Proactively Fighting Card Fraud

Security and merchant breaches are compromising member accounts by the thousands. In response, some credit unions are taking a proactive approach to fighting fraud and protecting their members.


Plastic card fraud can be initiated in many ways, most of which the financial institution have little control over. From phishing of website to outright theft of data files, consumers and financial institutions must be weary on all fronts. VISA estimates that during the fourth quarter 2005, net fraud charge offs were .06 percent of consumer sales volume, which averages $2.4 trillion annually.

Thousands of credit union members’ identities have been stolen just over the past year, with breaches of merchant files, rather than credit union security breaches, inflicting much of the damage. This has affected not only members, but the bottom line at dozens of credit unions, large and small, ranging from Navy Federal Credit Union ($24.6 billion, Merrifield, VA) to Leominster FCU ($340 million, Leominster, MA). In some instances, the out-of pocket expense of reissuing cards and recovering losses can be upwards of $500,000, with insurance covering only a portion of this.

Some credit unions are finding ways to protect their members’ identities, even with merchant breaches occurring with some frequency across the country. Pennsylvania State Employees Credit Union ($2.3 billion, Harrisburg, PA) has taken a proactive stance towards identifying fraud and mitigating losses. As compared to the financial industry’s .06 percent fraud loss average, PSECU has lost only .03 percent of their members’ consumer spending volume due to fraud. They are actively utilizing parameters that indicate fraud. PSECU is also using real-time indicators to be able to identify fraud at the point of purchase. This allows the credit union to stop fraud immediately.




May 1, 2006


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