Chelsea State Bank, FBI investigating 'widespread' fraud attack on debit card accounts

John Mann, CEO of the 113-year-old institution, said the bank and the FBI are actively trying to determine how many customers were affected.

Some 5,000 debit card customers at Chelsea State Bank had their accounts frozen over the weekend after the bank detected attacks starting in Australia.

File photo | AnnArbor.com

"We're still putting things together with the extent of our losses and ... the number of customers that were actually affected," Mann told AnnArbor.com this morning. "But it was widespread."

Mann said the bank has about 5,000 debit card holders — and those accounts were frozen after the bank discovered suspicious purchases that started Saturday in Australia. He said bank customers whose funds were misused would not be forced to accept losses and that the bank's losses would be covered by insurance.

The bank notified its customers over the weekend that their accounts had been temporarily frozen.

He said it was too early to estimate how much money was affected. The FBI declined to comment.

Chelsea State Bank has two branches on Main Street in Chelsea and one in Dexter. The bank had $196.6 million in deposits as of June 30, according to data from the U.S. Federal Deposit Insurance Corp.

The attacker tried to "duplicate existing debit card accounts" by acquiring "a good (account) number" and running "sequential numbers after that" to make purchases, Mann said.

Mann emphasized that the attacker did not gain inside access to the customer's accounts. Instead, the suspect successfully forged account numbers to make purchases. He said it's too early to know how the attacker acquired the numbers.

"It's not a computer system breach," he said.

Mann rejected the suggestion that an employee or a local thief may have been involved, since the attacks started in Australia. He also said it wasn't the "result of local merchants" mishandling accounts.

For now, all Chelsea State Bank debit card customers can't use their cards.

"In order to prevent unauthorized transactions, we were forced to freeze our entire debit card payment base, so all debit card activity is effectively suspended for now," Mann said. "We hope to have it turned back on tomorrow."

The bank is urging debit card customers to contact bank officials if they believe their accounts were compromised.

AnnArbor.com reporter Lee Higgins contributed to this story.

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.