Consumers call for tougher rules to halt soaring card fraud

Date: 19/07/01

Credit card fraud is up 50% and costs the Union €600 million a year. Consumer groups say Internet customers need more protection. Renée Cordes reports

THE European Commission has given the credit card industry and law-enforcement officials three years to crack down on fraud.

But while firms are pledging to do their utmost to comply, consumer advocates are pressing for binding EU-wide regulations to keep criminals at bay.

Earlier this year, the Commission unveiled an action plan designed to combat the growing problem of fraud and counterfeiting involving plastic cards and other non-cash forms of payment, following a plea by EU leaders at the Lisbon summit last spring.

Such fraud accounts for €600 million a year in the Union. Though this represents only 0.07% of the industry's annual turnover, the problem is becoming worse. Credit card fraud rose last year by 50%, much of it due to payments made via the telephone or the Internet. "The rate of increase in fraud and counterfeiting of payment cards concerns us all," Internal Market Commissioner Frits Bolkestein said when unveiling the plan. "To date the counter-attack has mainly focused on domestic payments, but the scale of cross-border fraud means we need urgent action at a European, and indeed, international level."

Bolkestein's plan calls for improved cooperation among law enforcement authorities in EU member states as well as third countries. It also prescribes several measures, including a single phone number throughout the EU to which consumers can report the loss or theft of their cards; a new website with information on fraud prevention initiatives and links to relevant organisations; and guidelines for exchanging information on fraud prevention. The Commission also plans to establish an expert group at Union level to keep tabs on the problem and ensure that representatives from banks, Europol, equipment makers, consumers and network operators meet regularly. Bolkestein's plan was drafted in consultation with the payment card industry, national authorities, retailers, network operators and consumers groups.

Initially it will run until the end of 2003, when the Commission will report on progress and propose further action it deems necessary.

Many in the industry welcomed the move. "There's a growing awareness about fraud," said David Emsworth, head of risk assessment at Europay

International, Europe's leading payment organisation, whose bank members have issued 250 million cards. "Banks are finally recognising that fraud is a problem that hits their bottom line." He agreed that the problem needs to be tackled on an international level.

Like many of its rivals, Europay has invested heavily in technology designed to stop counterfeiters. An example of this is a programme which analyses a cardholder's buying behaviour, either in shops or over the Internet. Another tool monitors international transactions and assigns 'risk scores'.

Emsworth said that while card fraud has increased for mail and phone orders, major fears about the Internet have so far proved largely unfounded.

A survey of 15,000 Europeans conducted by Europay last year found that debit and credit cards are the preferred method of payment over the Internet for 36% of customers. However, a third of those surveyed still prefer to buy from a site based in their own country.

Even if the Commission is able to allay their fears through its action plan, some consumer groups are worried that shoppers may still be left vulnerable to deceptive practices. "We think there is a need for guidelines on the relationship between the cardholders and issuers," said Dominique Forest of EU consumer lobby BEUC, adding that the present non-binding recommendations are inadequate.

Forest said EU-wide rules are needed on liability in the case of a fraudulent charge. Today, if there is an unexplained charge, the extent of liability for both the consumer and bank is uncertain. In France, consumers have no rights to reimbursement once a transaction has been made, regardless of whether it is proved to be fraudulent.

Dominique said the situation is worse when a purchase is made outside the consumer's home country.

Credit card fraud is up 50% and costs the Union €600 million a year. Consumer groups say Internet customers need more protection. Article forms part of a survey on e-commerce.