First American Bank in Chicago wasn’t willing to play them. Its tale begins on Feb. 10, when it received 11 fraud complaints in one day from checking account cardholders. They had noticed mysterious charges on their debit cards (the bank doesn’t issue credit cards). The bank did what’s known in cardland as a common point of compromise test and determined that the customers had all used the cards in Chicago cabs and experienced fraud right after that. The bank informed MasterCard, the network its debit card purchases travel, and Bank of America, which processes the charges for the taxi companies that seemed to be involved. First American started shutting down debit cards, issuing new ones and informing customers of those actions. The bank did this not just for the people who reported fraud but for also anyone who used their cards in cabs in the days after Fraud — and the sudden shutdown of a debit card — can make a hash of people’s financial lives. For all of Visa’s and MasterCard’s promises of zero liability, the fact is that in the case of theft, money is gone for a day or more until you discover it and the bank puts it back. In that time, you may bounce your mortgage payment or rent check. If you’re traveling, having no access to cash or your primary plastic for making payments can be a big problem As for the sudden cancellations, the bank felt it had no choice. Of the 227 cards it had replaced as of last week, there had been 478 attempts at what the bank believes were fraudulent charges. Had they gone through, the thieves would have ended up with more than $64,000 in goods and services. A few days ago, you informed me of the recent steps which the banks / RBI are taking to make credit card system more reliable in India. But even in the current time in USA, the banks in US have not implemented the strict rules of (A) chip-based credit/ debit card and (B) OTP system for transaction. For your information, the strict rules have been implemented in Europe & UK. This is for your information. In this background, please read the following piece of news about US. After Debit Card Fraud, a Chicago Bank Feels Its Customers’ Frustration MARCH 7, 2014 The First American Bank of Chicago revealed the fraud after waiting 18 exasperating days.Credit Peter Wynn Thompson for The New York Times People should no longer use debit or credit cards in Chicago taxicabs. Bank of America should shut off the card-swiping terminals in the back of those cabs. And MasterCard ought to learn to share more information with its customers. These may sound like the words of Ralph Nader or a fire-breathing regulator, but they’re not. In a sort of heresy, it was a bank that threw down this gauntlet late last month. The institution is First American Bank, and it has close to 50 branches in the Chicago area. On Feb. 28, it issued a news release and posted a notice on its website after 18 days of frustration over debit card fraud that it had traced to local taxis. By airing its grievances in such a public, punk rock fashion, First American has cast its lot with the growing number of Americans who feel queasy about the security of their money. Jim Van Dyke, the chief executive of Javelin Strategy & Research, said that the phrase that came to mind was “hot bank-on-bank action.” Everyone else connected to the world of plastic payments seems to be getting the message. This week, Target’s chief information officer resigned after its card breach debacle. MasterCard continued its weekslong ad campaign to remind consumers of its zero-liability policy: Cardholders will generally not be held liable for unauthorized transactions. And on Friday, Visa and MasterCard, which normally compete fiercely for the privilege of handling the purchases that bank customers make, jointly announced an initiative to improve security. If it could happen there, it could happen anywhere. But will it? Visa reports that for every $100 that passes through its system worldwide, 6 cents ends up being fraudulent charges. MasterCard claims a rate that’s half Visa’s, though it notes that it’s higher in the United States. Visa adds that in any single breach, criminals use only 2 to 5 percent of the vulnerable card numbers. Javelin Strategy & Research, using consumer surveys, looks at the numbers differently. It reports that 30.5 percent of people involved in any sort of breach in 2013 became victims of some kind of identity fraud. Whatever the odds, however, the bank was trying to get MasterCard and Bank of America to shut down card acceptance in cabs, stop the breach or at least explain what it knew about the problem. Neither company was saying much, though. “We told Bank of America that they needed to stop processing the cards until they found out where the breach was occurring,” said Christine Childers, First American’s associate general counsel and compliance officer. “They basically told us that they couldn’t talk to us and that their investigation was confidential.” The bank offered to sign a confidentiality agreement, but Bank of America turned it down. First American’s actions raise three questions. First, was it unreasonable and impatient of it to call out MasterCard and Bank of America? Ms. Childers said that no one had called to scold her so far, and Mr. McWilton, of MasterCard, said that he understood where the bank was coming from. “There is lots of frustration in the market right now,” he said, noting that he gets it from both sides, the retailers and the banks. “Banks, particularly smaller ones, say ‘This is costing me a lot of money and my customers a lot of disruptions, and retailers are not securing the point of sale and dragging their feet, leaving the back door open, and we’re paying.’ ” That said, we probably don’t want to live in a world where every sleuthing banker who spots fraud can make a payments processor cut off card acceptance at any retailer. And finding the bad guys who have infiltrated complex systems can take more than 18 days. As for Bank of America, Joe Rauch, a spokesman for its merchant services group, said that the company “strongly” denied any accusations that it didn’t do enough to stop a “purported” breach. “In any fraud investigation, the card brands’ industry rules explicitly prohibit discussing information with unaffiliated third parties,” he added in a statement. “As with all matters, we adhere to those rules.” Mr. Rauch’s use of the word “purported” brings us to the second question here: Is it possible that First American is mistaken? Ms. Childers said the bank was certain that fraud had happened. Still, she has not heard from any other banks that have experienced taxi-related fraud, and my efforts to get other banks with a big footprint in Chicago to admit as much were met with the sound of crickets chirping. Still, other sources I spoke to this week, who did not want to be identified given how frightened everyone is of scaring even more customers, confirmed that the issue was not limited to First American That brings us to the third question, which is how scared all of us should really be. I probably wouldn’t swipe my debit card in the back of a Chicago taxi right now, but I’m not an everyday debit card user. I don’t want to think about the small odds of fraud messing up all of my automated payments. If you’re using your debit card for everyday spending, you should probably have overdraft protection or a decent-size cushion in your checking account to allow for a delay in your bank restoring any stolen money. Even after the taxicab dust-up was all over the television news in Chicago, consumers don’t seem to be alarmed. One of the taxi operators that First American called out was Taxi Affiliation Services. Frank Kasper, who works in information technology there, said that he had no information about the data theft. As for card use in cabs in recent weeks? He said it had increased COMMENTS RDeanB is a trusted commenterAmherst, MA26 minutes ago BofA and Mastercard were probably unresponsive because, given their size, the loss of transactions based on a scare or safety limitation would be greater than the loss due to fraud, which they have figured into their cost structure generally. Note that although these companies guarantee against fraudulent charges, they do not offer any compensation for inconvenience or related but indirect losses based on the breachability of their systems. George S. Gati is a trusted commenterBeekman, N.Y.2 hours ago you should probably have overdraft protection or a decent-size cushion in your checking account Just the opposite ! If you have a decent size cushion that much more money a crook can take from your account. Overdraft protection ? Again, it may provide more funds available for unauthorized withdrawals. My debit card is specifically disconnected from all my other accounts, provides access to the checking account only. I use the card only at ATMs, and only at those of my bank (unless I am traveling). I am careful to cover the keyboard when I enter the PIN (yes, I know that some skimmers that put in a false keypad can get the PIN). Important point to remember : whenever possible, use your credit card, not the debit card. Using the credit card offers much more coverage against losses for consumers than a debit card does. Readers may want to see security blogger Mr. Krebs report on the issue reported in this article, which was written Monday (March 3) : Link: nytimes/2014/03/08/your-money/after-debit-card-fraud-a-small-bank-feels-customers-frustration.html?ref=business
Posted on: Sat, 08 Mar 2014 12:40:07 +0000
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