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What Can Be Done About Security of Debit Cards?
JumpDrive writes "I have been the victim of (Visa) debit card theft. I do not know where they stole or got the number, but it was used one day on the other side of the country and the next day it was used in Europe until they cleaned out my account. I had been monitoring my account online and immediately went to the bank and filed a claim. I was told at that time it would be 3 to 5 weeks for them to investigate the claim before they could return my money. Recently I tried to make a purchase with a debit card and was told that they couldn't use the card since it wasn't a Visa or MasterCard check card; this led to a discussion of why I no longer have a Visa or MasterCard check card. Which then led to the question of 'What can be done about it?' Currently I have a separate account for debit usage for my personal safety. But I also think that those producing these check cards should be required to advertise the hazards of having one of these cards (not in small print and maybe required in advertisement of these cards, similar to what is required with pharmaceutical drugs on television) and/or that if a debit or check card is issued a separate account should be required for its use, and users informed of the issues of placing all of their money in the same account that their debit card has access to. What other precautionary measures should be required or taken?"
The short answer? The banks will do nothing for you today.
The long answer: Nobody will do anything for you tomorrow, either.
Why? Because Visa does two things, only one of which makes money. First, they are in charge of defining financial card security through the PCI council, and they own and operate the secure network VisaNet, which carries authorizations from retailers to banks. Guess which one makes them money?
If Visa were to design and offer a cryptographically secure solution, one based only on smart cards for the customers and Hardware Security Modules (HSMs) at the banks, then I could safely route my charge authorizations over the plain ol' Internet. I wouldn't need to use the charge-per-transaction VisaNet. Visa would stop making money.
So instead of offering a secure solution, Visa and the PCI council say, "Merchants must lock down their systems, protect this data, follow these 12 steps, acknowledge that you are powerless over alcohol (oh wait, wrong 12 steps), and if you don't, we'll loudly blame you for allowing someone to see our non-existent security."
Visa owns the protocols used between merchants and banks. They could strengthen the protocols. They could prescribe encryption. They could require the deployment of chipped banking cards. But they do not, and have not for many, many years, despite a pathetic track record of security.
If you want the banks to be safe with your money, you ironically have to take charge of your own security. If you switch to using the green paper stuff, your losses will be finitely limited to what you carry on your person. If you want a more achievable answer in today's plastic world, DO NOT CARRY DEBIT CARDS. Debit cards do not offer you protection against loss. Credit cards are limited by U.S. law to a maximum of $50 liability to the cardholder. Debit cards losses are usually covered by the bank, but they are under no legal obligation to do so. For ATM access, most banks will honor your request for an ATM-only card instead of accepting their default ATM/Debit card. Of course, the use of credit cards requires personal discipline to always pay the debt on time, but otherwise you would see little difference.
John
If it gets stolen, it's not your money. Also, you got skimmed.
How the banks advertise it: "Use your own money to shop online!"
What it actually means: "Expose the cash you need to live on to fraud."
The banks like it because you're putting your money at risk, not theirs.
How we know is more important than what we know.
Step 1: Cut DEBIT "check" card in half
Step 2: Just use a CREDIT card. You're protected. Problem solved.
In Canada you need an ATM PIN to use a debit card linked to a bank account, but the PINs can still be skimmed by compromised payment terminals. I only pay by credit card.
Shop around for a bank that actually values you as a customer. I believe Bank of America will give you your money back within 24 hours. I'm not a fan of theirs but at least they do that for you. I personally use US Bank.
Work Safe Porn
But I also think that those producing these check cards should be required to advertise the hazards of having one of these cards
NO, NO, NO. No stupid, pointless warnings. Make the financial institutions solely liable for all identity theft. They're the only ones with the ability to stop it, and they should be the ones that bear the full economic incentive for managing fraud.
But I didn't say it first, Bruce Schneier did:
The actual problem to be solved is that of fraudulent transactions. Financial institutions make it too easy for a criminal to commit fraudulent transactions, and too difficult for the victims to clear their names.
[...]
It's not that financial institutions suffer no losses. Because of something called Regulation E, they already pay most of the direct costs of identity theft. But the costs in time, stress and hassle are entirely borne by the victims.
The whole article is +5 Insightful, well worth reading.
One day I found that my bank account had been cleaned out. There were a massive number of $50 charges from one vendor -- essentially they kept charging $50 until they got a decline. The charges had occurred after 11:00 PM and before 5:00 AM local time, which made me think that time zones were involved.
I called the bank immediately and reported it, had the card frozen but by that time there was only about $20 left.
I did some research from the transaction information -- the company had an address in California that appeared to be fake, an 800 number that was disconnected, and the domain was owned by a different company in Korea.
I printed all this out, took it to the credit union. They had me fill out some forms, and gave me access to some money (I was pretty much broke) while they worked on it.
Within 3 days all my money was returned to me. It's possible that the credit union fronted me the cash while they worked with the authorities -- they never said. But as far as I was concerned, the event was over in less than a week.
Maybe it makes a difference which bank you use. Or maybe it's the difference between a bank and a credit union. I dunno.
I never did figure out how they got my numbers.
Oliver's law of assumed responsibility: If you're seen fixing it, you will be blamed for breaking it.
Debit cards are functionally useless, since they give you nothing that using credit card which you pay off every month wouldn't while costing you quite a bit.
If you have a credit card you pay off every month, you get an interest free loan for a month. You earn points for rewards. You get protection against fraud. You often get warranties on things you wouldn't normally get.
You get NONE of this with a debit card. The only reason a debit card is preferable is if you don't have the self control to spend an amount you can pay off every month, or you have such a bad credit rating you can't get a credit card with a grace period.
IAABG (I am a banking geek).
The rules for provisional credit on debit cards is very well established. They fall under Regulation E, section 205.11. The bank has ten days to get you a provisional refund, and can take up to 45 days in certain circumstances to complete their investigation and finalize the credit.
Make sure you get them a notice in writing! Once you do, they have ten days to credit you, and many banks will do it much faster. If the bank drags their feet, just tell them "I want provisional credit within the mandated timeline per Regualtion E".
Here's more on this topic:
http://www.bankersonline.com/technology/guru2008/gurus_tech022508c.html
http://usa.visa.com/personal/security/visa_security_program/zero_liability.html
http://finsolinc.com/Reg%20E%20EFTA%20Error%20Resolution%20Flowchart.pdf
The protection for misuse of debit cards is strong, you just need to know what to do. If your bank isn't responsive, Move Your Money to a smaller institution that cares.
You are paranoid. And ignorant. As long as you report the theft to your financial institution as soon as you learn about it, there are strong protections in place. It's simply not true that it's up to YOU to track down your money. It's up to your financial institution. They are required by law to credit you in the case of errors or unauthorized purchases, and are even required to issue a provisional credit in many cases before the investigation is complete.
A Visa Debit card carries the same protections as a Visa Credit card for signature based-transactions. PIN based transactions are still covered by Regulation E, which protects the consumer.
And there's no such thing as a perfectly good ATM card: with a skimmer, a fraudster can clone your ATM card and have your PIN. Fraudulent PIN based transactions are MUCH harder to refute. People call up all the time and say, "I have no idea how that person got my PIN number, I've never given it to ANYONE!" We (my bank) pull the ATM video, and sure enough it's their son/daughter. The consumer sheepishly admits, "Oh, well, I just told them my PIN once, months ago..." Given the choice between turning the video over to the police or rescinding the claim of unauthorized use, many people will choose the latter.
I work IT in a community bank. I work very closely with our Operations and Fraud department. Here is what I can tell you about VISA debit card fraud. If you are a consumer, you are totally protected IF you report your debit card being lost, stolen, or compromised within 3 days that you became aware of it being lost, stolen, or compromised. The bank will also have a hard time proving when you found out you had a problem with your card. The bank HAS to give you your money back. VISA and Washington D.C. make all of these rules. The little known secret is that banks take huge losses on debit card fraud because the regulation coming from Washington D.C. totally protects the consumer. Most of the time in a fraud case, the bank isn't able to recover the money from the merchant and they have to refund the money to the consumer. Therefore, the banks lose money on VISA debit card fraud. As consumers, you really have nothing to worry about when it comes to VISA debit card fraud. You are totally covered. If you have a VISA business debit card though, you are not covered by the regulation and you are subject to taking losses in a fraud case. If you are a business owner, you better be REALLY CAREFUL when it comes to who has business debit cards tied to your accounts. In your case when the bank said 3 - 5 weeks to return your money, you should change banks. Go to a good community bank or credit union in your area. Somewhere that will recognize you as a person and not a number. Stay away from the large nationwide banks and regional banks. Especially the ones that are having loan trouble. They are trying to stay afloat by sticking all of their good customers with lots of account fees. I use my VISA debit card everywhere and never worry about fraud. You should do the same. I do suggest that you be careful using it on the Internet. As a computer security professional, I do recommend that you practice good computer security.... AV, Web Filtering, OpenDNS, Patching, etc....