Independent ATMs leave users open to fraud, higher fees, consumer groups say

Thieves have stolen account numbers, PINs

December 07, 2003|By NEWSDAY

Need to use an ATM? Go to a bank and stay away from stand-alone automated tellers.

That's what consumer advocates are telling customers in the wake of the latest fraud, in which a phony ATM in a New York convenience store left victims' wallets thousands of dollars lighter. Advocates say independent automated teller machines, which are not run by banks, are not licensed or regulated and are therefore far riskier to use.

"This is a glaring loophole in the law, which has enabled scams like this to happen," said Russ Haven, legislative counsel at the New York Public Interest Research Group. "We have brought this up to the New York State Banking Department and plan to bring it up again."

In recent surveys, NYPIRG has also found that many independently operated ATMs have higher surcharges, which it says is all the more reason for customers to stay away. Such ATMs numbered 238,000 this year, up from 67,000 in 1997, according to Jeffrey Green, editor of the ATM & Debit News trade journal.

The first discovery of a fake ATM occurred 10 years ago, when Gerald Harvey Greenfield and two conspirators rolled a phony machine into the Buckland Hills mall in Manchester, Conn., where it collected card numbers and passwords for two weeks before being rolled away. The thieves were able to steal $107,420.

One of the largest bank machine frauds occurred in Canada when thieves installed five fake ATMs in convenience stores last year throughout lower British Columbia, stole personal banking information and bilked customers of $1.26 million. Two men were convicted of the crime in September.

Although the incidence of fake ATMs is relatively rare, ATM users should inspect the ATMs that they use much more vigilantly, Green said. "People tend to just stick their card in," he said. "They should make sure there is nothing unusual about the machine that they are using."

But at least one maker of ATMs said avoiding independents is no protection. Fraud occurs at all types of ATMs, including those run by banks, said Brian Kett, president of Long Beach, Miss.-based Triton Systems, one of the largest manufacturers of independent ATMs.

As for how much of the loss consumers must bear, the consumer experts say it could be substantial. Since the ATM might not be run by a legitimate institution, it's not a likely source of reimbursement. Banks are liable only if consumers notify a bank of a loss or theft before the card is used.

Under these circumstances, consumers might not know they've been defrauded until long after the thieves have begun to use their ID and PIN numbers.

Newsday is a Tribune Publishing newspaper.

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