New legislation may provide fraudsters with legal loopholes.

The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act includes regulation that prohibits providing information about newly opened accounts before they are activated by customers, which could create an increase in fraudulent credit card applications.


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Press Release:Legislation in the works that could affect future trends in Fraud

Red Bank, Feb. 19, 2009 /The FraudBlog Newsletter/ - The current economic crisis is affecting all of us, but could it also be creating new loopholes for fraudsters to exploit?  You may be surprised to learn that some recent discussions could have a very tangible impact on fraud trends down the road. 

According to the USA Today Article entitled "Job credit checks called unfair" by Thomas Frank on 2-13-2009, five states are considering laws that would restrict credit checks by employers.  Amid the financial crisis U.S. states and government officials are calling to stop employers from unfairly screening out employees who can't pass a credit check.  For many industries that have jobs with access to money this is a necessary step to lower risk from employees with access to money such as tellers, cashiers and finance officers.  According to the Society for Human Resource Management about 43% of U.S. employers currently check job applicants for overdue payments on anything from mortgages and rent to credit cards and student loans.  While there is no correlation of employee performance to bad credit, there is implicit risk of employees with financial problems potentially being more susceptible to committing some form of internal fraud if they have the access to financial resources.  How real is this issue? If you recall our August 2008 newsletter, we reported 5 cases of employee fraud in that month alone, with 4 of those cases being embezzlement through the use of a company credit card (all cases were over $100,000 in losses) and one case of an employee perpetrated data breach.

Senator Chris Dodd is pushing legislation in the CARD ACT to change when application information can be posted into a consumer's credit file.  His argument is based on his belief that the policies of credit card issuers to post information on application attempts, instead of account activations, causes card issuers to change the consumers risk exposure thus producing higher fees and rates charged to the consumer.  Dodd stated, "Too many families are starting to rely upon short-term, high-interest credit card financing to meet basic needs". 

The most critical aspect of his plan is that the bill would prohibit providing information about newly opened accounts before they are activated by customers.  If this policy were implemented it could create an increase in credit card fraud applications. For example, a fraudster could open 10 credit card accounts, but waits to activate them until they receive all of the cards.  The second through the tenth issuer would have no idea the fraudster had already opened the other accounts when they processed these applications. This could lead to significant increases in Identity Theft per case losses.


About The Fraud Practice

The Fraud Practice,, is a privately held US LLC based in Sarasota, Florida. The Fraud Practice provides consulting services on eCommerce payments, fraud prevention and credit granting as well as prepared research and online training for payment and fraud professionals. Businesses throughout the world rely on The Fraud Practice to help them build and manage their payment, fraud and risk prevention strategies. Utilizing best practices and leveraging key partnerships, our team of industry and technical experts offer customers a single source for learning how to design, deploy, review  and integrate fraud prevention practices in their business processes and solutions.


The Fraud Practice LLC
David Montague,
President and Executive Consultant
Toll Free: +1 888-227-0402



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