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iofast.com programmers wrote the code for that module and we have a heavily updated version internally.
The pre-auth $1 test is used to validate the card information. The most obvious error is when someone tries to check out with say $1,000 in their cart and then fails an address or cvv check. They then try several more times as they get the details correct. If the customer tries 5 times, then they just drew $5,000 on their card and may be overdrawn. The $5,000 will not be released for several days thereafter. The $1 pre-auth eliminates this issue and many others. The $1 fee is released days after the transaction and should not be shown as a permanent charge. With the use of a pre-auth test for cvv validation, address validation and the use of minfraud, we have been able to cut down on customer errors and fraud DRAMATICALLY.
Before we touched the linkpoint code, no checks were being performed and that is the case with many cc processor modules. The code is modular such that you can disable debug emails, pre-auth and change the required cvv validation level as well as address validation. We explain a lot in the osc forums in a long linkpoint thread and in our readme files.
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