U.S. Justice Dept Joins The Target Credit Card Data Breach Investigation

The investigation behind Target’s data breach, which affected 40 million customers and is one of the largest hacking incidents in retail history, just intensified. The U.S. Justice Department has joined the hunt for the perpetrator, which already includes the FBI and the Secret Service, which usually oversees the federal government’s credit card fraud cases.

U.S. Attorney General Eric Holder told the Senate Committee that his office is trying to find the hackers who are responsible for the data breach, as well as anyone using stolen data to commit credit card fraud.

Between Nov. 27 and Dec. 15, credit and debit card numbers from 40 million Target customers were stolen. Then earlier this month, Target said that up to 70 million additional customers also had personal information stolen, including email addresses and phone numbers.

Last week, the FBI warned U.S. retailers to prepare for more data breaches involving the same kind of malware used against Target, which harvests data from point-of-sale systems, including cash registers and credit-card swiping machines.

Target is not the only company affected. Neiman Marcus also said that its data had been breached, with 1.1 million customer cards exposed, and Reuters reports that several other retail chains have also been affected. The FBI said that the malware used, RAM scraping, is becoming increasingly difficult to track down because one variation, Alina, is frequently updated remotely.

TechCrunch’s John Biggs recently wrote a post with more details about the specific form of malware used on Target, which grabs sensitive data from point of sale terminals. Data security expert Brian Krebs found that the version of the software that appeared on Target computers had been designed to hide itself from anti-virus software. He also traced it to a programmer called Antikiller who sold it on hacker forums.

“The accessibility of the malware on underground forums, the affordability of the software and the huge potential profits to be made from retail POS systems in the United States make this type of financially motivated cyber crime attractive to a wide range of actors,” the FBI wrote in a confidential report that was sent to retail companies.

Target’s data breach has far-reaching implications. In addition to the $3.6 billion fine the corporation is liable for, retail companies now have to deal with eroding customer confidence about how they manage their credit card information.

Article Source:  Shu, Catherine. "U.S. Justice Dept Joins The Target Credit Card Data Breach Investigation." TechCrunch. AOL Inc., 29 Jan. 2014. Web. 02 Feb. 2014.

Getting Credit Card From Your Local Bank May Be Best Bet

Assuming you don’t keep your money under your mattress, you may have noticed that the flow of credit card offers from banks where you have accounts has been getting heavier. Rather than chuck these offers unopened, it could pay to take a look.

Some of the nation’s biggest banks are focusing on building up their credit card portfolios by getting their plastic into the wallets of existing customers. To make the sale, they’re revamping their cards and offering extra rewards.

“I am not going to be satisfied until every creditworthy customer who calls us their bank carries our credit card,” Wells Fargo WFC -1.54% CEO John Stumpf said during a recent conference. At last count, only 37% of the bank’s 70 million customers had a Wells Fargo credit card. So to turn things around, the San Francisco-based bank is developing a new line of cards with American Express AXP -1.85% (available mid-2014) and Visa V -2.47% Signature, in addition to completely revamping its credit card rewards program.

“We want to get [customers] excited and give them products that are financially helpful,” said Brent Vallet, Wells Fargo’s Head of Consumer Credit Card, Lines and Loans business, during a phone interview. “We know there’s a tremendous opportunity within our base.”

Similarly, U.S. Bancorp will unveil a brand new line-up of American Express EXPR -1.2%cards later this year, and has said it will focus on marketing them to existing customers.Bank of America BAC -1.06%, which has steadily rolled out cards with (banking account) customer-only perks over the past two years, has announced a strategic and renewed effort to get these into the hands of existing customers.

Before these recent initiatives, the big banks’ in-house credit card businesses were generally pretty stagnant. Bank of America, for instance, didn’t see a spike in new credit card sign-ups until the last quarter of 2013, when it issued more than 1 million new cards, the majority to existing customers, according to a spokeswoman.

The timing of the new big bank push is hardly surprising. After the financial crisis hit in 2008, consumers went on a debt reduction diet. Banks, too, sheltered in place and avoided taking on new risk, particularly as they focused on cleaning up their balance sheets.

Now consumers are re-gaining the confidence to borrow; credit card debt surged $3.98 billion in October and $457.8 million in November, reaching the highest level in three years. With credit card delinquencies and charge-offs down across the board, banks are also exhibiting a growing appetite for this type of lending, Indeed, for many banks, credit card revenues have helped offset losses in mortgage holdings, recent earnings reports show.

Which brings us back to the banks’ push to peddle credit cards to existing customers, and why those consumers should actually consider such offers. For banks, the advantage is obvious. “They know the good guys,” says payments industry researcher Robert Hammer, CEO of the Card Knowledge Factory. “They know who is good and who is bad risk, from card usage to repayment behavior.” Existing customers also represent an opportunity to save on marketing costs and build on the relationships they’ve already cultivated. “Many [customers] have mortgages with us, so we have some knowledge of the mortgage relationship, and also the deposit relationship. They’re doing business with us,” said Vallet.

Banks stand to make money from credit cards in two primary ways: the interest on carried balances (at an industry-wide average rate of 15.06%) and swipe fees on card purchases. So even if you’re the type who pays in full every month, selling you a credit card can be profitable.

So should you take the bait? If it’s a card that meets your needs and is competitive in its own right, as many are, the extra rewards can be a final selling point. To help you decide, here are the perks that your regular bank will throw your way if you sign up for their card:

Bank of America:

• BankAmericard Privileges with Cash Rewards promises 50% greater cash rewards if you deposit the rewards into a Bank of America account. This turns your $25 cash back into $37.50.
• BankAmericard Travel Rewards touts a 10% bonus points award for existing customers. It’s based on your total spending: by charging $10,000 to the card in a year, you’ll get an extra 1,000 points added to your account.
• The BankAmericard Cash Rewards line offers 10% greater cash rewards for existing customers. This boosts your $25 cash back to $27.50.
• BankAmericard Better Balance Rewards gives existing customers a $20 annual bonus.

Chase

• Chase Freedom offers checking account holders an extra 10% bonus on all cash back earned at the end of each year.

PNC:

• All three of PNC’s credit cards — the PNC CashBuilder, PNC points and PNC Flex — offer extra perks (like better rewards rates or bonus points) if you have a qualifying bank account.

U.S. Bank:

• The $49 annual fee for FlexPerks Travel Rewards is waived for two years if you have a platinum checking package; other folks only get one year off the hook.
• The Cash+ card offers an introductory cash bonus exclusively for platinum checking customers. Collect $50 in cash back if you spend $2,500 in the first four months of having the card.
• FlexPerks Reserve and FlexPerks Travel Rewards have extra bonuses for high net worth clients who have a financial advisor at U.S. Bank. For FlexPerks Reserve, expect a 50% points bonus on the amount spent each month. For FlexPerks Travel Rewards, there’s a 25% points bonus on the amount spent each month.

Wells Fargo:

• The new suite of American Express cards will feature incremental rewards based on the level of spending you do with the bank, according to Vallet.

The last thing to consider — if your only credit card is with your primary bank — is whether you’re asking for trouble if the rubber ever meets the road. Say your bank decides to cancel your card without notice, which they reserve the right to do, whether you’re a loyal, longtime customer or not. Suddenly you’re left in a lurch until you can get another card. Or, say your bank tells you they’re going to hike your interest rate or lower your credit line upon a reassessment of your risk. This could be because they’ve adjusted their risk formula or you’ve gotten riskier. Maybe you recently missed a mortgage payment — on a mortgage carried by your bank. They have direct and speedy access to that information, rather than having to get it through a credit bureau, at least “assuming there’s communication between the lending arm and the banking arm,” said Ruth Susswein, Deputy Director of National Priorities at Consumer Action.

What it boils down to: Think about keeping a card outside your bank, too, just in case. “You wouldn’t want to only rely on one friend your whole life, you want to have options available to you…so it might be helpful to do business with more than one company,” said Susswein. “Two is better than one.”

Article Source:  McGrath, Maggie. "Why It Could Pay To Get A Credit Card From Your Regular Bank."Forbes. Forbes Magazine, 23 Jan. 2013. Web. 23 Jan. 2014.

Hefty Bank Fees Waylay Soldiers

Banks That Market to U.S. Military Are Among Top Collectors of Fees 

 

Army veteran Charity Williams says she racked up overdraft fees at her Fort Hood National bank while caring for her children. Eric Kayne for The Wall Street Journal

Fort Hood National Bank lets soldiers overdraw their accounts by hundreds of dollars at its seven branches on the Fort Hood U.S. Army base in Texas. It charges them up to $35 for each overdraft.

Not long after Samantha Smith started her customer-service job at the bank in 2010, she noticed she spent most of her time on soldiers struggling with those fees.

The bank disclosed the fees, she says, but many soldiers didn't understand it would charge them $35 repeatedly, even for small debit-card transactions. When their Army paychecks arrived, the bank withheld overdrawn sums and fees, often leaving them short of funds and vulnerable to more overdraft charges, she says.

"They could never catch up. It was awful," says Ms. Smith, who left the bank a year later. "These guys are 18 years old and they never really managed money. The bank knows that." Fort Hood National officials didn't respond to inquiries.

The overdraft-fee issue among soldiers isn't unique to Fort Hood. "It's the biggest wolf outside the door" financially for many military personnel, says Steve Abbot, a retired admiral who heads the Navy-Marine Corps Relief Society, a nonprofit that helps financially strained personnel.

Civilians also struggle with bank fees. But some banks that market heavily to the military are among America's top collectors of such fees.

 

A Wall Street Journal analysis of bank filings found that Fort Hood National and three other banks that have on-base branches were among the top 10 U.S. banks in terms of service-charge income as a percentage of deposits in the 12 months ended Sept. 30.

Officials at the U.S. Army, which runs many of the bases at which these banks operate, say they aren't aware of any issues with overdraft fees at those banks or in its wider banking program.

Among the other six banks in the top 10 in the Journal analysis of almost 7,000 banks with more than $5 million in deposits, three have head offices near major military bases and share ownership with at least one of the four on-base banks flagged as having high fees.

The filings don't break out overdraft charges. But federal regulators generally estimate that overdraft fees make up the majority of bank service charges. Moebs Services Inc., a banking research and consulting firm, estimates the figure is close to 75%.

Across the U.S., military posts typically have one on-base bank and one on-base credit union, ranging from small local players like Fort Hood National to big institutions such as Bank of America Corp. Each base sets the maximum fees its financial institutions can charge.

The bank with a presence on the most domestic bases is Armed Forces Bank N.A., with branches on 35, according to the Association of Military Banks of America. Bank of America is runner-up, with branches at 12.

Armed Forces Bank, based at Fort Leavenworth, Kan., was among the top 10 banks in the Journal analysis. Its fee income was 5.6% of funds on deposit and averaged $234 per account, more than four times the $56 weighted average for all banks in the analysis.

The bank is part of privately held Dickinson Financial Corp. of Kansas City, Mo., which controls four other small banks in the top 10. They include several banks with branches on or near bases and the bank with the highest fee ratio, Phoenix-based Sunbank NA, whose website says it has 14 branches in Wal-Mart stores. Dickinson officials didn't respond to inquiries.

At Fort Hood National Bank, service charges were 6.8% of funds on deposit and averaged $328 per account, the Journal analysis found.

Bank of America's fees nationwide were 0.5% of deposits and averaged $82 per account. A Bank of America spokeswoman declined to disclose fee data for its on-base banks but says overdrafts have been "greatly reduced" for its customers, including military members, since it stopped allowing overdrafts from debit cards in 2010.

Overdraft programs can help customers avoid bounced-check charges from merchants and hits to credit ratings. But for many chronic users, critics say, overdraft fees are almost indistinguishable from short-term loans with ultra-high interest rates.

In a 2008 report on overdraft fees, the Federal Deposit Insurance Corp. pointed out that a $20 debit-card transaction incurring a $27 overdraft fee repaid in two weeks equates to an annual percentage rate, or APR, of more than 3,500%.

The Pentagon considers debts incurred by military members to be a significant morale and readiness issue. Much attention has focused on payday lenders that allegedly prey on military customers with high-cost loans. Congress cracked down with the Military Lending Act, which, starting in 2007, limited to 36% the APR interest on many payday-style loans to military members.

Since then, overdraft programs have replaced payday lending as the leading financial problem for many military personnel, says Adm. Abbot of the Navy-Marine relief society. Some financial institutions serving the military have reined in overdraft fees, he says, while others are engaged in "predatory or punitive overdraft practices."

Cpl. Rosalio Montes, a Marine at California's Camp Pendleton, sought help last October at the Navy-Marine society after getting into an overdraft hole. Needing $500 for a family emergency, he used his overdraft privilege to withdraw $500 from his Navy Federal Credit Union account. He expected a $20 fee, which he figured he could pay after his next paycheck.

But after payday, Cpl. Montes found the bank had taken out the $500, plus $60 in overdraft fees. The fee tripled because the ATM limited his withdrawals to $200, requiring him to take the cash in three chunks. He says he was "in too deep" and couldn't support his wife and children.

A spokeswoman for Navy Federal, which has branches near the base and many others in the U.S., says it doesn't comment on individual customers but prides itself on having some of the industry's lowest fees. Credit unions weren't part of the Journal analysis. Navy Federal's filings show its fees were 1% of deposits and averaged $44 per account in the same time period.

The Navy-Marine society, which introduced the Journal to Cpl. Montes, provided him with financial aid. The society's Camp Pendleton office typically sees four or five service members a day seeking help for overdraft and similar problems, says Meredith Lozar, the office's director.

The Army says its own emergency-relief offices, which it runs, haven't seen significant overdraft problems. Army officials declined requests to interview relief officials at two large Army installations where the Journal analysis showed banks with high fee income.

A 2011 Army study found average fees at on-base banks, including for a single overdraft, were well below civilian-bank averages.

Eric Reid, director of the U.S. Army Financial Management Command, praises on-base financial institutions as a "bulwark against those outside the gate that are trying to gouge" soldiers. Among the services the Army requires the banks to provide, he says, is free financial-education training.

Mr. Reid says it isn't surprising that military banks are more reliant than civilian ones on fee income, because they do few mortgages or commercial loans. It is reasonable to let banks recover the cost of "special processing," he says, if soldiers get into overdraft problems. "The real heart of the issue" is to provide financial education to soldiers so they avoid trouble, he says.

Amid a fresh Pentagon review of the Military Lending Act, the Center for Responsible Lending and other consumer groups have together argued that overdraft loans at banks serving the military should be subject to the law's 36% rate cap. In a letter to Defense Secretary Chuck Hagel in August, the groups said overdrafts "extend credit to service members at abusive rates and terms that mirror payday loans."

The American Bankers Association and five other banking groups opposed those measures, arguing in an August letter to the Pentagon that overdraft loans are among the few options available to those who have trouble managing their finances.

Curtailing certain overdraft practices, they wrote, would "further discourage depository institutions from maintaining an on-base presence" and make service members more susceptible to outside predatory lenders.

A Defense Department spokeswoman says the Pentagon is reviewing the issue and is drafting a "revised rule regarding credit protections" likely to be released in the first quarter of 2014 for public comment.

Since 2010, U.S. banks have been required to get customer assent to charge overdraft fees on debit-card transactions and ATM withdrawals.

Some banks go further. USAA Federal Savings Bank, which doesn't have on-base branches but serves many active-duty military and veterans, doesn't allow overdrafts with debit cards. It limits its $25 overdraft fees to two a day on other types of withdrawals. USAA's fees were 0.3% of deposits and an average of $19 per account in the Journal analysis.

Of the top 10 banks in the analysis, nine are controlled by one of three concerns: Dickinson; JRMB II Inc., of Lawton, Okla.; or First Community Bancshares Inc., of Killeen, Texas. The other, Woodforest National Bank, of Woodlands, Texas, is controlled by an employee stock-ownership plan, its filings show. Woodforest, which in 2010 reached a settlement with bank regulators to repay $32 million to consumers allegedly harmed by its overdraft practices, declined to comment.

Fort Sill National Bank, which is based at Oklahoma's Fort Sill Army base and also has branches at five Air Force and Marine bases, is among the top 10 banks. The privately held Lawton, Okla., bank also has dozens of civilian-oriented branches inside Wal-Mart stores.

The bank charges up to seven overdraft fees per customer a day. That is among the highest in the industry, although its overdraft fees are among the lowest, at $19.50 a transaction.

The bank's fees in the 12 months through September totaled $51.6 million, the Journal analysis found, an average of $620 per account and 18% of the funds on deposit. Its per-account service charges were 10 times as high as those at Fort Sill Federal Credit Union, Fort Sill's other on-base financial institution.

Fewer than 15% of Fort Sill National Bank's branches are on military bases, says John R. Davis, CEO of the bank and an officer of its parent, JRMB. One reason the bank's fees appear to be high as a percentage of deposits, he says, is that its typical customer has low-to-moderate income and carries a small bank balance.

A "large proportion" of its fees come from overdrafts, but customers incur overdraft charges only if they have signed up for that service, he says. "Our customers choose to bank with us, because many of our fees are lower than our competitors."

As for questions about the bank's high average fees per account, Mr. Davis says many people spend more than that annually on cable TV. "Why don't we tell the soldiers how much they can spend on cable TV?," he says.

Fort Sill National Bank has won the Army's Distinguished Bank Service Award 10 times since 1990, most recently in 2012.

Fort Hood National Bank is a 10-time winner of the same award. The chairman and CEO of the bank's parent, First Community, is listed in Texas records as 82-year-old Jerold B. Katz of Houston, who also runs GC Services LP, a large debt collector. Mr. Katz didn't respond to inquiries.

The bank—seven of its eight branches are on the Fort Hood base—offers free checking and charges $19 for the first overdraft in a rolling 12-month period, $29 for the second and $35 for additional ones, in compliance with the fees allowed under its agreement with the base.

Charity Williams, an Army veteran, says she started banking at Fort Hood National in 2009 when she was in the National Guard and not long before her husband was deployed in Iraq.

She says she later lost track of their bank account amid caring for two young children and started getting hit with $35 overdraft fees, including on small debit-card overdrafts. "If you use your debit card and the money's not there, they should cut you off," she says. There were times, she says, "when I was only 50 cents or $1 off, and they charged me $35."

She says she switched most of her banking to another bank. She later joined a putative class-action lawsuit against the Fort Hood bank in U.S. District Court for the Southern District of Texas. The suit was dismissed in November 2013, largely because many claims were too old or subject to arbitration.

Michelle Atkins, a supervisor at the bank until 2010, says overdraft responsibility lies with customers. "They're not responsible enough," she says. "They know when their check is going to hit, and they go and spend it."

Fort Hood National offers a zero-interest "Fresh Start" loan that lets customers pay large overdraft balances over time. In an indication of the volume of overdrafts at the bank, a 2012 bank-regulator report found 22% of its consumer-loan portfolio consisted of Fresh Start loans.

 Article Source:  "Contactless Payments Market [by Solutions (Payment Terminal, Business Management, Card Issuance, Anti-Skimming), by Services (Consultation, Integration, Value Added Services)] - Global Advancements, Market Forecasts and Analysis (2013 - 2018)." Contactless Payments Market by Modes, Solutions & Services. MarketsandMarkets, Jan. 2014. Web. 02 Feb. 2014.