SAN DIEGO, Calif.-When a member living in San Diego buys a couch in Los Angeles with a credit card, something may be wrong.

"Big purchase spending will normally be close to home," said Alejandra Klemaske, manager of support services at California Coast Credit Union. "Even though San Diego is close to Los Angeles, normally a large furniture purchase would be made closer to home."

Another example of likely fraud, she recalled, "was when we had some fast food merchants showing up for $200 to $300 in charges for fast food out of state. We immediately lowered the limits to $50 for that type of merchant within our zip distance tables until we saw the fraud trend change."

California Coast doesn't always put an immediate stop-payment on a purchase such as that, but the steps to take are laid out in advance via First Data's Falcon fraud detection system, now accessed through The Members Group, Des Moines, Iowa.

CCCU has been using Falcon since its inception more than 10 years ago. "Before Falcon we didn't have any system. Any monitoring was done manually," she said. "We weren't experiencing the fraud problems we have today. Making the counterfeit plastics didn't happen then like it does now. It's a two-way process. In the beginning we did a lot of adjusting. They set it up in the beginning, but they are in Iowa, and the fraud patterns we see in California are different. We see all the fraud coming in because we process all disputes and chargebacks in-house. Falcon pretty much tells us a normal spending pattern."


The Notification Process

Klemaske said California Coast's fraud exposure is really monitored by TMG. "They notify members and update the members card record once they've verified the transactions in question with the member. If it's fraud, TMG blocks the card and we pull a daily report of cards blocked. By then the member usually has contacted us directly as well, because they want the money back in their account."

"Falcon has gotten more sophisticated over the years," Klemaske added. "It has allowed us to make more changes."

As an example, Klemaske cited changes to the CU's Zip distance strategy, which sets credit card purchase parameters in terms the type of fraud occuring and the miles from the member's home.

"We are notified frequently by Visa and MasterCard of card compromises," Klemase said. "We want the member to be able to continue to use their card until we can get a new one in their hands. We notifiy TMG's Falcon team and they place the compromised cards in a restricted category to limit fraudulent type of transactions while we are in the process of notifying the member and replacing the card."

If the CU is notified of a compromise just before a three-day weekend, she said, "We wouldn't want to block the members cards but by putting them in the 'compromised strategy.' The Falcon system monitors the cards closely while we begin the process of getting new cards out. "

Klemaske said California Coast wants to address fraud without unreasonably inconveniencing members. "It's all about the balance," said Klemaske. "We want to improve the balance to accomplish more approvals and less fraud. We estimate how many members would be impacted before we set limits."


Instant Card Issue

With proper fraud monitoring there is no need for the process of issuing credit cards to be lengthy and cumbersome, she said. "With instant card-issue technology we can issue the plastic and the member can use it immediately on a pin basis. It's no different if it's system issued. Once the card is in the system Falcon is ready to go 100%."

TMG recently added some new enhancements to Falcon. "An example is the ability to send members text message instead of the phone call. Another is having a system in place where we can see transaction on screen. We haven't agree to do them yet."

In any event, "once a week we make some kind of change in Falcon," she said, either a simple user-configured change or a more significant customization of the system. "That is key to keeping up with new fraud threats.

Klemaske said fraud loses were lower in 2011 even though the volume of card transactions went up."

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