Fraud cases on rise for local debit card users

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By the numbers Debit fraud

7 local banks and credit unions that blocked signature-based debit card transactions in May in response to fraud

19,000 suspected instances by Ohio banks of debit card fraud in 2011

30 reports of fraud filed with Englewood Police Department in April and May, compared to 11 the same time in 2011

Tips to Protect against fraud

Some local credit unions and community banks said they’ve seen more debit card fraud so far this year than in all of last year.

The issue came to light in May when at least six local financial institutions — Wright-Patt, CODE, River Valley, FirstDay Federal and DayMet credit unions, and National Bank and Trust Co. — beefed up security in response to a spike of fraudulent charges to customers’ accounts. The spike has slowed, but banks and credit unions still remind customers to be vigilant in protecting their debit card accounts.

Police and bank officials suspect many of the account numbers were gathered from an out-of-state payment processing firm earlier this year.

National Bank and Trust of Wilmington, with locations in Centerville, Carlisle, Franklin and Lebanon, said more than 100 customers called during May with reports of fraud.

“That for a bank our size was an unusual amount of fraud transaction calls,” said Howard Witherby, senior vice president of operations of National Bank.

The fake and suspicious charges reported by customers reached the tens of thousands of dollars, a significant amount, Witherby said. But it’s not enough to adversely impact the bank, he said. Many banks and credit unions have zero-liability policies for their customers and absorb the full amount of bad charges.

Banks and credit unions refer customers to police departments to file reports. CODE Credit Union, for example, is located in Englewood.

Sgt. Mike Lang of the Englewood Police Department said in April and May the department received 30 reports of card fraud from residents, compared with 11 reports of fraud during the same time last year.

Universal 1 Credit Union said it didn’t see the same one-time spike, but rising fraud locally and elsewhere prompted it to put in place temporary extra security.

National Bank and Trust and the credit unions have reacted by blocking signature-based transactions of customers in certain states outside of Ohio. Customers are required to enter their Personal Identification Number when using their debit cards in certain places. The PIN increases security because only the true card holder has the PIN to complete the transaction, Witherby said.

Bill Hicks of Centerville said he didn’t know $1,600 to $1,800 in charges he didn’t make was spent on his account a month ago until his debit card was rejected. The charges on his WesBanco Inc. account to buy things at liquor, convenience, grocery and auto parts stores in Detroit happened quickly.

“It was certainly surprising; never had anything like that happen before,” Hicks said. “It was no surprise to them the morning my son went in. They obviously had a fair amount of this type of activity going on.”

WesBanco, based in West Virginia, says on its website it uses leading technology to combat debit card fraud to help identify and prevent suspected fraudulent debit card activity.

Sometimes it’s necessary to block signature-based debit card transactions in other states, foreign countries and at various merchant locations where fraudulent activity is prevalent, WesBanco says.

Greg Dugan, executive vice president of operations of WesBanco, said it hasn’t seen more fraud activity in Dayton than usual, but it saw a spike in the last two to three weeks in Greater Cincinnati.

Fifth Third Bank, the largest bank in the Dayton area by total deposits, said it had not seen a significant increase in debit card fraud recently.

Ohio banks reported almost 19,000 suspected instances of debit card fraud in 2011, up more than 7 percent from 17,600 instances reported in 2010, according to the Financial Crimes Enforcement Network, part of the U.S. Treasury Department. Bank compliance officers file suspicious activity reports to the enforcement network. The costs aren’t reported.

Debit card fraud is an industrywide issue and a cost of doing business for financial institutions, said Darrick Weeks, chief operating officer of Fairborn-based Wright-Patt Credit Union.

“It’s just one of the costs we calculate in whether we offer debit cards and credit cards,” Weeks said. “Although it is on the rise, it still impacts a small amount of debit card holders.”

Wright-Patt has three times as many debit cards in use than credit cards.

Nationwide, there are an estimated 547 million debit and prepaid cards issued in the U.S. by Visa and MasterCard, compared to 519.1 million credit cards, according to The Nilson Report, a payment system industry publication.

Fraud is on the rise because of the economy, data breaches of payment processors and merchants and criminals with smarter technology, Weeks said.

Debit card fraud is expected to be a problem until the U.S. adopts chip technology, which increases card security, said Ann Davidson, senior consultant of risk management for CUNA Mutual Group of Wisconsin, who works with credit unions to prevent fraud. Chip technology can prevent counterfeit magnetic stripe fraud due to a data breach or skimmers by validating the card without storing the data.

“I would say it’s rising across the industry because we are the last country to move towards chip technology,” Davidson said. “It’s not going to prevent lost and stolen, but over 80 percent of our reports from credit unions is mag stripe fraud.”

Contact this reporter at (513) 705-2551 or clevingston@coxohio.com. Follow this reporter on Twitter @ChelsLevingston