Saturday, March 15, 2008

Credit card fraud soars despite 'chip and pin' .

Fraud on credit and debit cards rose by a quarter last year to reach a record high despite the introduction of the "chip and pin" security system. The cost of fraud on cards issued in Britain totalled £535.2 million during 2007, with losses rising for the first time since 2004, according to the payments body Apacs. But there was also a six per cent increase in card fraud losses in Britain, which was largely driven by fraudsters using stolen details to make purchases over the telephone or internet, or by mail order. This "card not present" fraud soared by 37 per cent to £290.5 million, possibly as criminals frustrated by chip and pin security looked for alternative scams.

The above is taken from a newspaper story last week and is one of those things that you imagine only happens to other people. Wrong, last Friday - 7th March I had a telephone call from the Alliance Leicester whom we have a current account with. The caller was working in their fraud department and she had discovered some unusual transactions on our account earlier than morning. Could we confirm that we had made 7 transactions with Cotton Traders and 1 transaction with Green Light? No, certainly not - nobody would make 7 transactions with Cotton Traders in the one day because you would pay postage and packing on each order - money down the drain - we have never heard of a company called Green Light. These were not silly amounts but big money. The Cotton Trader debits were for £129.55 - £129.55 - £129.55 - £153.65 - £173.65 - £153.65 - £20.74 - giving a total of £890.34 - The Green Light transaction was for £30.00 making the attempted fraud on our account totaling a staggering £920.34 - no wonder the flags were flying at Alliance Leicester.

I was very pleased that the fraud department had picked up this attempted fraud and reversed these payments on our account. Because of this fraud the Alliance Leicester canceled both our debit cards which meant we could not use them until the replacement cards arrived. We have not lost any money because of this fraud but we have been inconvenienced by these robbers. Because of their actions we have not been able to use a debit card and have had access to our money denied. These thieves have stopped us using our account and our money although we have done nothing wrong or foolish. Thankfully there was plenty of food in our house and I had some cash to buy petrol to get to work. Our independence has been robbed for a week before our new cards arrived in the post yesterday.

It really annoys me that this fraud can occur. Chip and pin is supposed to be secure and internet websites starting https are declared as secure sites. What would have happened if the fraud department had not picked this activity up or had not been able to talk to me on the telephone? People can loose a lot of money through fraud and even if they do not suffer a cash loss then their lives can have big problems as we move towards a cash-less society. We pay very little in cash these days, most transactions are done by chip and pin. Chip and pin is very convenient for us but when you loose this method of payment you are effectively broke and penny-less.

Thankfully this nightmare is over but sadly it will probably happen to someone else tomorrow. The most frustrating thing is that there is nothing the consumer can do to guard against this fraud. We are all at risk, so check your bank statements very carefully indeed. We have signed some disclaimers with the Alliance Leicester so that they can pursue this crime and hopefully they can catch these robbers. We have no idea were the leak in card security has come from and I suspect that some criminals have hacked into traders intranet systems to steal the information.

At the end of the day the consumer pays for this crime with increased costs somewhere along the line.
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