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WASHINGTON-Credit unions should be active participants in fighting credit card fraud and safeguarding member information, NCUA Vice Chairman Rodney Hood told credit union officials during a recent conference. “In today’s financial services landscape, ATM cards, debit cards and credit cards are now standard products credit unions offer members so they have the freedom to access funds whenever they want,” Hood told attendees of the CUNA/Association of Corporate Credit Unions Payment Systems Conference April 19. “Unfortunately, the freedom of the cashless society has been violated. Data security breaches threaten to erode the trust consumers have developed in the electronic payment system if not detected promptly, prevented where possible, and mitigated when breaches do occur.” He cited Federal Trade Commission estimates that 10 million Americans fall victim to identity theft each year and has been increasing. He said he knew of 50 database security breaches since January 2005, that in aggregate affected more than 51 million Americans. Total costs to recover from a data breach averaged $14 million per company or $140 per lost customer record. He pointed to the highly publicized BJ’s data loss of more than 40,000 credit and debit cards because the wholesaler was in violation of Visa and MasterCard rules. “Credit unions, together with their insurers, have suffered more than $5 million in losses from the BJ’s breach alone,” he said. Plastic card losses for the CUNA Mutual Bond Policyholders have grown exponentially from $38.6 million in 2002 to over $100 million in 2005, Hood stressed. “The unique role that credit union insurers possess in regard to insuring credit cards could be jeopardized if this trend continues,” he said. “At some point, the cost benefit analysis will not support this product line if the industry does not aggressively attack data security and credit card fraud.” He encouraged the entire financial services community to work together to develop and implement best practices to address increased fraud. One that has made significant strides for PIN-based cards is the Card Verification Values (CVV for Visa) and Card Validation Codes (CVC for MasterCard) mandated by the card associations. Other best practices include member education, Real Time Neutral Network Scoring and around the clock fraud analysis. CUNA’s three-day conference brought top credit union executives nationwide to Washington, D.C. to learn more about payment system issues like data security breaches, payments risks, credit card frauds and electronic crimes. -

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