On the dark side of credit card fraud
Call it the Attack of the (Credit Card)
As you read this, a thief anywhere in
the world could be using a counterfeit credit card with your name
and account number on it.
Here's how he got it:
Someone, somewhere made an extra swipe
of your credit card. It could be a waiter or a store clerk or anyone
you've handed your credit card to for payment.
Instead of just charging your card, the
thief made an extra swipe of your credit card into a small hand-held
device known as a skimmer.
"Think of a skimmer as a net. It
takes information right off the card itself," says Brian Marr,
a spokesman for the U.S. Secret Service.
The skimmer pulls the data from your
card, giving the thief all the information needed to make a counterfeit
card. A skimmer can hold card data from hundreds of different credit
"Once this information has been
downloaded into a skimmer it can be downloaded into a computer and
e-mailed anywhere in the world," Marr says.
Credit card skimming has become a worldwide
problem. Card losses due to skimming exceed $1 billion a year.
"You're seeing this anywhere credit
cards are put into a point-of-sale database," Marr says. "With
technology, there's really no boundary."
Skimming and counterfeit credit card
scams are widespread in Europe, Asia and Latin America. They're
growing problems in the United States.
"A Far East factory will do as many
as 5,000 cards a night, and the next day those cards are in a suitcase
on the way to Europe," says George Wallner, chairman and chief
strategist at Hypercom Inc., a leading provider of point-of-sale
card payment terminals.
Smaller-scale skimming operations are
common as well. Consider this scam ring in Florida, in which seven
people were indicted in April.
Two waitresses skimmed a large number
of credit cards from an Orlando restaurant. The waitresses then
sold the credit data to a middleman who sold the information to
a group making counterfeit credit cards in Miami.
"Technology giveth and technology
taketh away, and we're seeing the dark side of some of that,"
says Robert Finkbeiner, an assistant statewide prosecutor in Orlando,
Fla. "It's a pretty insidious thing."
Ten years ago, skimming was much less common. Skimmers were too
bulky to carry around and had to be hidden under counters.
Smaller skimmers, roughly the size of
a pager, hit the scene two or three years ago. These skimmers are
easy to carry, easy to hide and easy to buy.
"A few years ago you had to make
a skimmer yourself. Now you can go out on the Internet and buy one,"
says Lou Struett, executive vice president of Magtek, a manufacturer
of magnetic stripe card readers.
Everything needed to pull off this crime
is available on the Internet. A skimmer costs about $300, and the
equipment to make a counterfeit credit card costs about $5,000 to
If all this weren't bad enough, there's
another kind of skimming going on as well. A thief slips a small,
skimming bug into an older credit card terminal. The bug pulls credit
card data from the terminal. A few days later the thief removes
"The bad guy comes and take out
the bugs and no one's the wiser," Wallner says.
What's happening to fight skimming? For
one thing, newer credit card terminals can't be bugged. And portable
terminals, which would enable a waiter to swipe a credit card at
a customer's table, are available, although not widespread.
The U.S. Secret Service is working with
the credit card industry to track down skimming rings by assembling
a database of locations where scams have occurred.
As with any kind of credit card fraud,
a consumer victim is not on the hook for the bill. Someone living
in San Diego won't have to pay for a thief's $5,000 shopping spree
in Hong Kong with a counterfeit credit card.
Know your rights
The Truth in Lending Act limits consumer liability to $50 if a credit
card is lost or stolen. And most issuers waive the $50 fee.
The hardest part for a fraud victim is
straightening out their credit report after a thief piles up charges
in their name. It can take months to sort out.
And that's why it's so important to monitor
credit card bills carefully and report any suspicious activity immediately.
"Look at credit card bills line
by line," Finkbeiner says. "If something looks suspicious,
you can catch it before it gets out of control."
It's also important to guard your credit
card number. Be sure to shred old receipts and credit card bills.
"The number is the thing,"
Finkbeiner says. "You want to take whatever steps you can take
to keep your numbers from getting out."
Keep a close eye on your credit card
when paying in a store, restaurant or gas station. Finkbeiner knows
of a skimming victim who won't let his credit card out of his sight.
He'll even follow a waiter back to the payment terminal in a restaurant.
"It's awkward and silly and makes
people uncomfortable, but it's what he feels he needs to do,"
What to do if you
become a victim
What should you do if you've been a victim of skimming or any kind
of credit card fraud? Clear your good name as quickly as possible.
This guide will show you how:
- Contact the three
major credit bureaus. Equifax:
(800) 525-6285; Experian:
(888) 397-3742; and Trans
Union: (800) 680-7289.
- Ask them to place a fraud alert on your credit
report. Include a statement that asks creditors to call you for
permission before any new accounts are opened in your name.
- Contact creditors for any accounts that have been
tampered with or opened without your knowledge. Be sure to put
complaints in writing.
the FTC: (877) 438-4338. While federal investigators only
tend to pursue larger, more sophisticated fraud cases, they do
monitor identity theft crimes of all levels with the hope of discovering
patterns and breaking up larger rings. Fill out the ID
Theft Affidavit at the FTC's Web site, make copies and send
to creditors. The agency also has an online
- Alert the police that your wallet is stolen. Fill
out a police report, and consider signing a written affidivit
verifying that unauthorized transactions on your account are fraudulent.
Send copies to creditors and credit bureaus as proof of the crime.
- Report the fraud to the Office
of the Inspector General's fraud hotline.