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U.S. Finally Cracking Down On Credit Theft

When you consider the size of the U.S. population vs. everyone else in the world, it's shocking to realize that we are this far behind when it comes to protecting consumers from fraud.   I myself received a call from Chase some years ago when a person walked in a electronic game store I had never visited, and charged over $700 on lord only knows what, and then returned a few moments later to charge another $300.  Let's face it - clerks rarely check signatures to begin with (when's the last time a clerk compared your signature?) and being a holiday season, the store was jam packed so checkout girls were ringing up purchases as quickly as possible.  Luckily Chase caught the incident.  I was obviously flabbergasted.  How did they get my information to begin with?  My card was still in my wallet!  Our only guess is that they may have found an old, written credit receipt or knew a clerk somewhere who stole my information. The larger question:  why has it taken the U.S. so long to implement better security standards?  Oh, those lobbyists.  They have it made pitting banks against retailers up on the Hill........while we wait......and wait.....and wait.  Note:  Anything in green italics are my comments only.

Well all of that is about to change (thank goodness).

LATE next year Americans can expect to see a big change at every retail establishment they visit: new chip-and-pin credit-card readers that require customers to enter a pin number, rather than sign a receipt, to confirm a transaction. The readers will be paired with a new wave cards that include microchips, rather than the easier-to-copy magnetic strips that dominate in America today. Instead of transferring an entire credit card number during each transaction, the new cards will generate unique authorization codes. The goal is to reduce fraud.

America is the only developed country that still relies exclusively on magnetic strips and signatures. As a result, it is also the only country in which payment card fraud is growing. Some 42% of Americans have experienced some form of card fraud in the past five years. Of the $11.3 billion lost around the world to such crime in 2012, half was in the US.

Part of the problem was banks and retailers not wanting to go the extra cost of upgrading.  That's understandable but what fraudsters did was as chip-and-pin grew in popularity overseas, they moved to the path of least resistance (as the data shows above).  The United States was a big, juicy target.

After the recent credit identity thefts at Target and Neiman Marcus brought the issue more mainstream attention, leading to a Senate Judiciary Committee.  Executives told the senators that once the country transitions to the new system — which includes credit cards embedded with a microchip containing security data — these kind of hacking attacks will be much more difficult to pull off.  Finally someone paid attention.

The switch will cost retailers hundreds of millions of dollars. But credit card companies have pushed for the change for years. Beginning in October 2015, they will start leaning harder on banks and merchants by shifting the legal liability for fraud to the party with the least-sophisticated technology. That will be a powerful incentive for retailers to upgrade their systems.

You’ll still be signing for the time being, but the new system also enables the use of PIN numbers, if card issuers decide to add them to their cards.

Some are already making moves. On June 4th, Sam's Club, a chain of retail warehouses, announced it would begin offering chip-and-pin cards. As Mother Jones notesJPMorgan Chase and Wells Fargo have made similar announcements. And a huge security breach last year at Target, a discount retailer, seems to have persuaded it to embrace safer technology

Those of us who travel internationally for business are already used to the difference between American readers and those used in much of the rest of the world—and the accompanying inconveniences. Many automated machines, which are common at petrol stations and supermarkets, do not accept American swipe-and-sign cards at all. And tell a European cashier that you want to sign for a transaction and you will often be met with a bemused look. For those Americans who don't yet have chip-and-pin cards (and that's most of us, since few banks offered them before last year), the coming change will eliminate that awkwardness once and for all. The bottom line for card users: if you're not already using a pin with your credit cards, get used to the idea—and start thinking of a good one.

As an after thought, I wonder what the costs to adapt to the new technology will cost banks and retailers.......and their stock price.  Will it be passed on to consumers via higher fees and prices?  I think you know that answer. *sigh*

Courtesy of TheEconomist

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  • Laura, For some of us dumb folks who shop on line, how does this work?

    Back in 2002 I traveled across country using my debit card to easy track expenditures since the employer whom I would contract for would reimburse me for my expense. On arriving at my destination I discovered an expenditure of $800 plus dollars made in England. I called my bank. I was told that thieves in the Ukraine was responsible. The amount was erased by the bank.

    Online purchases accounts for a chunk of hacker abuse.

    • Admin

      Patricia from what I've seen thus far, it seems as though it's going to vary based on the bank which issues your credit or debit card.  Some banks, for example, offer a 100% guaranty against fraudulent online purchases.  Others from what I understand will begin offering "virtual cards" starting this July which can be used for online purchases.  Some may already being doing this (?) as Citibank and Bank of America were talking about it in 2013. Your actual account # is never revealed during the online transaction - just the "virtual" account number. and your PIN to authorize  Some of these cards will come with a slight "fee" but no matter what, keeping an eye on ones statement is definitely going to be a must.  The more time that passes between losing a card or not reporting an erroneous charge on a monthly statement, the greater the chance the credit card company won't return the funds.  Definitely be proactive.  Hackers get smarter and smarter every year. 

      • That is good advise for all.

        BTW, don't you think that writing a blog regarding safe practices online would be a great idea. Why not kick that off --- you are a perfect person to give this attention.

    • Laura, BTW thanks for sharing.

      It seems that banks and company's within the U.S. often balk at new technology that are designed to protect consumers.

      At times the hesitation to move to technology that offers conveniences to the consumer is delayed due to their incurred cost factors.

      Other times I imagine while the  new technologies are adopted say in Europe the American consumer gets the surplus old technology dumped on them.

      Consumer protections are a good idea. Industry will balk at every turn heck industry will likely write protections to protect themselves.

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