July 1, 2010 at 8:01 PM ET
There's a new reason to check your credit card bills carefully every month. The Federal Trade Commission this week asked a U.S. court to stop an elaborate credit and debit card scam that has already hit more than 1 million victims with tiny charges -- some as small as 20 cents each. The identity theft scam lasted nearly four years, according to the FTC's complaint. In the end, more than $10 million was moved out of the country and into bank accounts in Lithuania, Estonia, Latvia, Bulgaria, Cyprus and Kyrgyzstan, it said. In many cases, the charges were so small that consumers didn't notice them, and paid their bills.
"The vast majority of consumers ... either do not notice these charges, misunderstand them, or do not file formal complaints with their credit or debit card issuer to challenge the charges," the complaint reads.
The FTC said it doesn't know where the stolen credit card numbers came from, but the lawsuit filed on Monday offes a rare glimpse of the efforts by overseas criminals to turn stolen cards into cash.
According to the complaint, criminals managed to set up nearly 100 fake U.S. corporations, and use the firms to set up fake credit card merchant accounts. Then, they were able to charge and collect credit card payments.
The firms were located all over the U.S. -- New World Enterprises in New Jersey, SMI Imports in Florida, Parts Imports in Louisiana, Bend Transfer Services in Bend, Ore., for example.
Consumers would see names like Alpha Cell, Image Company, or United Services on their credit card bills next to the charges, along with an 800-number. Consumers who called to complain usually found the number was disconnected.
In order to create the appearances that the phony firms were based in the U.S., the criminals hired 14 "money mules," unwitting accomplices who helped move cash in and out of the country.
The mules were recruited through job postings delivered as spam messages. The e-mails said an "international financial services company is seeking a U.S. finance manager," according to the complaint. The mules were then directed to open limited liability corporations, and to open bank accounts. After money arrived from the credit- and debit-card charges, the mules transferred the money from their bank accounts to accounts in the Baltic States.
A key element of the scam, however, was the indifference shown by consumers whose credit cards were charged.
"In many households, one person handles paying the bills for the family, while two or more people may be using the same credit or debit card account. It's easy for a small charge to fall through the cracks," said Karen Barney, a spokeswoman for the Identity Theft Resource Center. "These criminals depended upon consumers failing to verify each charge. They purposely kept the charges small, so as to not bring attention to their crime."
While the businesses and accounts associated with the civil complaint have been shut down by a U.S. District judge in the Northeast District of Illinois, the Federal Trade Commission does not know who was behind those companies -- they are named as John Does in the complaint. So it's likely the crime is ongoing, using other fake firms and money mules.
RED TAPE WRESTLING TIPS
The Identity Theft Resource Center offered several tips for consumers to keep from being a victim of a small-time credit card scam:
•When reviewing monthly statements check off each item as you confirm and verify each transaction. If there is a discrepancy, immediately report it to your credit card company or financial institution.
•Check your accounts frequently and question any purchase you do not recognize.
•Implement a system of tracking purchases that works for your family. For instance, everyone might put the receipts in one basket or drawer to facilitate tracking purchases.