Running a trucking company and satisfying customers can be a demanding task. With the constant search for new business, the need to prevent freight fraud, and the pressure to deliver shipments on time while remaining profitable, distractions can become a luxury.
Unfortunately, freight fraud in the trucking industry takes a heavy toll on legitimate businesses, causing annual losses exceeding $80 billion. Apart from the financial impact, such fraud also hinders future business opportunities.
It's crucial to shield your trucking company from freight fraud, fake shipping companies, and identity theft. In this comprehensive guide, we will shed light on common trucking scams, equipping you with the knowledge to effectively prevent freight fraud and safeguard your business.
Fraudulent activities in the freight industry pose a significant risk to businesses and shippers. Stay informed and be vigilant about these top five common freight fraud scams.
Chargebacks occur when customers dispute transactions on their bank statements, prompting the bank to withdraw the transaction amount from the merchant's account and refund it to the customer. In addition, the bank imposes an extra fee on the merchant as compensation for the inconvenience.
Chargebacks have a significant impact on specific sectors of the trucking industry, resulting in a staggering loss of $5.8 billion in 2016 alone. They can potentially affect 5% to 15% of a company's invoices, translating to a revenue loss of approximately 2% to 10% for a trucking company. Common reasons for chargebacks include defective ticketing and late deliveries, among others.
To mitigate chargeback risks, it is advisable to avoid accepting card payments when it is difficult to verify the customer's identity and billing address. For instance, taking such information over the phone should be avoided, even if it means potentially losing the business.
In cases where a customer's transaction exceeds $1,000 and a phone transaction is necessary, obtaining voice authorization is crucial. Additionally, it is essential to secure a signed consent form from the customer after conducting a thorough walkthrough.
Utilizing business data analytics can help identify potential instances of customer fraud, enabling proactive measures to reduce chargeback incidents. By pinpointing chargebacks resulting from discrepancies in the "address verification service" (AVS) and "card verification value" (CVV) numbers, you can effectively minimize these occurrences.
A prevalent form of identity fraud within the trucking industry occurs when drivers refuel their vehicles. Scammers employ various tactics, such as attaching magnetic strips to payment terminals, to illicitly obtain payment card details. In more sophisticated cases, malicious individuals may place counterfeit keypads on top of authentic ones, allowing them to capture PINs as they are entered.
To safeguard against such fraudulent activities, drivers should thoroughly inspect the keypad or card reader for any signs of tampering or irregularities. It is essential to compare the payment device with adjacent ones and identify any discrepancies that might raise concerns. If the payment device appears suspicious, attempting to physically displace it can help determine its authenticity. If it remains securely in place, there is likely no cause for alarm.
Additionally, when making card payments, it is advisable to use cards equipped with EMV chips. These cards enhance transaction security by storing authorization data directly on the card, eliminating the need for a transmission. Consequently, fraudsters cannot exploit magnetic strips to intercept payment information during the transaction process.
One highly effective preventive measure against fuel pump fraud involves adopting trackable fuel cards for fleet management. These cards enable constant monitoring of card activity, enabling prompt detection of any suspicious transactions.
In general, fraudulent activities tend to target payment processes, making it crucial for your trucking business to take proactive measures in handling payments across all fronts.
When embarking on a trip, it is advisable to carry only the necessary card required for that specific journey. By keeping your fuel card separate from the fleet card, you minimize the risk of compromising your payments in case of a lost wallet.
During fuel card usage, it is essential to maintain constant visual contact with the card. Keep it within sight at all times and retrieve it promptly after each transaction, without diverting your attention.
Similarly, never disclose your fuel card number to anyone over the phone or by writing it down. Memorize it to prevent unauthorized individuals from obtaining it.
One effective method to detect hidden fraudulent charges is to meticulously examine your fuel card reports. Develop a habit of thoroughly reviewing them, and immediately reach out to your card issuer upon identifying unfamiliar transactions.
Keeping your expense receipts will facilitate the process of comparing them with the card statements.
Moreover, if presented with a blank receipt, refrain from signing it. Instead, draw a line across any empty spaces above the totals to prevent unauthorized additions.
In fraudulent load booking schemes, scammers may collaborate with a driver to carry out the theft of a load. In this scenario, the malicious individual appropriates your trucking company's identity and affixes it to the illegitimate truck they are using. One way to potentially identify such an illicit truck is by looking for a removable door placard.
Given that the fake truck and driver appear legitimate, unsuspecting customers may mistakenly entrust them with their load. Subsequently, the customer's shipment becomes susceptible to theft as the fraudulent driver and truck vanish without a trace.
To protect against this scam, it is important to raise awareness in the market and ensure that customers verify they are dealing with your company at the outset of each transaction. Providing a toll-free number for customers to confirm authenticity can be a helpful measure.
Double brokering presents a more intricate form of fraud compared to typical identity fraud. It occurs when a shipper or freight broker reserves the services of a carrier for a shipment, but the carrier subsequently brokers the load to a third party without the original broker's knowledge.
This practice introduces potential issues related to insurance coverage and liability, ultimately reducing the shipper's control over the shipment.
To mitigate the risk of double brokering, it is essential to conduct thorough research before entering into a contract with a new freight forwarding company or shipper. It is crucial to exercise caution when encountering deals that appear too good to be true since they likely are.
While the desire to save money is understandable, falling victim to a scam that will ultimately result in higher costs is not worth it in the long run.
The trucking industry's profitability makes it an attractive target for fraudsters aiming to exploit your earnings. To protect your business from freight fraud, it is essential to familiarize yourself with various scams and proactively implement measures to prevent them from impacting your profits.
It is recommended to use a digital payment and factoring platform specifically designed for the transportation industry. It offers a convenient and efficient solution for carriers and shippers to manage their expenses and invoices online, streamlining the entire payment process.
On the other hand, trucking companies should use an effective transportation management system such as LoadStop TMS to boost efficiency and enhance profitability.
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