The owners of an East York corner store said they've have been defrauded of thousands of dollars by a customer who exploited a loophole in card payment terminals.

Zahra Dhanani, co-owner of Old's Cool General Store on Westlake Avenue near Main Street and Danforth Avenue, said a man visited their business in early December to purchase lottery tickets with Visa gift cards.

On each visit, he bought hundreds of dollars worth of lottery tickets; eventually totalling $6,000. Dhanani said sales of that amount did not raise red flags, especially during the holiday season.

Zahra Dhanani, the owner of Old's School General Store, said she worries about the future of her business. (Adrian Cheung/CBC News)

"It's not abnormal. You can spend $400 on a single [lotto] ticket package," Dhanani said.

Four days after the sales, Dhanani received an alert from Elavon Merchant Services, the payment processing company that provides the store's payment terminals.

The sales were found to be fraudulent and the store owners are on the hook for thousands of dollars.

Elavon told the owners that they would not re-coup the fees because the waiver they signed absolved the company of any financial responsibility.

Dhanani said she found the company's response "completely dehumanizing."

'This is your problem, you deal with it'

"The company, which is a big corporation, and we're this little, tiny, corner mom-and-mom shop. And they said, 'This is your problem, you deal with it,' she added.

Dhanani and her partner, Mariko Nguyen-Dhanani, then learned the alleged fraudster likely exploited a little-known loophole built into many terminals — known as "forced sales."

Establishments such as hotels often use the forced sales feature for damage deposits — essentially allowing a business to charge a customer without them being physically present.

Security camera footage shows several instances of alleged fraud. (CBC News)

The fraudster is believed to have entered a universal PIN on the payment terminals that allowed him to bypass expired Visa gift cards.

But Dhanani said she was never told about the forced sales feature by Elavon.

"Those of us who didn't know that this exists are left vulnerable to fraud. Because someone who knows can punch in the numbers and voila!"

Elavon declined to provide further details on the dispute, citing contractual confidentiality agreements but said in a statement: "We are trying to work with the customer to make sure she understands the steps to take to protect her business and mitigate fraud in the future."

'Community hub' under threat

Residents and regular customers in East York said they worried about what a $6,000 bill could mean for a business they consider a community hub.

Lisa Cyr, a customer who visits the store several times a week, said she is upset to hear a local business has been targetted.

"It's heartbreaking. Not only for the community but for [the owners]. You can see they're pouring their heart and soul into the business," Cyr said.

Dhanani said small business owners operate on small margins and that a bill of several thousand dollars could mean she must close the store.

Frequent customers in the area have planned fundraisers to help the owners pay for the cost of the outstanding bill.

Toronto Police are now in possession of the store's security footage, which shows the alleged culprit and have started an investigation.

The owners said their big worry is for other businesses in the city that could be targeted by those who know how to exploit the forced sales feature on payment terminals.

Dhanani added that she is considering legal action against Elavon if the company refuses to cover the cost of the alleged fraud.