COLORADO SPRINGS, Colo. — Breaches may be high profile these days, but credit unions are witnessing an improvement in fraud conditions on plastic cards, according to a CUNA Mutual Group security executive.
Addressing CO-OP Financial Services annual meeting here, Joe Dillon, product executive in CUNA Mutual's Bond and Plastic Card Division, said actual CU submitted losses to the insurer in 2006 were $98.7 million up from $89 million in 2005, "but better than the originally forecast $120 million."
"While the rate of reported fraud loss growth has slowed significantly over the past year to just about a 10% increase over 2005, fraud losses are still 2.5 times what they were in 2002."
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It is evident that counterfeit and skimming losses continue to be the main culprit, he said.
"While looking at plastic card losses is never a good thing, the bright side is that the rate of deterioration of plastic card fraud losses slowed in 2006," Dillon said.
Nonetheless, the "plastic card fraud crisis continues to have a tremendous impact in the credit union space," he told CO-OP attendees.
"What we've learned is that plastic card fraud is catastrophic-type coverage–very similar to disaster-type coverage–which is top of mind right now for many credit unions as we enter the hurricane season," said Dillon. "Just like a hurricane, if you haven't yet been impacted by loss, then you've been lucky."
Dillon, pointing to CUNA Mutual data, noted that debit card use is growing, and so are the submitted losses associated with these cards. Nationally, debit card usage surpassed credit card usage for the first time.
CMG has said that increased debit card losses correlate with increased usage:
- 2004 42.3% of submitted loss dollars
- 2005 45.5% of submitted loss dollars
- 2006 64.2% of submitted loss dollars
In comparison, credit card submitted losses have dropped as a percentage of total submitted loss dollars: 52.5% (2004); 49.8% (2005); and 32.4% (2006).
"There is likely a very strong correlation between the credit card improvement and the implementation of security best practices," he said. "However, we still have not witnessed the same best practices implemented with debit card programs."
In 2006, he continued, "we saw submitted losses specifically in the area of counterfeit trend downward each quarter. However, the breaches continue to lead to an unacceptable percentage of counterfeit losses–76.7%."
In closing, Dillon said, "It is important to remember that we cannot point fingers at each other, but it is about working together to defeat the fraudsters.
"Together, we have made significant progress," he said. "However, without question, plastic card fraud continues to be on the rise, and it is critical that credit unions actively manage their plastic card exposure to stay ahead of fraudsters."
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