Nightline: Billions Snatched in Credit Card Theft

Nightline produced a story on Credit Card theft, which ran the night before last.  The story told of the billions of dollars stolen by fraudsters, but in my humble opinion, they left an important part of the story by the wayside.  

When fraudsters attack, who gets hurt the most...  Here's a quick excerpt from their story, followed by exactly what I mean by "who gets hurt the most."

Thieves Snatch Billions in Credit Card Identity Theft Scams - ABC News

'Nightline' Tracks Hackers in Underground Identity Theft Chatrooms; How to Protect Yourself

By ELISABETH LEAMY

Foryears, crimes have followed the same age old mantra: wrong place at thewrong time. For someone to commit a crime against someone else, theyhad to be physically in the same area. But that's no longer the case;it's now easier than ever to be victim of a crime, particularlyidentity theft, without even realizing it.

Identitythieves snatch tens of billions dollars a year through credit cardfraud, either outright, or by selling your card information to othercrooks across the globe. The perpetrators come from a loosely organizedinternational underworld working beyond the reach of the law andwithout limits.

"They can sit in an apartment in Kiev ... andsteal your identity and you're going to be in a world of hurt," saidDan Clements, founder of Card Cops, a company that has been trackinghackers who buy and sell people's identities. "They blatantly ... tradecredit cards. They trade social security numbers. They trade debit cardpin numbers."

Card Cops has been tracking hackers' activity fora decade. Crooks from all over the world meet in Internet chat rooms,in what almost looks like an underground stock market. "Credit cardsare commodity items," Clements said. "They can go for as little as $2or $3 for a regular credit card. If you have a platinum card, it may befor $10 or $20. It's big business. They make a lot of money. There arepeople here that claim to make $20,000 to $30,000 a month selling theseresources in these chat rooms."

The chat rooms operate like acommodity floor, where information is openly traded, and the hackerswho carry out identity theft usually live in another part of theworld.  "It's a global market," Clements said. "It's like a bazaarwhere you can buy anything at any time."  The Card Cops should know:They entered the business of protecting consumers and merchants fromidentity theft because many of them were scammed themselves when theyworked together at another Internet company.

To help understandhow fast a thief can siphon money from an account, ABC Newsexperimentally opened a Visa account. It only took 15 minutes before ahacker got hungry.  "

We had a hit from a retailer inMassachusetts," said Clements. The culprit used the credit card numberto buy Dominos Pizza. "So there is your charge for $39.76. It lookslike some kid might have found the card in this chat room and decidedto buy his buddies pizzas."

Continue Reading at ABC News

Editors' Note:  Regarding that $39.76.  Somebody lost $40 bucks.  Who was it? ABC News didn't take the hit...they are protected by the "Zero Liability" program...introduced by Visa...who also didn't take the hit.  Oh, and the bank that issued the card?  They didn't take the hit either. 

That leaves...Dominos, who got screwed out of not only their $39.76, (and as much as I'd prefer not to call this the "domino effect" it is what it is) but they also got screwed out of the cost of the cheese, the sauce, the sausage, the onion, the mushroom, the pizza box, the labor and payroll involved in making the pizza, the gas to deliver the pizza etc. 

At the end of the day, they lost $40 plus an additional $20+ bucks.  So it's easily a $60 hit. 

There are several groups that have stood up to fight high interchange fees, but here's a suggestion.  Rather than bitch and moan about Interchange, start doing a little b&m'ing about the fact that Visa is pushing a less secure product (signature debit has up to a 15 times higher fraud rate than PIN Debit) which, not coincidentally, also carries a higher interchange fee.  Why would Visa's Signature product be the least secure of the two types (PIN & SIG) of debit products?  

I would make it a point to ensure that argument was all over the House Bill introduced yesterday.  (Credit Card Fair Act Introduced by House)

So the Big Question is simply this:  If Visa stands to "lose nothing" and Visa stands to "make more money" by pushing a "less secure" (Signature Debit) payment product, why on earth  would they be interested in pushing a more secure (PIN Debit) payment product? 

The short answer is "they wouldn't." 

So then the next Big Question becomes: Why is PIN Debit outpacing Signature Debit by a nearly four to one margin? 
Have the merchants finally realized that there are virtually no chargebacks involved with PIN Debit and Interchange Rates are signifcantly lower?  Or have consumers become more savvy?  You tell me.  I'd love to hear your comments.      

Related articles by Zemanta

• ISR News: Credit Card Fraud Explodes (information-security-resources.com)