Chelsea State Bank: 'Huge network' of criminals made 2,500 fraudulent debit card purchases
A coordinated network of criminals used Chelsea State Bank debit card numbers to make more than 2,500 fraudulent purchases over the weekend, the bank reported today.
Chelsea State Bank CEO John Mann said the early results of an investigation into the incident by the bank and the FBI indicate that the bank was targeted by a "a network of individuals spread out all over the country, if not the world."
"It's obvious that there is a huge network," Mann told AnnArbor.com.
Investigators have determined that criminals made more than 2,500 fraudulent debit card purchases using Chelsea State Bank accounts.
File photo | AnnArbor.com
The criminals made 2,539 transactions, most of which were less than $15, he said. Mann also said Chelsea State Bank was not the only institution the criminals targeted.
Chelsea State Bank, a 113-year-old institution with about $196 million in total deposits, has about 4,000 debit card customers and it's still not clear exactly how many were affected. Mann said that customers whose accounts were compromised are still unable to use their debit cards.
Customers whose accounts were not affected can now complete any transactions that require the card to be swiped, including ATM withdrawals. But, for now, they still cannot make purchases in which the card is manually entered and not swiped — such as Internet-based transactions.
AnnArbor.com on Monday first reported the news of the suspected debit card fraud after Chelsea State Bank temporarily froze all of its debit card accounts over the weekend.
"I recognize that this is a huge inconvenience for customers and we are very sorry it happened," Mann said. "I can't emphasize that enough."
Mann said the investigators have determined that the perpetrators used "fictitious cards" with real numbers and fake names. They were able to make purchases because they were not required to swipe the card or enter a corresponding pin number.
"If there were more accountability at the point of sale, these types of frauds wouldn't happen," he said. "These people don't have to show ID. There may have been a magnetic strip, but it didn't work. These cards were not swiped, they were all manual key-ins."
Mann today reiterated that customers whose funds were misused would not lose any money. They are urged to contact the bank if they suspect that their card numbers were misused.
The FBI has declined to comment on this investigation.
Contact AnnArbor.com's Nathan Bomey at (734) 623-2587 or nathanbomey@annarbor.com. You can also follow him on Twitter or subscribe to AnnArbor.com's newsletters.
Comments
swcornell
Sat, May 14, 2011 : 7:36 p.m.
This kind of fraud needs to be stopped by the vendors accepting the cards. We need to go back to the days of checks when they always asked for picture ID's. And remember at some places we had to do a thumb print!
JollyG
Fri, May 20, 2011 : 9:11 p.m.
This would be great except a thumbprint isn't any good if you don't have anything to compare it to. Besides, you don't want to go back to writing checks, trust me. Check fraud is still higher than debit card fraud AND you, as a consumer, are less protected from forgeries than from debit card fraud. In almost every case of debit card fraud, the consumer is not held liable and receives all of his money back; this is not the case with forgeries. Trust me, you want to keep your credit and debit cards.
Townie
Wed, May 11, 2011 : 1:20 p.m.
"Several years ago, I got a call from the bank. A check that I had deposited was returned, and I was about to bounce checks. They noticed I had substantial funds in savings and wanted to know if I'd like to transfer some to avoid any problems. You won't get that from the megabanks.' Window dressing and looking out for the bank, not you. Yup, these folks got hacked and didn't realize it until the FBI showed up. But then again it's not really the bank's money so they're not terribly concerned (except for the PR angle). Mr. Tibbs: Ted Nugent as an example?! Ha. If he wasn't famous he'd be in an institution.
JollyG
Fri, May 20, 2011 : 9:01 p.m.
"Window dressing and looking out for the bank, not you." No, Townie...if the bank was looking out for itself, they would wait until after items hit and charged you $300 in fees, then call and ask you if you want to make a transfer or never call you at all. ChelseaBob has it right. Small community banks are the way to go. That's why I chose to work at one in Florida 7 years ago. The board members and employees all volunteer in the community and we know our customers by name. It's really awesome to get to deliver Meals on Wheels during work hours every week. The seniors that I deliver to are very appreciative, too!
treetowncartel
Tue, May 10, 2011 : 10:14 p.m.
Cash is King!
ffej440
Tue, May 10, 2011 : 9:56 p.m.
Sounds like the banks records were hacked and they don't want to admit it. If that was the case being swiped or manual entry would make little difference. Card encoders can be bought on the internet, allowing any magnetic strip to be recoded with your bank card info. Magnetic strips will soon be a thing of the past, countries in Europe are already using a "Chp" like car keys. Most internet companies require the code from the back of the card, which would not be available if hacked. Most of these hackers are operating outside of the USA and will never be prosecuted, China , Russia and Nigeria seem to be the worst offenders.
ChelseaBob
Tue, May 10, 2011 : 8:44 p.m.
I've been a customer for 14 years. This bank offers REAL customer service, and my guess is they caught it much faster than larger, impersonal institutions would have. Several years ago, I got a call from the bank. A check that I had deposited was returned, and I was about to bounce checks. They noticed I had substantial funds in savings and wanted to know if I'd like to transfer some to avoid any problems. You won't get that from the megabanks.
clownfish
Tue, May 10, 2011 : 7:56 p.m.
It should be required that anybody using a "card" for purchases show proper ID. I am amazed that CSB has almost 200 million in deposits. I had no idea they were so well capitalized. Is that about normal, smaller or larger than a typical small town banking institution?
JollyG
Fri, May 20, 2011 : 8:51 p.m.
I agree that ID should be used in conjunction with signatures at the time of purchase. However, if the store swipes your card and they have "a signature" on the recept, they are not liable. Johnny the Crook can use Aunt Myrtle's card and sign "Mickey Mouse" on the receipt and the store is not liable for the fraud. If you want more protection, I suggest calling your congressman. As for your question regarding the amount the bank has on deposits, I can only say that you should go to the FDIC website and review their balance sheet and financial statement to see if they are actually "well capitalized". Remember to a bank, deposits are liabilities and loans are assets; to a consumer, it is the opposite. Hope this helps you.
RuralMom
Tue, May 10, 2011 : 8:02 p.m.
All of my cards say in the Signature Line "REQUIRE PHOTO ID". Period. I have copies of all my cards on file, if my card is used by someone other than me, the store/business gets tagged for not doing their job, checking the ID that goes with that card!
Mr. Tibbs
Tue, May 10, 2011 : 5:56 p.m.
Good thing the CPL laws allow me to carry large amounts cash..... I like Ted Nugents ideas of repeat offendors.....there should never be any. never was a repeat "dead offender". Like it doesn't affect each and every one of us? How much does it cost to house the illegal? and then how much does it cost to house the "legal" criminal right next to him? And then when this county and many others like San Francisco are ignoring our constitution and harboring illegals? that's OK we got money. we got jobs....we can pay for everyone illegal and otherwise. if america does not wake up soon we will wake up broke. one last question Mr. Columbo.....I thought it was illegal to aid and abet......? and why doesn't our prosecuting atty's start prosecuting them? I will tell you why. they are elected officials as well hoping to become representatives and law makers(?) as well and if you think they are not looking after each other.....
djm12652
Wed, May 11, 2011 : 2:20 p.m.
I adore Theodore, but I must ask what in the world are you talking about? And how does this relate to the bank fraud.
Jimmy McNulty
Wed, May 11, 2011 : 11:53 a.m.
So by your reasoning, a repeat traffic offender for example, shouldn't be living? How many drivers license points would require immediate execution?
clownfish
Tue, May 10, 2011 : 7:57 p.m.
yeah, huh? Putting aside the alien ranting, are you saying that the death penalty should extend to someone that steals $15?
julieswhimsies
Tue, May 10, 2011 : 7:27 p.m.
Huh?!
Greggy_D
Tue, May 10, 2011 : 5:53 p.m.
Chelsea State Bank's Fraud Department should have caught this WAY earlier during the process of the transactions.
conservative
Tue, May 10, 2011 : 7 p.m.
I believe they actually DID catch this early in the process. All fraudulent transactions were less than $15 so it was a really good effort on the banks behalf to see this and react as they did.
Tom Joad
Tue, May 10, 2011 : 5:31 p.m.
What a hell of an inconvenience. If you travel anywhere make sure you carry a few hundred dollar bills in your wallet. The threshold of fraud detection can be set very low and any unusual activity, like you traveling to see grandma in another state, can get your Visa card summarily canceled, leaving you high, dry and broke. Hence, the pocket cash back-up. The bank has to physically send you a new card if that happens.
Roadman
Tue, May 10, 2011 : 5:31 p.m.
This type of fraud and variants of it have bilked consumers and financial institutions of billions of dollars over the last several years. The only thing that will deter criminal conduct such as this is swift criminal investigation and vigorous prosecution.
Tom Joad
Tue, May 10, 2011 : 5:32 p.m.
Hard to prosecute some criminal in Moscow