Credit, debt and security

Posted on October 14, 2009. Filed under: All, forensic, life | Tags: , , , , , |

Sitting at home with nothing but the radio and daytime TV for company is an interesting experience. I tend to keep the TV on while I’m working just to have some background noise and movement.

One thing I’ve noticed recently, though, is that there’s a steadily growing number of adverts for “pre-paid credit cards”. Let’s just review that for a moment – pre-paid credit cards.

Now – a normal credit card is really a debt card – i.e. a token which represents a notional sum of money which someone is willing to lend you, and in the UK such things are governed by the consumer credit act. This makes the lender jointly responsible with the retailer and can give a handy degree of protection if something goes wrong with a purchase.

Then we have debit cards – which are a mechanism for getting access to such funds as are available in a bank account and nothing more, unless an overdraft has been agreed. These are not governed by the consumer credit act.

So, where do pre-paid credit cards lie ? Well – the process is simple – the user “loads” cash onto the card, just like making a deposit into a bank account – in effect, giving the card company an interest-free loan. When the card is used, only the available balance in the account can be spent. These cards are being marketed as a way of controlling your own spending without having to carry cash.

So what is the card ?

To me, it looks very like another form of debit card with none of the consumer protection of a true credit card and fewer of the checks required to open a bank account.

I’ll go further – the adverts seem to be targeting the age group who traditionally have problems getting credit cards because of age and low income. These cards look like real credit cards and can be used in much the same way BUT have less protection – even less since chip & PIN was introduced.

Ah, chip and PIN – I hate this system. Under the old scheme where the bearer had to sign the slip, the retailer could be held liable for fraudulent transactions because it could be claimed that they had failed to check the signature properly. With chip and PIN the responsibility shifts and the first claim is that the card holder has not protected the PIN properly. Don’t get me started on abuse of CVV for mail order and Internet transactions…

So, now we have a card with low initial requirements, no consumer credit act protection and nothing significant in the way of proper anti-fraud mechanisms.

Oh dear. I can see at least 6 criminal activities which would benefit from these cards already.

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7 Responses to “Credit, debt and security”

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So essentially, I’m guessing the idea is to have the functionality of a credit card (in terms of where it can be used, and what for) without the ‘hassle’ of a credit card (debt, overspending, dameged credit ratings, etc. – and also the governing legislation as you suggest)? This to me would basically suggest a Debit Card that can be used in more situations, in more locations – high street and online – with a variety of additional uses but no increase in security to go with it. Do I sense a potential boom in fraudulent activity here, or have these things been around for a while?

This certainly may well be relevant to my interests.. Academically, that is.

Well – that’s what my point is – these things are being marketed as CREDIT cards – when they are far more like debit cards. So – it may be that they can be used in more situations, though I find that hard to believe, but without the protection afforded by a credit agreement in the UK. The only saving grace that I can find is that the maximum that can be lost is the amount “loaded” onto the card by the user. However, I can envisage situations where cash is loaded on for the purposes of money laundering, or generating a fake ID, and a few others too.

Just been checking it out on a major provider’s website, a few interesting quotes:

“More secure and convenient than cash or cheques” — Really?

“Internet access to balance, account information and transaction history”

“You may need to provide proof of your identity and your address when applying for a prepaid card – but that’s all” — ‘May need to’? Proof of address? Let me guess, some letter with the address on?

“Everyone can get one – there are no credit checks or any other information that you need to provide” — Eveyone? This seems a perfect way of funding crime – Money is place on the card, card is passed on to whomever. There seems to be a very limited amount of information stored on the owner of the card. If they were used as a convenient way to finance crime, that’s less information to trace it back to an owner – All there seems to be is a name, address and transaction history associated with the card. Apparently, the cards can also be obtained from ‘financial institutions, merchants, on-line and from kiosk locations.’ ‘Kiosks’?

“A lost or stolen card can be stopped and the balance transferred to a replacement card. Terms & conditions apply” — Okay, so these things are described as being ‘quick, convenient and easy to use’ – how likely is it that a card can be stopped before a substantial amout of damage is done?

and they have been available on online auction sites for years…now tell me how that prevents fraud again ?

Fraud prevention? That’s taken a back seat in favour of convenience, for both the customer and the financial institution, it would seem.. In fact, it’s further back than that – it’s actually lurking somewhere in the car boot within the obligatory dusty cardboard box containing rusty tools and a nylon rope for apparent use in roadside emergencies.

I don’t think the reform being considered by Congress goes far enough because I don’t think they (and we) know the extent to which bankers will go to get their way. On suspicious practices at amcore bank in IL, I recommend the following:
http://euandus3.wordpress.com/2009/11/05/advantage-banks/

euandus2 – my thoughts were prompted by things happening in the UK where, it seems, we have a bit more regulation than you do in the US, However – the use of any sort of “card” system, be it debit or credit clearly has an underlying problem – the user can’t “see” the money being spent – and for some this leads to increasing debt with no real hope of ever paying it off. Some of this is clearly down to unrealistic minimum payment calculations too, of course – and sceptics would suggest that the banks like to keep these low to maximise their income.


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    This is the weblog of Angus M. Marshall, forensic scientist, author of Digital Forensics : digital evidence in criminal investigations and MD at n-gate ltd.

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