KNOXVILLE, Tenn. -- Pilot Flying J Travel Center officials believe the chain is taking "a financial hit and a reputation hit" even as they point the finger at a California state ruling that has led to at least $9,000 in fraudulent credit-card charges.
"A sophisticated credit-card fraud operation is exploiting Pilot's insistence on following state law," Mitch Steenrod, the CFO for Pilot Flying J Travel Centers, Knoxville, Tenn., told The Mountain Enterprise in Frazier Park, Calif.
The fraud is focused on a Lebec, Calif., Pilot Flying J site, where the travel-center chain removed in April 2011, due to a California Supreme Court ruling, removed the ZIP-code verification requirement for credit-card purchases at the pump at its locations in California. Then in October 2011, Assembly Bill 1219 created an exception that allows for ZIP-code collection information during a credit-card sales transaction at a retail, motor-fuel dispenser or payment island.
The California Supreme Court ruling said that requesting ZIP codes for credit-card purchases was contrary to the privacy provisions of California's Song-Beverly Credit Card Act. But because the fraud danger was immediately understood regarding self-service card transactions, where personal identification such as a driver's license could not be examined as it is at indoor cash registers, California legislators took action with Assembly Bill 1219. It created an exemption for collecting ZIP codes when used solely for prevention of fraud, theft or identity theft, "to prevent potential disruption of gasoline station services throughout the state."
Pilot Flying J recently reinstituted ZIP-code verification for all credit-card purchases at its fuel pumps in California.
According to the Enterprise report, consumers reported that data thieves were making fraudulent purchases on their credit cards, with charges made at Pilot Flying J sites from Lebec to Castaic, Palm Springs to Thousand Palms.
The thefts allegedly took place after each bought gasoline at the Flying J in Lebec.
Pilot Flying J said in a statement provided to CSP Daily News that it currently requires ZIP-code verification on credit-card purchases at all of its company locations, including those in California.
Because ZIP codes are not included in the data in the mag stripe on the back of credit cards, asking the purchaser to enter their ZIP code at the gasoline pump stops thieves, the industry says. If the ZIP code entered does not match that of the legal card owner, service is denied and the theft is stopped.
Steenrod said that Pilot has averaged the $400,000 monthly loss for about two years because credit-card companies reimburse the cardholder but deduct the payments from the vendor that accepts the card.
"[California's law] was supposed to protect privacy," he said. "But what it did was open a hole in the security checks we can use to protect consumers."
"California is the only state out of 46 in which we operate where this [fraud] is happening--and Pilot is the chain that is being hit, because we are following the law. … California's legislature is pretty messed up," Steenrod told the paper.
He said that customer credit-card numbers are stolen with the help of accomplices who place skimming devices on the dispensers that capture credit-card numbers.
In its press statement, Pilot Flying J said it has worked closely with credit-card companies to implement various policies and procedures to help protect against credit-card fraud at its locations. Such measures have included turning off the ability to fuel through Visa and MasterCard at the outside truck diesel pumps and requiring customers to enter the stores and have face to face interactions with our cashiers to help prevent credit card fraud. While Pilot Flying J views this procedure as an inconvenience to its customers, it has unfortunately become necessary in many high-fraud areas, including some travel centers and travel plazas in California.
"The privacy, security and convenience of our customers are always top priorities at Pilot Flying J," the statement said. "As credit-card fraud at fuel pumps continues to become an increasing problem at locations across the U.S., we remain committed in our efforts to reduce instances of fraud which cause inconvenience to our customers. Pilot Flying J will continue to work with law enforcement and credit card issuing companies to identify those who commit fraud against our customers."
Based in Knoxville, Tenn., Pilot Flying J has more than 600 retail locations and is the largest operator of travel centers and travel plazas in North America. The Pilot Flying J network provides customers with access to more than 60,000 parking spaces for trucks, more than 4,400 showers and more than 4,000 diesel lanes, of which more than 2,200 offer diesel exhaust fluid (DEF) at the pump.