Company out $30K after TD Bank approves, then denies purchase

Toby Palmer smiles when asked whether it was a good scam.

“It’s a fantastic scam, fantastic!” said the Pickering, Ont. flooring company business owner.

But not in a good way, he said, recalling what happened more than a year ago when a prospective customer called to order some hardwood flooring.

“It’s scary,” Palmer said, describing the incident that cost his business more than $30,000.

Summit International got a call from someone in the area identifying himself as a contractor. The customer told Summit he was referred by a hardwood manufacturer and he wanted to buy a substantial amount of a particular flooring product Summit sells.

Using a credit card over the phone, TD Bank authorized separate purchases totaling more than $30,000.

To be sure, Palmer said someone at his company called the bank to make sure the buyer was legitimate, so as not to rely only on the credit card terminal.

Three days later, to be extra sure, Palmer said a store representative went to the delivery site and was shown the original signed credit card provided by the buyer. At that point, they were convinced there would be no problem with selling the flooring.

“The only reason we would ship it out the door is if the credit card was approved by the bank,” Palmer told Global News.

But three months later, Palmer got a shock: TD had withdrawn $30,000 from the store’s bank account. The bank later advised that it did so because the credit card was “fraudulent.”

Palmer hired a lawyer who investigated what happened. He discovered that the home to which the wood was shipped was up for sale and unoccupied at time. The fraudster had apparently broken in and was using the garage as a point to receive the goods. The customer has never been found.

Still, despite its efforts to be sure the buyer was real, TD held Summit liable for the loss.

Its bank ombudsman denied Summit’s request to be reimbursed by TD.

In a statement to Global News, the bank said in part: “TD Merchant Solutions followed the required procedures to process the chargebacks in question. In addition, all the information in our review of this file suggest that Summit International had clear signals immediately before and after the goods were delivered that should have led them to question their customer and take immediate steps to address the situation as they saw fit at the time.”

TD said its merchant services agreement is clear that merchants are “responsible for all fees, discounts, refusals and chargeback resulting from unsigned, un-imprinted, manually keyed or unauthorized transactions.”

Palmer said the experience has been an eye-opener.

Summit now asks unknown customers to come to the store in person to verify who they are using photo identification and to make the purchase in front of a staff representative. It no longer relies on the acceptances provided by TD Visa alone.

In the era of online purchases and credit card buying by phone, that’s an unusual requirement. But other merchants could be left with huge liability, too, if they’re defrauded by a customer and can’t show they did the same.