1. Make copies of everything in your wallet, front and back. This is actually a proactive step that you should do right now, before you run into trouble. That way you’ll have a record of what was lost and how to contact the issuers. Just be sure to keep these copies in a safe place.
2. Call your card issuers and report the loss. In order to minimize your liability, you should make these calls as soon as you realize that there’s a problem. Can’t remember what was in your wallet? No problem. Just look at your photocopies (Step 1). You might also consider following up with a written account of what’s happened, when you reported it, etc. They should be able to shut down your old accounts, and also issue new cards.
3. Place a fraud alert on all three of your credit reports. I’ve posted detailed instructions for placing a fraud alert on your credit record in the past. The good news is that the three agencies should share this information, so you really only have to contact one of them. If you detect fraudulent activity, you might want to extend this to a seven-year victim statement.
4. If your Social Security card is missing, report it. Call the Social Security Administration at 1-800-269-0271. Better yet, remove your Social Security card from your wallet right now. No sense in carrying it around with you. Same goes for your driver’s license — if you lose it, call your local DMV. Pronto.
5. File a police report. Last but not least, report the loss/theft to your local law enforcement agency (or the police in the area where it occurred).

That’s it. Hopefully you won’t run into any problems, but if you do, this list of tips should help you steer clear of any major problems.

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So what’s the deal? This could be the result of scammers trying to steal a paltry $0.25 from millions of people (do the math, it adds up) or it could be a sign of something far worse… Scammers testing out a bunch of credit card numbers to see which ones are real/active, with the ultimate intent of using them later for much larger charges.

My Advice to You

Check your credit cards bills. Not just for charges from Adele Services, but on an ongoing basis. Be on the lookout for anything that doesn’t look right, and contest any unfamiliar charges no matter how small they are.

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I know you can get free credit reports, but I’ve already done that in the last 12 months. I’m pretty sure someone has opened credit cards in my name and I want to reorder, any ideas on where to get credit reports cheaply?

This is a great question, and something that I’ve written a bit about in the past. If it were me, the first thing that I would do would be to place a fraud alert on my credit report. This should stop (or at least hamper) and further fraudulent activity.

In addition, placing a fraud alert entitles you to a free hard copy of your credit report from each of the three credit reporting bureaus within a few days. This will allow you to check for fraudulent activity.

If your credit report confirms your suspicions, then you should (at the very least) extend your alert by placing a seven year “victim statement” on your report. If you want to do one better, you could freeze your credit record, which stops all credit-related activity in its tracks. Beyond that, I’d recommending filing a complaint with the FTC and then contacting your local police.

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Fast forward to this morning… I was taking a shower when my wife came in to say that we had received an automated phone call saying pretty much the same things about our Citi Driver’s Edge MasterCard. Apparently our account details “may have been illegally obtained,” and our cards could be at risk for unauthorized use.

After having received that call, I now recall getting new cards in the mail recently. Given that we’ve shelved our Driver’s Edge cards for the time being in favor of what I consider to be the best cash back reward card, I didn’t look at them too closely when they arrived. I just figured that our old cards had expired, and they were sending new ones.

Assuming that the note enclosed with this this round of new cards is anything like the previous one, I need to activate soon, or our account will automatically be closed. After that, I’ll just toss them in the back of my sock drawer in place of the old cards.

As an aside, I’m really curious as to who’s at fault for these problems. Presumably some merchant databases got hacked, but Citi isn’t telling us who was involved.

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Apparently the hackers used a “wardriving” approach where they simply cruised through retail areas looking for vulnerable wireless networks. They then hacked in, installed sniffer software, and skimmed the credit and debit card numbers directly as transactions were processed. The information was housed on servers in the Ukraine and Latvia, and either sold or used directly by the thieves.

It’s nice to know that stores are looking out for us and going to great lengths to protect our financial data, isn’t it?

This is just one more reason that you should be keeping a close eye on your credit report and either placing a fraud alert on your credit record or freezing your credit if you see anything suspicious.

Source: The Associated Press

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IMPORTANT SECURITY MESSAGE!

Your account number may have been illegally obtained as a result of a merchant database compromise and could be at risk for unauthorized use. As a result, we have issued you a new Citi Card(s).

Please call the too-free number on the sticker affixed to the enclosed new card(s) as soon as possible. During that call we will activate your new card(s) for immediate use; this will automatically close your existing account number (the last 2 digits of which are indicated on the attached card carrier). These steps have been taken to reduce the risk of unauthorized use.

If you do not reply by the date indicated on the top of your card carrier, your existing account will be closed automatically. Please inform authorized users that this account number is being close. Also, please contact any service providers who automatically bill your account to provide them with your new account number. We regret any inconvenience that this may cause. Please be assured that Citi Cards is committed to safeguarding the security of our customers’ accounts.

Unfortunately, there was no indication of whose database had been compromised. I’m assuming that this problem wasn’t limited to Citi cards, though I haven’t heard from any other card issuers on this matter. Fortunately, we don’t really use this card for much anymore, so it won’t be hard to switch over to the new number. All of our recurring charges are on our Amex Blue Cash card.

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As a followup, I just wanted to point out a NY Times article on the same subject that claims that credit cards often transmit your data unencrypted. The test described in this article was based on a sample of 20 credit cards from Visa, MasterCard, and American Express.

Unfortunately, the article didn’t actually provide details on how many of the cards that tested failed to encrypt the data, so it’s hard to determine how widespread this problem is. Moreover, that article is over two years old, and it’s unclear (at least to me) how much things have changed with regard to the RFID technology that card issuers are using. It’s also worth noting that this study was carried out by a company that specializes in data encryption techniques (RSA), so it’s not exactly unbiased.

Nonetheless, a recent article over at BoingBoing.net talked about how to steal unencrypted data from an RFID-enable credit card using just $8 worth of gear. While others have claimed that the risks associated with unencrypted data are incredibly slim, it amazes me that credit card issuers wouldn’t implement at least rudimentary security features when designing these cards.

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For those of you that are unaware, LifeLock is a service that promises to protect you from identity theft — in return for a monthly subscription fee. For the past two years, Todd Davis (CEO of Lifelock) has been promoting the service by advertising his social security number and inviting would-be identity thieves to give it their best shot.

Well, after 87 attempts, someone appears to have succeeded. They got an online payday loan operation to give them a $500 loan in Davis’ name. Unfortunately for Davis and LifeLock, this revelation has spawned a series of lawsuits from unhappy customers for whom LifeLock didn’t work.

Customers in New Jersey, West Virginia, and Maryland are now suing Davis, claiming that his service didn’t work as promised, and that he knew it wouldn’t since the service had failed even him. Beyond the payday loan revelation, attorney David Paris claims to have found records of at least 20 other people applying for, and sometimes receiving, a driver’s license using Davis’ Social Security number.

Interestingly, LifeLock’s primary strategy is to set up fraud alerts with the various credit bureaus — in return for a $10 monthly subscription fee. But guess what? You can place a fraud alert on your credit record for free, and it only takes a few minutes.

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Here’s what they had to say about card security:

The contactless cards use secure data transmission. All information that is transmitted is subjected to 128-bit encryption.

The contactless card never transmits your credit card number. Rather, your card transmits a unique number for each transaction. If someone intercepts that number, it would be useless even if they could decrypt it.

Another thing to keep in mind is that card issuers typically extend the same sort of fraud protection whether or not you swipe your card.

The article also argued that contactless cards are faster to use. Cash transactions take and average of 34 seconds. Transactions in which you swipe your card take an average of 25 seconds. But contactless credit card transactions take an average of just 15 seconds.

Beyond all of this, contactless cards remove one major headache associated with “old school” credit cards — the magnetic strip never goes bad. In fact, I’m currently carrying around an Amex Blue Cash Rewards card with a sketchy magnetic strip. I need to call and get it replaced, but just haven’t found the time.

I’m still not sure how I feel about all of this — and I’ve never actually used the RFID feature. In fact, I just discovered that my Chase Freedom card has this ability.

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Why place a fraud alert?

The benefits of placing a fraud alert are that potential creditors should contact you at a phone number of your choice prior to approving credit applications, and also that you get a free credit report from each of the three bureaus such that you can check for fraudulent activity. Sure, you can always get a free credit report with no strings attached, but that’s limited to once per year. This gives you a second chance of checking to be sure everything is alright.

The only real downside is that some credit issuers have a fully automated approval process, and will be unable to process your application if a fraud alert is in place. This is a slight hiccup, but well worth the inconvenience in my book if it prevents you from becoming a victim of fraud. Also keep in mind that you can remove the alert in the future if you decide you no longer need it.

How do I place the alert?

Actually placing the alert is surprisingly easy. You simply need to contact one of the three credit bureaus to request the alert, and they will automatically pass the information to the other two. I ended up going through Equifax, who allows you to place the alert over the phone or via the internet.

Since I was out and about when I did this, I ended up calling them, and the process couldn’t have been easier. I simply dialed 1-888-766-0008, punched in some information (including my SSN and a portion of our street address), and confirmed the request. Within a few days I received a letter from all three bureaus confirming that the fraud alert was in place.

It’s worth noting here that Experian subjects you to a pitch for their identity protection services when you call to request a fraud alert, so I would suggest avoiding them. I’m not sure about TransUnion, but since the process was so easy with Equifax, and since they autoatically notify the others, I would suggest going with them.

What next?

The initial fraud alert is good for 90 days, but the letter that you receive will include instructions for requesting an extended alert, which stays in place for seven years Similarly, the letter will include instructions for requesting your free credit report. Also note that requesting an extended alert entitles you to an additional free copy of your credit report (for a total of two) in the twelve months following your initial request.

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