Interview with Bob and Sue Smith, Victims of Debit-Card Fraud

Interview Date:

June 30, 2006

Bank debit cards are a staple of modern financial life. And so too is debit-card fraud.

Research conducted by the Gartner group estimated that 3 million U.S. consumers were victimized by debit/ATM card fraud in 2005. For the 12 months ending in May 2005, losses due to debit-card fraud reached $2.75 billion, with the average loss weighing in at a cool $900 per incident. (What we don't know is if this number attempts to factor for the time spent, by both consumers and banks, to rectify the fraudulent activities. My guess? It doesn't.)

So just when you thought your credit cards were the plastic to most worry about, it turns out that your check card might be the most criminally sought-after item in your wallet or purse. Liz Pulliam Weston, MSN Money columnist and author of the book Your Credit Score (among others) asserts that debit-card fraud is growing at a faster rate than credit-card fraud for a variety of reasons — chief among them that banks have made debit fraud easier to pull off than are other forms.

Recently I had the opportunity to talk to a young couple — we'll call them Bob and Sue Smith — who a few weeks ago were victimized by debit-card fraud. Their experience, I found, was particularly unnerving ... on quite a few levels.

Dealing With Debit-Card Fraud: Bob and Sue Smith, Married Couple

Several days ago, the two of you logged into your bank checking account and found something (or many �somethings�) that surprised you. What exactly did you see? How did each of you react?

Sue: The first thing that I saw was the account balance written in red and wielding a very scary negative sign. Being the "Keeper of All Things Financial" in our household, I completely freaked out.

My first thought was that I had over-extended the bank account, which I've never done before. Upon closer inspection, I realized that there were ten transactions from the past 3 days that I didn't recognize. All of the withdrawals that had posted, read "POS PUR FROM CHK THE DEPOT 8, VICTORVILLE, CA". At that time, six of the transactions had posted and the others read "DDA POS PURCHASE" and were pending debit. I knew that "pending debit" meant that the money was already gone, but that the transaction hadn't officially posted. I also saw that our overdraft protection had gone into effect. I'm still not sure if that was a good thing or not.

We hear about credit-card fraud all the time. Debit-card fraud, where the money is actually taken from your bank account, is often more troublesome � and isn�t as well-publicized. What were the offshoots of the fraud in your case? Overdraft fees? How much? How much time have you invested in this so far?

Bob: Well, I just started a new job the day after we found out about this. And I can tell you that there is nothing better than having to ask your employer for time off on the first day. I doubt they appreciated that!

Anyway, I spent several hours on the phone the night this happened. I tried to get in touch with someone at the bank to "hot card" our debit cards. It was a huge hassle. I also spent time online trying to figure out what kind of business the "Depot 8" was. We spoke to the Victorville police, and they had never heard of it. Someone suggested that it might be a local Home Depot, so we called there.

The Home Depot customer-service rep who answered my call was very helpful. She told me that that their store was not Number 8. She then tried to help by looking up the name in the phone book. She told us that there was a convenience store called "The Depot 5" outside of town. We took that information and called 411 to get a number for the place. We got the number and called several times, but never got an answer. I'm not sure what I was going to say if someone had answered the phone, but I was pissed off. I'd say that we've put in a good eight hours so far, trying to get this stuff straightened out.

Here's the important question — the one that everyone is probably going to ask: Is your bank holding you responsible for any of the charges?

Sue: The bank told us that we would not be held responsible for any of the withdrawals or overdraft fees. But we will be out the convenience of an ATM card/debit card, since we "hot carded" our cards and have decided that we will no longer have them.

When people voice concerns about credit- and bank-card fraud, they�re often afraid that someone will get their information and �clean out their accounts.� Yet sources usually show that this isn�t what happens — that the fraud occurs in strings of smaller amounts. What happened in your case? What was the total of all the fraudulent transactions once everything posted?

Bob: Yeah, in our case the transactions happened in smaller amounts — from $52.01 to $55.00 to $75.00. We had a lot of $75.00 debits. I believe that the total came to about $560.00.

When you notified the bank of your fraud concerns, what did they tell you? Anything that readers might find interesting or helpful? What did they suggest you do, if anything?

Sue: We were actually pretty disenchanted with our bank's "Oh, this happens to everybody!" attitude. We didn't get much more info than the fact that this particular branch (which is not where we opened the account) had had 6 other occurrences of debit-card fraud since February of this year. The rep could not tell us how it happened, since we both were in possession of our cards and don't make a habit of giving out our PIN numbers. The only thing that she knew for sure was that the fraudulent transactions happened with Bob's debit card number. She told us that one of the bank employees at that branch had had it happen to her, too.

Bob and I left the bank (which operates in 3 states) and went to our credit union to see if they could give us more information about this type of fraud. The lady that we spoke to there told us that she had seen 5 occurrences since the beginning of the year. She told us that they once had had 3 customers come in at about the same time, all with fraudulent debits from Spain. They compiled information from all three customers to see if there were any connections. The only thing that they could come up with was that all of them had eaten out at restaurants in this area.

We were pretty shocked by that. Bob and I never purchase items online with our debit cards — we always use a credit card. We've been paying bills online using individual merchant sites (Lowe's, Discover Card, Honda Financial, etc.) and giving our routing number and account number to pay bills. We've been doing this for at least two years and haven't had a problem.

I asked at both financial institutions what they thought about the safety of this. Both told us was that they believed that paying bills online was safe as long as the merchants were reputable. Both bank representatives told us that they pay their bills online, too.

As a general rule, we don't use our debit card very much outside of the bank's own ATM in one location. I looked back at our register for the past 3 months and found that we had debit-carded 3 times to places other than the ATM. Those places included a local oil-change shop, Wal-Mart, and Quizno's. Probably less than the average American.

Were the criminals able to withdraw cash from your account, such as by ATM? since both of you had your debit cards in your possession, did the banks (or anyone else) offer any ideas as to how the criminals might have done this?

Bob: The bank was absolutely no help in determining how this was done without our debit cards. We've done our research online, and we surmised that the criminals either worked or had connections at this convenience store, or they somehow made debit cards with our stolen numbers.

Did you contact law enforcement? If so, when? Did they tell you anything useful or interesting?

Bob: We did. We got in touch with the county sheriff's department that night. The deputy was nice about everything. But he didn't offer up anything useful or helpful. We did have to give him a copy of our online bank statement so they could have a record of the fraudulent transactions.

What actions will you be taking from this point forward? What advice would you offer to others?

Bob: Like Sue said, we disabled both of our debit cards from the bank. We are also going to disable our debit cards from the credit union. I'm convinced that the reduction of people having access to our accounts, whether it be through paying bills online or the waitstaff at restaurants, can only benefit us in the future.

Sue: I believe that the best advice is to minimize any unnecessary use of your debit card. This should reduce the chances of the card number being misused or stolen. Given what we know now, we'd have to say that the convenience factor of a debit card is far outweighed by the risk and possible emotional hardship caused by this type of crime.