Debit Cards. On April 20, 1999, while visiting her daughter and son-in-law Michael Dowdell, Carol Farrow asked Dowdell to fix her car. She gave him her car keys, attached to which was a small wallet containing her debit card. Dowdell repaired her car

Question

and returned the keys. Two days later, Farrow noticed that her debit card was missing and contacted Auburn Bank, which had issued the card. Farrow reviewed her automated-teller-machine (ATM) transaction record and noticed that a large amount of cash had been withdrawn from her checking account on April 22 and April 23. When Farrow reviewed the photos taken by the ATM cameras at the time of the withdrawals, she recognized Dowdell as the person using her debit card. Dowdell was convicted in an Alabama state court of the crime of fraudulent use of a debit card. What procedures are involved in a debit-card transaction? What problems with debit-card transactions are apparent from the facts of this case? How might these problems be prevented?

Answer 1

Debit cards
The steps in a debit card transaction begins with a card issuer, Auburn Bank in this case, providing cards to its customers, who use their cards to make purchases or obtain cash. A re-tailer's electronic cash register or an institution's automatic-teller-machine (ATM) records the amount and the routing number of the issuing bank. The retailer or institution then submits the recorded data to its bank. This bank forwards claims for funds to the system operator. The op-erator transmits these claims to the issuing bank. Once the issuing bank honors its obligations by debiting the card owner's checking account, the bank of the retailer or institution credits its customer's deposit account. One of the problems with debit card transactions apparent from the facts of this case is that one person can use another's card without the owner's permission, as long as the unauthorized user has the owner's personal identification number (PIN). Farrow testified at Dowdell's trial that she did not give him permission to use her debit card and that she had not told him her PIN, but that he may have overheard her tell her daughter what it was or have seen her type it into an ATM. Fortunately, the bank maintained security cameras at their ATMs and kept records of debit card transactions' times so that Farrow could check her unauthorized user's identity. There may be new technology that could be applied to further avoid unauthorized use of debit cards—retina scans, for example, or the use of code words such as a parent's maiden name rather than a PIN.