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From: dhepner@hpcuhc.cup.hp.com (Dan Hepner)
Newsgroups: comp.dcom.telecom
Subject: Re: Fraudulent Coin Calls
Message-ID: <13526@accuvax.nwu.edu>
Date: 12 Oct 90 00:29:51 GMT
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X-Telecom-Digest: Volume 10, Issue 735, Message 3 of 5


>Credit is extended to individuals, based on individual circumstances;
>it is not extended to neighborhoods, or groups of people of a certain
>ethnic origin.   PAT]

Imagine you're a merchant offering your own credit, say a jewelry
store.  Now imagine that a particular form of jewelry, say ruby
studded belly button plugs, has one distinction: of 146 ruby studded
belly button plugs sold on credit, 143 turned out to be to people who
had used falsified credentials.  Now you buy RSBBPs for $12.50, and
they retail for $900, and that's why you sold 143 to fraudulent
customers, but by now you're tired of the ripoff.  You advise your
staff: no more credit sales of RSBBPs.

The next thing you know, out there on Usenet, the moderator of
comp.jewelry is griping because he has noticed that the only people
who bought RSBBPs were people with holes in their belly buttons,
people of the "holey belly button ethnic origin".  Discrimination! the
moderator screams.  You cannot conclude that just because 98% of the
previous credit sales of this item were fraudulent that this
individual wishing to buy is likely attempting fraud.  There are
principles involved here!  You must complete the transaction
regardless of your knowledge.  Just pass the costs along to your other
customers who do pay their bills.

Dan Hepner


[Moderator's Note: In your hypothetical example, if 98 percent of the
merchandise sold on credit was lost due to fraud, then the merchant
did a very poor job of screening persons applying for credit. Can you
say Credit Bureau? Do you know what they are used for, and how they
operate? If the merchant handed out his credit cards freely to whoever
asked for them without bothering to check credit references, or verify
the person's address or place of employment, then he should not be
surprised at the fraud he suffers. And despite the fraud he suffers
due to his careless handling of his credit accounts, there are honest
folks who might wish to buy the merchandise and pay for it on
convenient terms. If an honest customer reports that his credit card
has been lost or stolen -- or otherwise compromised -- then if the
merchant makes little or no effort to prevent sales to that account,
he should not be surprised at the losses suffered. 

Unlike the example you gave, where the characteristics of the supposed
buyers of the merchandise are so common that they would apply to almost
every single human being, it is quite unlikely that most Americans
would have any reason or interest in calling a foreign country from a
payphone in an ethnic neighborhood. Most calls to such places would be
from business telephones or at the very least, private residential
telephones. The characteristics of the buyers of international long
distance phone service from pay telephones in certain neighborhoods of
our inner cities are rather specific. The persons involved are most
likely immigrants to the USA from the country involved. If they are in
legal possession of a telephone calling card, they should be permitted
to use it. If they are not in legal possession of the card, then it
should be a simple enough matter to have the network spot the call,
and notify a human being who would in turn arrange to have a police
officer tap on the person's shoulder as they were standing there
making their fraud call. It has happened that way in the past! 

To the extent that telephone calling cards are defined as instruments
of credit, then the rules of the Federal Trade Commission would apply.
The FTC has said by all means vigorously prosecute credit fraud. The
FTC has also said credit grantors may not block entire categories of
people from obtaining credit merely because some creditor-defined
ratio of fraud to legitimate transaction has been exceeded. That,
after all, is what credit bureaus, check verification and similar
services are for: to say who is credit worthy and who is not. Imagine
Amex or Diners saying to an Indian or Korean or Israeli that they are
not going to honor a given credit transaction because "... people from
your country tend to commit fraud a lot...".   If Bob Allen -- who has
written to the Digest before -- or someone from his office wishes to
respond, I'll be privileged to print their letter here.   PAT]