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Report: ATM/Debit Card Fraud On The Rise

Half of financial institutions experienced fraud complaints as a result of major data breaches
Credit card fraud may get most of the publicity when it comes to identity theft, but ATM and debit card theft is expected to grow 10 to 14 percent this year, according to a survey of financial institutions released today.

It turns out the study was well-timed, too: Police officials in New York City yesterday reported that a fraud ring had stolen $500,000 from hundreds of bank customers' accounts in the city using skimming devices affixed to ATM machines at Sovereign Bank branches in Staten Island. The skimmers read and stored their account information, and a rogue camera affixed to the machines captured victims' typing in their PIN numbers. They also used the information to clone the cards, according to published reports.

Nearly 70 percent of the respondents to the survey, conducted by antifraud firm Actimize, said they had experienced an increase in ATM/debit card fraud claims in 2008 compared to 2007. Around 23 percent said those claims jumped by 5 to 9percent; around 16 percent, by 10 to 14 percent; 17.5 percent, by 15 to 19 percent; nearly 9 percent, by 20 to 24 percent; 11 percent, by 25 to 49 percent; and 5 percent, by a whopping 50 to 74 percent.

Half of the institutions had been hit with fraud complaints that came out of some of the major data breaches, with more than 30 percent saying they had seen fraud incidents as a result of the TJX hack, and 30 percent out of the Heartland Payment Systems hack.

"It was interesting to confirm that not only are banking customers using ATM/debit card at risk, in general, because their data has been compromised and could be used for fraud -- but it is being used for fraud," says Paul Henninger, director of fraud solutions at Actimize.

Around 80 percent of the survey respondents said these massive data breaches can decrease consumer confidence in ATM/debit card use. Around 15 percent had reissued cards to more than 20 percent of their cardholder customers, Henninger says. "The rate at which they are reissuing cards is well ahead of what we thought it would be," he says.

Last year, respondents lost an average of $744,321, with some as high as $12 million, to ATM fraud alone, and an average of $145,560, or as high as $1 million, to data breaches, according to the survey.

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