Debit card readers compromised at Michaels stores

This post comes from Mark Huffman at partner site ConsumerAffairs.com.

Michaels, a chain of craft stores, said debit card readers at 80 of its stores in 20 states show signs of tampering. That means consumers who used debit cards in those stores may have exposed their bank information to criminals.

Michaels said the 80 stores are located in Colorado, Delaware, Georgia, Illinois, Iowa, Massachusetts, Maryland, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, Utah, Virginia and Washington. You can find a complete list of the stores here (.pdf file). Post continues after video.

Consumers who have recently used debit cards at a Michaels store in the above states should immediately contact their bank's fraud department and report it. By issuing a new card and PIN, the bank may be able to thwart attempts to break into consumers' bank accounts. Michaels said customers who used credit cards should monitor their statements for fraudulent transactions.

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The company said the compromised swipe pads have been removed and it will replace all 7,200 of its debit card keypads at all its stores. While the transition is taking place over the next two weeks, stores will accept only cash, credit cards or signature-based debit cards.

Criminal access to debit card data is much more dangerous than access to credit cards. With information from debit cards, crooks can empty a bank account. With credit card data, they can only make purchases, which the credit card company can disallow once they are shown to be fraudulent.

Electronic transactions have raised potential fraud to a whole new level in recent years. Keypad skimmers have become more common at gas pumps and ATMs. A skimmer is a keypad device that is placed over the real keypad by a scammer. The device captures the consumer's debit card information and PIN when they are entered.

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It's not clear how the Michaels keypads were compromised, because neither the store nor the police are providing any details.

Security experts say keypads could have been replaced with skimmers by criminals posing as repair personnel. It's also possible the pads weren't replaced at all, but the network that linked them together was infected by malware, allowing the thieves to effectively take control of the devices.

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