Pin Block Schemes: A New Wave of Fraud

March 14, 2006 (WPVI) -- Hundreds of thousands of consumers are going to get new ATM or debit cards in the mail. It's the result of the latest security breach that could put you at risk of identity theft. Action News consumer reporter Nydia Han explains what experts are calling the worst consumer scam to date. She also explains how to keep your information safe.

Debit cards are a kind of compromise between cash and credit and consumers love them. "It's much easier and convenient." "It's better for a lot of people because then you don't run up those horrible charges." But with the increased use of debit cards comes the increased risk of problems. In 2004, the U.S. banking industry lost 546-million-dollars to debit card fraud, and what some are calling the worst consumer scam began weeks ago but continues to unfold. Dr. Robert D'Ovidio/Drexel U. Cyber Crime: "The risk is not an isolated incident. Once your personal identifying information is stolen, you run the risk of being victimized for a number of years out." The ongoing fraud has forced many banks across the country to re-issue ATM or debit cards to an untold number of consumers and even shut down some pin-based transactions. The banks include Citibank, Bank of America, Citizens Bank, and PNC among many, many others. "That's very alarming." Banks are being tight-lipped about the details of the scam, only saying they have fallen victim to a third-party information breach. But law enforcement officials in New Jersey have arrested 14 people in connection with the crime spree. Published reports quote the Hudson County prosecutor as saying some of the stolen information came from the office-supply chain Office Max, although Office Max denies any security breach.

Meantime, many banks tell Action News a small number of cards were potentially compromised and new cards are being issued primarily as a precaution. "The cybercriminal is going after larger pots of money." Security analysts anticipates more banks and more customers will soon learn they've been affected, too. They say this is the largest pin theft to date and highlights a new wave of fraud called pin block schemes. In these schemes, hackers break into retailer servers to steal pins and magnetic-strip data found on the back of ATM cards. They then create counterfeit cards to enable them to withdraw cash at ATMs. Robert Slama/Secret Service: "Consumers need to realize that the first line of prevention to being a victim is themselves."