Read this article. Describes how scammers use fake merchant accounts to process stolen cc's.
http://www.msnbc.msn.com/id/6175738/

The question I have is who ends up paying for this?

Well not sure, but it seems most of the banks didn´t release the money yet because of some days of holdback and reserve rollings. But if they released the funds, the banks will most likely pay the bill.

Originally posted by GrindKore
.....The question I have is who ends up paying for this?

well im gonna take a guess and say we do as the tax payer :angry:

This is why there is a background check etc for a merchant account. The processor is responsible for the money if the merchant goes AWOL.

The answer is that the merchant processor incurs 100% of the losses if it signs up a fraudulent merchant who runs through a bunch of stolen cards, gets paid and then skips town.

And if the loss is so substantial that the merchant processor has insufficient funds, then the Member Bank who sponsored them would be held 100% liable.

Any chargebacks that are incurred on a given merchant account that are left unpaid by the merchant are borne by the above companies - and in that order.

It is important to keep in mind that tax payers & consumers are not affected by this. And the U.S. government definitely does "bail out" any processors or banks due to chargeback losses.

Anyone whose credit card had been stolen receives back their funds since all of those transactions would end up being charged back.

So that is why it is a 100% a loss incurred by the processor and/or acquiring bank.

Sadly, scams like this happen every single day. And it is very easy to lose a great deal of money overnight if a merchant processor is not careful about both the accounts it approves and the way it manages its risk.

Fraudsters also sometimes go to great lengths to deceive - producing falsified driver's licenses, checks, business licenses and other documentation along with Web sites. I've seen this firsthand many times.