approved authorization amount exceeds the actual rental cost. If the actual cost is less than your previous estimate, you will need to submit an authorization reversal for the difference between the authorization amount and the actual rental agreement.
• Apply the final authorization and the 15 percent rule. At the end of the car rental period, authorization is required when:
  • There was no previous authorization. In this case you should authorize the total transaction amount.
  • There was a previous authorization but the actual final amount is more than the previous transaction amount. In this case you should apply the 15 percent rule. To do this you should add 15 percent to the previously authorized amount and compare the total to the actual transaction amount.
  • The actual transaction amount is more than the total. In this case an additional authorization is required for the difference between the original authorization and the final transaction amount.

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