Velera Arms Credit Unions Against Consumer-Engaged Fraud

Credit union service organization (CUSO) Velera has released a new resource designed to help credit unions navigate complex consumer-engaged fraud cases, the company said in a Thursday (Aug. 20) press release emailed to PYMNTS.

Velera’s “Consumer-Engaged Fraud Case Management Playbook” provides a framework for investigating claims, making informed filing decisions and reducing chargeback risk. It includes case management guidance, filing best practices, real-world examples, and tools and resources such as a case management checklist, according to the release.

Consumer-engaged fraud is a growing source of losses for financial institutions and merchants. Because this form of fraud can involve legitimate cardholders who are either manipulated into fraudulent activity or intentionally misuse their accounts, it requires a more nuanced approach to investigating claims, the release said.

Velera’s new playbook builds on the “Consumer-Engaged Fraud Classification Guide” the company released in April, which helps credit unions identify and categorize key types of consumer-engaged fraud, including misuse, persuaded and collusive merchant fraud, per the release.

Velera Managing Vice President of Risk Operations Nicole Reyes said in the release that credit unions can’t rely on the signals and assumptions they use to evaluate traditional fraud when evaluating consumer-engaged fraud.

“An authorized transaction doesn’t necessarily mean the member acted knowingly, and a disputed transaction doesn’t necessarily mean the member was a victim,” Reyes said. “This is where context becomes critical. Credit unions need to understand what happened around the transaction, not just what happened during it, so they can protect members, manage losses and make decisions they can stand behind.”

Velera sounded the alarm on consumer-engaged fraud in March when it announced its “Consumer-Engaged Fraud Classification Guide.”

Velera said there are two types of consumer-engaged fraud: misuse and persuaded.

Misuse happens when a “transaction or engagement is made or initiated without outside influence by someone who does not have authorization to use an account and is subsequently reported as fraud.”

Persuaded fraud happens when that transaction or engagement happens with outside influence “due to an authorized user of an account engaging with a third party that influences the completion of a transaction, which is then reported as fraud.”

The PYMNTS Intelligence and Velera collaboration “Defending the Member: How Credit Unions Are Responding to a New Fraud Landscape” found that consumer-engaged fraud is part of a rapidly changing fraud landscape.

The report also found that as fraud risks grow, members expect their credit unions to detect, communicate and prevent threats in real time while preserving a seamless experience.