Credit Card Skimming: A Growing Problem

August 2003

Attack of the credit card clones

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.

 

Could that happen to you? Easily! Here's how. Someone, somewhere takes an extra swipe of your credit card. It could be a waiter, a store clerk, or anyone to whom you've handed your credit card for payment. Instead of just charging your card, the thief takes an extra swipe of your credit card into a small, hand-held device known as a skimmer. The skimmerextracts and stores the data from your card - giving the thief all of the information he or she needsto create a counterfeit card.

A skimmer can store card data from hundreds of different credit cards. Once information has been downloaded into a skimmer, it can then be downloaded into a computer and e-mailed anywhere in the world.

 

A growing problem

Credit card skimming has become a worldwide problem, with losses exceeding $1 billion a year. Skimming and counterfeit credit card scams are widespread in Europe, Asia and Latin America, and is a growing problem in the United States. Small-scale skimming operations are already common. Consider thescam ring which was recently uncovered in Florida.Seven people were indicted. Two waitresses skimmed a large number of credit cards from an Orlando restaurant. They sold the credit data to a middleman.He sold the information to a group making counterfeit credit cards in Miami.

 

As technology expands, there are currently no boundaries to contain credit card skimming. Ten years ago, skimming was much less common because skimmers were too bulky. They were typically hidden under counters. Today, they are smaller, roughly the size of a pager, easy to carry, easy to hide and easy to buy. What's more, everything needed to pull off this crime is available on the Internet. A skimmer costs about $300.The equipment required to make counterfeit credit cards costs $5,000 to $10,000.

If this isn't bad enough, there is another kind of skimming going on as well, stealth skimming. 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 bug.No one is the wiser.

 

How can business fight skimming?

Newercredit card terminals can't be bugged. And portable terminals, which allow a waiter to swipe credit cards at a customer's table, are now available. 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.

 

 

What can you do?

As with any credit card fraud, a consumer victim is not on the hook for the bill. That means you won't have to pay for a thief's $5,000 shopping spree in Hong Kong with a counterfeit credit card. The Truth in Lending Act limits consumer liability to $50 if a credit card is lost or stolen, and most issuers waive that 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. That's why it's so important to monitor credit card bills carefully and report any suspicious activity immediately. Look at your monthly credit card bills line by line. If something looks suspicious, you may be able to catch it before the crime mushrooms.

It's also important to guard your credit card number. Be sure to shred old receipts and credit card bills. Take all steps available to keep your numbers from getting out. Keep a close eye on your credit card when paying in a store, restaurant or gas station.

 

What should you do if you've been a victim of skimming or any kind of credit card fraud?

Here are five steps you can take to help clear your credit as quickly as possible:

 

• Contact the three major credit bureaus (Equifax, Experian and TransUnion). 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 creditorswhere accounts have been tampered with or opened without your knowledge. Be sure to put all complaints in writing.
• Contact the Federal Trade Commission. Fill out the ID Theft Affidavit at its Web site, make copies and send them to appropriate creditors. The agency also has an online complaint form.
• Alert the police that your wallet has been stolen. Fill out a police report and sign anaffidavit 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 (1-800-269-0271).