Sunday, August 29, 2004

Canadians being ripped off by Debit card fraudsters

The card sharks


MOST PEOPLE think of a debit card as a convenient cash substitute with a built-in anti-theft device -- a security code. But clever thieves have become adept at cracking the defences of debit cards.

Last year 27,000 Canadians -- more than 2,000 people a month -- were the victims of debit card fraud. The cost of the crooked transactions totalled $44 million.

Because consumers are protected by a code of practice that prevents them from being held responsible for unauthorized transactions, it meant that banks ate the losses.

That doesn't mean consumers don't suffer.

For anyone who suddenly discovers their bank account has been cleaned out or overdrawn, dealing with the dilemma can be both stressful and inconvenient.

Toronto Sun editorial designer Tim Peckham wasn't overly concerned last month when a debit card reader wouldn't accept his PIN when he tried to make a purchase.

He chalked it up to technology (understandable given high-profile glitches recently at Royal Bank and TD Canada Trust) and planned to pay a visit to his bank.

Unbeknownst to Peckham, someone had managed to "skim" the information from the magnetic stripe on his debit card and create a duplicate, complete with working PIN.

Before Peckham could replace his card, the culprit managed to put through a debit transaction worth $1,846 on the joint account shared by Peckham and his wife, Natalie Celuch.


The couple were stunned to find their account deeply overdrawn when their statement arrived.

When Peckham's wife called her bank to complain, she says she was told it could take up to six weeks to investigate and there was no guarantee the amount would be reversed.

"At first I thought it was an obvious mistake," said Celuch. "When they make it sound like it wasn't such a simple thing, I was upset."

However, the $1,846 transaction was reversed shortly after the Sun contacted the couple's bank on their behalf.

Maura Drew-Lytle, a spokesman for the Canadian Bankers Association, says fraudulent debit transactions are normally reversed within five to seven days.

Drew-Lytle says in some cases, the bank's software programs may even red flag phony transactions before the customer is aware of them.

"If a card is used in Vancouver and then used 20 minutes later in Toronto, systems can look for unusual things like that," said Drew-Lytle.

While software is a valuable tool in chasing debit card crooks, consumers must also do their part to stay ahead of thieves.


That means taking precautions to safeguard your debit card personal identification number (PIN) and not letting your card leave your sight or allowing it to be swiped twice.

Because a person's PIN is not embedded in the info on a debit card itself, thieves must steal this info after "skimming" the data on the magnetic stripe.

"The most common method is a pinhole camera or some kind of video device set up that can see the PIN," said Sara Feldman of the Interac Association.

Another option is "shoulder surfing," which occurs when a person behind the debit card user sneaks a peek at the keypad when a person in punching in the PIN.

Feldman points out that, since about $270 billion worth of debit transactions occur each year, fraud represents only a tiny fraction of all purchases.

But knowing how crooks operate can help you beat the odds of becoming the next victim of debit card fraud.

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