Below are 39 tips to detecting credit fraud.  This is useful information and as a member more information will be packed into your news letter available for download on this site!
 
General:
1. A favorite technique of the fraudulent operator is the planned overbuy. Beware of medium to large orders received immediately after trade shows. Set low limits on shipments without a thorough credit check.
2. Is the order unsolicited? The fraudulent operator usually orders during or immediately after trade shows and the order(s) are usually placed either by telephone or fax.
3. If you have been victimized by a fraudulent credit operator, the chances are excellent that other "bust out" artists are aware of the weaknesses in your credit and shipping procedures. Be alerted to similarities in cities, states and zip codes, buyer's names, credit references, etc., for credit frauds for at least two years.
4. Be aware of shipping multiple carton COD orders with one COD tag.
Frequently the customer will accept the cartons without COD labels and refuse the lead carton. The most effective procedure is to divide the COD amount by the number of cartons and use a COD label on each carton.
Name of Account:
5. Is the name of the business confusingly similar to another successful local or national business?
6. Is the name of the business prestigious-sounding, i.e., American, National, or Universal?

 

Orders and Reorders:

7. Is the first order paid promptly with re-orders in larger amounts?
8. Are re-orders sent more frequently than your usual "turnover" experience?
9. Are re-orders with a new account sent before previous invoices are paid? This is a common technique of the fraudulent operator.  
10. Is the order marked for "immediate" or "rush" delivery from a customer who is not known to you? Is the buyer unusually demanding?
11. Is there a marked change in the buying pattern of an account? This may be an indication that "New Management" is buying a business with an established credit record. 
12. Does the merchandise ordered seem unrelated to the customer's line of business?
13. Is the account ordering merchandise which is effectively interchangeable within several types of retail operations?
14. Is the order placed by an out-of-state company? A fraudulent operation frequently avoids placing orders within its state of residence.
15. Is the signature on the purchase order a facsimile stamp? This tactic is used for processing a large number of purchase orders.
16. Are the orders placed by telephone rather than in writing so as not to reveal additional information about the customer, thus avoiding a "paper trail"?
17. After shipping the order, are there inordinate complaints relative to returns, shipping, prices, shortages, quality, etc.? A fraudulent account will use these tactics to delay payment and to prolong his operation time.
 

Credit Application:

18. Beware of the authorization to ship on a COD basis. Payment may be stopped, the account closed or a fraudulent check issued.
19. Is the business less than one year old? If the business is incorporated, you can check with the Secretary of State's office in the state in which the corporation is registered.
20. Request a completed, signed and dated credit application prior to shipment of order.
21. Are you receiving an inordinate number of credit inquiries for an account with whom you have little credit history?
22. Does the address of the credit reference have a suite number? If so, it may be an answering service or a residence.
23. Is the telephone reference an answering service? Does the reference answer the telephone using the digits of the number, i.e. "6754"? With suspicious telephone references, instruct your credit personnel to ask "Is this an answering service?".
24. Is there information on the credit application which cannot be verified?
25. Are the credit references localized, i.e. in the same city or state as the account?
26. Are the companies provided as references unfamiliar to you and not generally known in the industry?
27. Are the credit references not listed in the telephone directories or unknown to directory assistance? Rather than using the telephone number provided on the reference sheet, contact directory assistance in the reference's city.
28. Do the telephone references provide an immediate good report? If the reference does not have to check his records before responding, this could be a "Phone Drop" which has been set up by a fraudulent operator.
29. Beware of using "800" numbers to verify a credit reference. Multiple 800 numbers can be located at the same address and answered by the same person using different company names
30. Do the references advise that your call will be returned later? This could be an answering service for the "credit reference".
31. On telephone credit inquiries, instruct your credit personnel to ask "Have you had many inquiries on this account?". 
32. Is the customer's attitude overly friendly or demanding when the order is placed and when references are requested and checked? A credit criminal relies on a short time frame between order placement and shipment of merchandise and preys upon a hurried credit decision.
33. Is there information on the credit application which cannot be verified?
 

Financial Statements:

34. Is the customer reluctant to submit a financial statement? When submitted, is the financial statement unaudited? Beware of financial statements from a foreign country.
35. Does the financial statement have an inflated or "intangible" net worth? Many companies extend credit to a new customer based on a percentage of net worth.
36. Is the financial statement consistent with your knowledge of industry standards?
 

Banking Information:

37. Has the applicant's bank account been established beyond one year? What is the average balance? Has there been any "unsatisfactory experience" i.e., NSF or dishonored checks?
38. In the event the debtor's bank will not provide reference information, ask your bank to inquire for you.
39. Does the applicant have a borrowing relationship with the bank? A lending relationship implies that a credit investigation by the bank has been performed and is usually a positive indication.