Remain vigilant to avoid plastic card losses, CUs told

SAN FRANCISCO (9/29/05)--Remaining vigilant is essential to control plastic card fraud losses, according to Ann Davidson, CUNA Mutual Group payment systems risk manager.

Davidson told CUNA Future Forum attendees that all card-issuing credit unions remain vulnerable as plastic card fraud continues to escalate. CUNA Mutual, which insures roughly 5,000 card-issuing credit unions, expects plastic card fraud losses to double in 2005, compared with each of the six previous years.

"If your credit union has dodged large amounts of fraud to this point, you've been lucky," Davidson said.

About 90% of plastic card fraud losses come from approximately 225 credit unions. Davidson said that means there is "ample opportunity" for fraudsters to expand to other institutions, particularly as more plastic is issued through popular debit check card programs.

Counterfeit skimming is now the most prevalent and fastest-growing type of plastic card fraud. Thieves use this high-tech counterfeit technique to copy encoded information on the magnetic stripe of debit and credit cards. Stolen information is later replicated on a blank plastic card that the thief can then use to make purchases.

Scams to capture magnetic stripe data range from telephone taps that intercept data during authorization or terminal downloads to false storefronts or "spoof shops," set up for the express purpose of stealing data.

Davidson offered tips to help credit unions control fraud:

• Work closely with your card processor and neural network provider;
• Use every fraud prevention tool available;
• Be prepared to recognize different types of fraud--such as skimming--and report it correctly; and
• Educate members through statement stuffers, websites, newsletters and membership meetings.

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