American Express Converts to a Bank

NEW YORK — Longtime card issuer American Express has received federal approval to become a bank holding company and has reportedly sought $3.5 billion in bailout money from the U.S. Treasury Department, according to the company and press reports.In an announcement of its change in status, American Express CEO Kenneth Chenault indicated that the need for capital was paramount in the decision.“Given the continued volatility in the financial markets, we want to be best positioned to take advantage of the various programs the federal government has introduced or may introduce to support U.S. financial institutions,” Chenault said. “We will continue to build a larger deposit base to broaden our funding sources. With Federal Reserve oversight we should gain greater access to the capital on offer under the current and any future government-sponsored programs. This decision to become a bank holding company does not fundamentally change American Express’ core focus on the payments industry, nor will it require any significant divestitures,” he added.The company already has two subsidiary banks, American Express Centurion Bank, an industrial loan bank chartered in Utah, and American Express Bank FSB, a federal savings bank.Card analysts say the card brand, which has traditionally focused primarily on higher end cardholders, became vulnerable to the impact of economic downturns after it changed it its card issuing model to resemble that of more traditional credit card issuers

Children a Source of Card Fraud

YORK, United Kingdom — Credit unions and other card issuers should perhaps begin warning their cardholders that a key risk to card security may reside in their own households.A survey conducted in the United Kingdom suggests that children using their parents’ credit and debit card numbers without their permission are a significant part of the online card fraud problem.The survey was conducted online for CPP Ltd., a UK firm that helps consumers protect themselves from card fraud and identity theft, with 500 adults and 500 children aged 8-16 between Oct. 27 and Nov. 2.The survey found that 20% of the children were going online with their parent’s card numbers and making purchases for the most popular gadgets, computer games and fashion accessories, without permission. A number of children also reported using their parent’s Paypal accounts to make purchases.The pollsters also found the amounts of money that the children were spending were significant, ranging from ?25 per purchase (roughly $37) to ?150 (roughly $221) each time.“Being lax with details online could not only tempt children into making sneaky purchases online, but also exposes parents to the dangers of online fraud. Web fraudsters are getting increasingly sophisticated and card-not-present fraud is on the rise. We are advising people to make sure they log out of sites when finished, to check that shopping Web sites are legitimate and to avoid storing credit or debit card details online.”More than 70% of the of the children surveyed indicated that they know the sites where their parents shop online and 20% know the passwords and user names their parents use when making purchases. Over 25% of the children bragged to researchers that their parents had no idea how easy it was for them to use their cards on the Internet.And while the children appeared to know a lot, the adults surveyed appeared to know relatively little. Only 6% reported to pollsters that their children have access to their card data online and only 2% believed their children could have made online purchases without their permission.CPP pointed out that the dangers of these practices included not just the possibility the children might spend money that their parents otherwise needed, but that the children might be more susceptible to online fraud and identity theft.