Thieves are finding new ways to steal from us. In stealing account information, they have made an end run around the PIN code system and started producing counterfeit ATM cards to steal money directly from related accounts. The information is usually stolen from a retailer or other third-party, according to MSNBC.
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Several banks have reported that account information has been stolen and consumers have reported mysterious fraudulent account withdrawals. Litan told MSNBC, “This is the absolute worst hack that has happened, the biggest scam to date.”
Using a debit card to steal cash is a more direct process for thieves. Stealing merchandise and converting it into cash can be a risky business. MSNBC reports this so-called “white card” fraud does not require interaction with clerks or other store staff. Careless PIN storage is to blame for these losses.
PIN information is available from merchants that incorrectly store PIN information, entered on keypads in stores, that should be destroyed after the transaction is completed. Although the information is encrypted, the encryption key is often stored on the same network, Gartner analyst Avivah Litan told MSNBC.
Litan told MSNBC, “But in defense of (the retailer), it’s just using payment software and probably doesn’t even know what’s in there. The software is storing PINS just because it can. No one is paying attention to this stuff, it’s deep in the software.”
Financial institutions are issuing debit card fraud warnings or replacing debit cards outright. After detecting suspect activity, several large and small banks, including Bank of America, Wells Fargo, Washington Mutual, Citibank, and PNC Bank, have reissued debit cards. Merchants or retailers usually receive the blame. According to MSNBC, OfficeMax has become a target of speculation after the San Francisco Examiner reported that 200,000 account numbers had been stolen from the company.
Different consumer protections apply, making the consumer penalties for debit card fraud much worse than credit card theft. MSNBC reports that a debit card holder can be entirely liable for their entire bank account balance after debit card fraud, while liability for credit card fraud is set at up to $50, according to banking regulations.
Consumers generally never lose the amount of their loss by not paying the bill for the fraud, in cases of credit card fraud. Some banks extend credit card-style protection to debit cardholders but only voluntarily. They have no requirement to do so, according to MSNBC.
A simple precaution for debit cardholders is to avoid making PIN-based transactions. A Wachovia customer service representative told AccountingWEB.com, that if your debit card has either a Visa or MasterCard symbol on the front of it, it can be used to make signature-based, credit-card-style transactions. It would be a good idea to check with your bank to ensure this is true for your debit card.
It should be your primary goal to avoid diclosing your PIN to a potential thief via a retailer or their software provider. Mike Urban runs Fair Isaac Inc.’s ATM Fraud Detection program called CardAlert. He told MSNBC, “There are so many places along the transaction that the numbers can be. There’s a shift going on in fraud. (Criminals) are moving to where the cash is, and moving away from credit.”
In good news for debit cards, payroll debit cards are a hit with banked and unbanked employees. Ecount completed a survey taken of some 2,000 Ecount cardholders and nearly 54% of the respondents were banked and using direct deposit and use the payroll cards for savings or other discretionary uses.
Matt Gillin, Ecount CEO, said in a prepared statement, “We have found that for every unbanked employee who signs up for the Ecount Program, one banked employee requests a payroll card as well. The fact that Ecount payroll cards are desired by both unbanked and banked employees is great news for our clients. Now they are able to implement a program that allows them to achieve 100% direct deposit, eliminating 50 to 75% of payroll costs and have the added advantage of providing a valuable employee benefit.”
In other good debit card news, JP Morgan Chase has announced a rollout of pre-paid debit cards for the payment of tax refunds to those taxpayers without bank accounts. The Chase Direct Benefit Cards provide a convenient and secure method of payment, as well as allowing consumers a means to make direct purchases in stores.
Mark A. Willis, Executive Vice President, JP Morgan Chase Community Development Group, said in a prepared statement, “The Chase Direct Benefit Card provides and alternative banking service for consumers without bank accounts. Participants in this program will get their refunds faster, eliminate check cashing fees and not have to worry about carrying cash.”