Global: Chelsea State Bank beefs up security after debit card fraud

Chelsea State Bank has been making security changes in the past month after fraudulent debit card charges totaling more than $380,000 hit bank accounts over Mother's Day weekend.

The charges were identified the day before the Sunday holiday and forced the bank's staff to shut down its system to stop the fraud. Customers lost the use of their cards for a period of about three days.

The bank will reissue debit cards to all its customers on July 6 and, going forward, will block debit card activity in foreign countries. According to a press release from the bank, customers should notify the bank about foreign travel to keep their card activated abroad.

In addition, John Mann, the bank's president and CEO, said the financial institution will cover late fees for customers who can document losses and show they did not have another way to pay bills during the shutdown period.

The bank is encouraging customers who continue to have any problems to call or visit a branch office.

"We regret this inconvenience, but safeguarding our customers' funds and personal information was our top priority," Mann said. "No customer lost money, no customer information was compromised and we had no security breach of our computer system."

Mann said he was proud of his employees for identifying the fraud so quickly and stopping it and identifying customers' concerns.

"My staff came in Saturday morning and saw many charges denied from Australia and knew something was up and tried to stop the fraud in its tracks right there by not allowing manual transactions," Mann said, "but we needed cooperation from our vendors to make it happen."

He said if the bank hadn't taken the drastic measure of shutting down its system then and there, the loss would have tripled.

"On Monday morning we had long lines of customers at our doors at 9 a.m. following the fraud," Mann said. "Many thought their accounts were empty because we made the computers think accounts were zeroed out.


"It was a daunting task but our employees stood up and, really, I can't say enough about how my employees responded and also how understanding customers have been."

Though the FBI case remains unsolved, Mann said it has been confirmed that the charges were made in Australia.

"It looks like they got working numbers and ran enough transactions that they sold card numbers to somebody in, perhaps, organized crime in the United States," Mann said.

Mann said purchases made with the cards were mostly gift cards from "big-box retailers" with $200,000-worth of loss occurring in Californian Target stores and another $40,000 each in Wal-mart and Macy's in western states.

"All of the fraud happened that way against us because the retailer did not swipe the card," Mann explained. "Debit card fraud is becoming more prevalent, and I strongly feel that retailers and merchants need to take more responsibility at the point of sale."

Mann said the current laws only require merchants to record a signature with a debit card for a sale.

Chelsea State Bank was not the only bank to suffer losses from the Australian source. Six other banks, which Mann said were not local, were also attacked.

Mann said the bank has installed new blocking software to assist them in preventing similar types of fraud in the future.

"However, as you well know, there are Internet and other thieves plotting new schemes by the minute," Mann said. "We encourage our customers to use their debit card wisely and to regularly check their transactions online at www.csbonline.com to verify they are legitimate."

Mann said some good practices for customers to engage in include checking your surroundings during an in-store purchase.

"The best practice is to look around and make sure nobody's around the immediate vicinity, but also, look around at the machine to see that it all looks right because people do put false readers in there to record your transaction," Mann said. "So, make sure the machine is intact."

Mann said it's also a good idea to make sure that there is no camera recording customers entering PIN numbers and to hold something over the PIN pad to block the numbers being entered.

But, in general, Mann said in-person purchases are generally secure.

"Where it's not so safe, is when you're using it on the internet or by telephone and the seller does not ask you for the CVC (security code) then the chances are increased," Mann said.