Globetechnology: Debit card fraud more widespread than banks believe

By SANDRA CORDON

Monday, June 6, 2005 Updated at 8:50 AM EDT

Canadian Press

OTTAWA — An unexpectedly large percentage of Canadians say they’ve been victims of debit card fraud and many complain their bank hasn’t been much help, according to a poll done for the federal government.

About 4 per cent of people surveyed by Environics Research for the Industry Department last fall said they had been a victim of fraud through their debit card in the previous year.

That figure is a great deal larger than the official fraud statistic of 1/10 of 1 per cent publicized by the banking sector and the debit card association.

With 19 million regular card users identified by the debit card industry association, 4 per cent would represent about 760,000 Canadians. One-third of respondents told Environics their bank refused to reimburse them for their losses.

Advertisements

That suggests the public might not fully understand the risks around debit cards, which directly debit a consumer’s bank account for the amount of a purchase, and how little support they may find if they become a fraud victim, says a public interest watchdog.

The typical debit card agreement between client and bank isn’t very clear on who gets tagged with losses, said John Lawford, lawyer for the non-profit Public Interest Advocacy Centre in Ottawa.

“It doesn’t say: ‘You are responsible,’ but it says basically that ‘We are not responsible for any loss . . . in using the system.’ And people don’t know that — they think if something goes wrong, of course the bank will cover it.”

The Environics survey was commissioned by the federal government as part of a broader review of consumer protection in the new world of electronic banking.

It also confirmed just how much Canadians love using their debit cards, either to withdraw cash and pay bills at an automated banking machine, or to buy all kinds of goods and services.

Eighty-six per cent of the 2,027 people surveyed by Environics said they use a debit card, a figure that cuts evenly across regions of the country, income and education levels.

Senior citizens were the least likely to use the cards, with 67 per cent of respondents over 60 saying they do so.

The poll, with a margin of error of 2.2 percentage points 19 times out of 20, also suggests the incidence of fraud may be underreported and not well-known.

The 1/10of 1 per cent is widely used by the Interac Association, representing the industry, and the Canadian Bankers Association.

But that actually represents just the most common type of debit-card fraud known as skimming, said Caroline Hubberstey, director of media relations for the bankers association.

There, thieves use tiny, hidden cameras to record the victim’s personal bank access number at a machine while also making a clandestine copy of the card. The thieves then have all they need to get into the victim’s bank account and clean it out.

About 49,000 cards were reimbursed for fraud cases involving skimming last year, said Sara Feldman of the Interac Association.

“We are trying to raise awareness, letting people know that they’re covered by the debit code of practice, that anyone who is proven victim of a confirmed fraud, theft or intimidation will be reimbursed,” Ms. Feldman said.

But that voluntary code places a high and unfair burden of proof on the victim, said Mr. Lawford of the advocacy centre. “You’re often not covered, there’s no safety net at the end of the day.”

If a fraud victim has let a spouse or family member use their card, they won’t likely be able to press a fraud claim. Or, if a person has carelessly picked a personal identification number — such as one’s date of birth or phone number — or even written it down, that can invalidate any fraud claim, he added.

Canada’s embrace of debit cards is one of the highest in the globe, according to the Interac Association.

In 2003, we used our debit cards an average of 43 times each, compared with an average user rate of 40 times per capita in Britain and 37 in the United States and Sweden, according to the Interac Association.