Click to watch the clever Freeze It commercial

Click to watch the clever Freeze It commercial

Now here’s a good idea.  Discover Card consumers who lose track of the credit cards, but aren’t sure the cards are really lost yet, can temporarily “freeze” the cards with a new feature called “Freeze It.”  New charges will be declined, which automated payments will continue, while the consumer continues to search for the card. Everybody wins here.

For consumers: While card replacement is relatively easy, it’s still a pain. Automated payments need to be updated, account numbers need to be changed, and so on. Sometimes, all that work is unnecessary, and the card turns up in a pants pocket within a few days.

For banks: Replacing cards cost money..even more money, now that the cards have embedded security chips.  We’ve trained consumers for years to call immediately after a card disappears.  Now, at least some of those cards won’t need to be replaced.

The freezes can be activated and deactivated via a mobile app, website or a toll-free phone call. They also trigger alerts if a transaction on  a frozen, missing card is attempted.

“We’re giving our cardmembers a fast and simple security feature that gives them more control over their accounts and more peace of mind if a card goes missing,” said Julie Loeger, senior vice president of marketing. “The Freeze It feature adds another layer of protection to Discover’s continued efforts to increase cardmember security and help prevent fraud.”

Discover says it’s the only major card issuer with the feature. Expect others to follow suit if Freeze It is as popular with consumers as I suspect it will be.

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Click for the full report from Intralinks

Click for the full report from Intralinks

It’s great that more folks are backing up their files using cloud-based services like DropBox.  While hacker and virus writers get all the headlines, I think hardware failure is really the biggest risk most consumers face.Cloud services have become such a part of the way we live, however, that we’ve gotten a little too casual about it.  That’s how tax returns end up lying around in public places for all to see. You’ve set your computer to back things up automagically, and you’ve also shared some cute cat photos with friends, and all that gets conflated so anyone can Google your tax returns.

So today’s short story is this: Stop right now and think — Where are the digital copies of your tax returns?  And by that, I mean all the copies.  Have they been vacuumed up by some cloud service? If they have, are they at least password protected? Are you sure about that?  Maybe you’d be better off printing copies and putting them in a strongbox. While there’s merit to having copies on your computer, don’t forget that any hacker who breaks into your machine from now until the end of time will almost certainly search for “1040″ a moment later; it’s easy to find old tax returns on a computer. Store them there at your own risk.

This is not a drill.   Graham Cluley at his excellent blog, points out that file-sharing service Intralinks was able to find a tax return on the DropBox service this week using a trick that had been revealed more than one year ago. You could certainly call it user error.  Someone had used DropBox to share files and  then placed a tax return in their cloud space, which could be found using search engines. There’s a few more details about how it works, which you can slog through if you like.  NOTE:  Intralinks makes clear that this kind of vulnerability could apply to any file sharing service.

What should you do?  Cluley says it’s important to use the privacy settings that cloud services provide. Unfortunately, free DropBox users have fewer options that consumers who pay for the upgraded product.

“If you use the free version of Dropbox, you should not use the Share Link facility as it could be leaked to a third party,” Cluley warns.

Intralinks also recommends getting into the habit of deleting old data you don’t need any more from cloud services. And here’s the best piece of advice:

“Don’t mix work and pleasure. Mixing work and personal files in a single account is, quite simply, a bad idea. Losing your personal data is serious enough, but losing company data can have severe consequences: lost reputation, reprimands and other professional consequences, regulatory and legal issues and even fines,” the firm says.

And remember ,”work” includes critical information like your tax returns.  The cloud is great, but like all technology, it has a dark side, and must be used thoughtfully.  Particularly at tax time.

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Click to read the report

Click to read the report

There was recently a very public debate about how awful airline travel is…vs. how whiney airline passengers are.  In the New Yorker, Tim Wu argued that airlines actually create “calculated misery,” in order to trick you into paying more.  Criminy, people pay extra now just to board the airplane early,theoretically so they can ensure their carry-on bags will fit, and they can avoid bag fees.  Any sane person would recognize this as madness, and Megan McArdle over at Bloomberg concedes this, but she goes for the economist-friendly, “the fault lies not in our stars but in ourselves” argument. People are so darned insistent on finding the lowest price that this race to the bottom is inevitable. “The problem isn’t greedy airlines. It’s us,” she writes.

Regular readers of this column, or of my book Gotcha Capitalism, should see the problem here – I call it “death of the price tag.”  Because price tags no longer include the true costs of things — from cell phones, to cable TV, to airplanes — price has become a mere diversionary tactic. Sure, people sort flights on Expedia using “lowest price,” but it’s unclear what folks are getting for what they are paying. Could they pay $27 more and get two more inches of legroom? Or pleasant flight attendants instead of angry ones? Or a 2x chance the flight will be on time?  Or a 3x chance their bag will be lost?  Or a 4x chance the price of the ticket could double if any kind of life surprise occurs that requires changing a ticket?

These are big data questions that can only be answered by corporations who own the data and the big computers. No consumer can rationally decide how to buy an airline ticket today. So of course, they make the next best choice, and pick on price. It’s terribly unfair to blame them for this.

Capitalism has become information warfare, and consumers are at a massive disadvantage in this war, thanks to analytics. 

What’s happening here is simple: Without any minimum standards for service, there is an inevitable race to the bottom. Airline pricing is trickery, a bait and switch designed to lure you in with a come-on price and then load you up with fees to make you profitable. It’s no way to run a business, or a country for that matter. This is why I say America is not a free market economy, but rather a Gotcha economy.

Congrats, airlines!  The race to the bottom is almost complete.  You know this based on nearly every conversation you’ve had with a friend who’s been on an airplane recently.  But there’s even data to support this, as you’ll see below.  

Before I get there, I must concede this point: Airline travel is cheap.  Transportation expert Joe Sulmona, who helped me with my Ubernomincs story recently, cautioned me about going to far with my woe-is-travelers argument,and he’s right to point out that since de-regulation, prices have gone down.  A race to the bottom that impacts safety is a big deal, and there is no evidence that’s happened in U.S. airlines. A race to the bottom of inconvenience? Well, not everyone believes regulators should worry about that.  To his point, I’ve flown regularly between Seattle and New York for almost 20 years. My first flight cost about $400.  I often pay less than that now.  But I also arrive with more leg cramps, and I have a lot more options for flight times.  And in the past, I sure never had to pay a $200 fee because I got sick and had to change my ticket.

Prices don’t reflect true costs. Airlines get away with it because they enjoy virtual monopolies or duopolies on many American routes. That’s what has to change. Because you should really ask yourself: How bad does airlines service have to get before someone does something? If you think market forces will correct this problem on its own, I have an ivory tower to sell you.

Now, as for the data supporting your miserable feelings…

(The story below first appeared on Read it there.)

If you feel like airline service is slipping, that’s because it is. In fact, it has slipped back to levels not seen since the recession, according to a new “Airline Quality Rating” report out this week. The rating considers four factors most important to travelers: on-time performance, involuntary bumping, mishandled baggage and complaints. Only Virgin America, Alaska and Hawaiian upped their game last year, according to the study, while all other major airlines offered worse service.

University professors Brent Bowen (Embry-Riddle) and Dean Headley (Wichita State) have conducted the research using Department of Transportation data for 25 years, and found that performance levels have sunk back to where they were in 2009, during the Great Recession.

“The Airline Quality Rating industry score for 2014 shows an industry that declined in overall performance quality over the previous year. As an industry, performance in 2014 was worse than the previous four years,” the authors say. “Of the 11,364 complaints registered with DOT regarding all U.S. domestic carriers, 62.7% were for either flight problems, customer service problems, or baggage problems.” Overall, complaints skyrocketed 22% in 2014.

So which airline attracted the most complaints? To adjust for airline size, the authors published a rate of complaints per 100,000 passengers. The industry average was 1.38 for 2014. At the “top” of the list is Frontier and United. Alaska and Southwest attracted the fewest complaints. These stats aren’t a fluke: Alaska also had the fewest complaints per 100,000 in 2013, while Frontier and United had the most last year, too.

The Most Complaints per 100,000 Passengers

  1. Frontier 3.91
  2. United 2.71
  3. American 2.12
  4. Envoy 1.59
  5. JetBlue 1.17
  6. Virgin America 1.14
  7. ExpressJet 1.01
  8. Hawaiian 0.89
  9. SkyWest 0.84
  10. Delta 0.72
  11. Southwest 0.53
  12. Alaska 0.42

Frontier didn’t immediately respond to a request for comment.

“I’m not surprised by the latest results,” said consumer travel advocate Chris Elliott, who operates “Airline passengers are fond of referring to the industry’s customer service record as a race to the bottom. These numbers leave little doubt that the race is far from over.”

The results also reveal a backslide from improvements that airlines had made since the recession, Elliot said.

“These numbers suggest that the uptick in customer service was only temporary,” Elliot said. “The study is a big disappointment, both for airline passengers, and also for me personally. I had really hoped the industry had begun to turn a corner.”

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Learn more about Lytx in-car cameras

Click to learn more about Lytx in-car cameras

It’s obvious that smartphones and driving are a dangerous combination.  At this point, it should be obvious that ever-more-drastic laws banning cell phone use while driving have been ineffective, other than as another revenue-producing tool for law enforcement. A new study of teen drivers offers some insight into why.

Experts examined in-car video of 1,700 crashes involving teen-age drivers and found that distraction was a factor in 6 out of 10 moderate to serious crashes. What kind of distraction? Here’s the breakdown:

  • Interacting with one or more passengers: 15 percent
  • Cell phone use: 12 percent
  • Looking at something in the vehicle: 10 percent
  • Looking at something outside the vehicle: 9 percent
  • Singing/moving to music: 8 percent
  • Grooming: 6 percent
  • Reaching for an object: 6 percent

(The study was conducted by AAA using videos provided by Lytx, which provides in-car camera technology. Click to see more on the study.)

Distracted driving is the problem. It’s haunting to think that a majority of bad accidents could have been prevented by better focus. But the numbers here don’t lie: Cell phone use is only a part of the problem, and it’s not the bulk of it, at least among teen crashes. Singing along to music was almost as common a cause of the crashes studied. Looking around was a more common cause.  Reaching for something and putting on makeup, together, caused more crashes than cell phone use.  And of course, the distraction of other passengers was the most serious problem (which is why some states don’t let young drivers transport others).

One critical element of this study: The cameras were quite out in the open. The drivers all knew they were being watched. Still, they engaged in all these risky behaviors. That just shows how irresistible and powerful the lure of distractions are.

Sadly, it’s fairly impossible to legislate attention.  So most states have, with good intention, tried to help by passing all manner of cell phone use bans.  Here’s the problem. In some states, it’s now strictly speaking illegal to use GPS devices. In other states, judges have ruled that smartphone use is legal while talking on a cell phone is not. The laws are incredibly hard to enforce, which means they are ineffective.

I use my smartphone as a radio often. While I can pick the station before I put the car in gear and drive, I worry that doing so might be illegal in some jurisdictions.  Yet, stand on any street corner in America, watch cars pass by, and I’ll bet you see up to one quarter of drivers playing with their phones.  And, as I’ve mentioned, there’s no shortage of studies showing cell phone bans don’t actually reduce accidents.

So what should be done?  Most important: We all need to recognize distraction is the problem. I’ve written a lot about the seduction of multi-tasking in The Restless Project, and how most people wildly overestimate their skills at doing two things at once.  The vast majority of people, doing the vast majority of tasks, can only focus on one thing at a time. Today’s kids are assaulted by multi-tasking temptations as they grow up. We can’t expect them to suddenly master the art of focus at 16 if they’ve been talking to people while playing video games and texting through their early years.

We shouldn’t be picking on kids, of course.  Distraction is a problem for all of us, menaced as we are by the 45 different ways any of us can be interrupted during the day.

I’d like to see police use a wide, wide berth of discretion while enforcing cell phone laws. My suspicion is that only those who are dumb about it get caught – folks who plant their smartphone on top of the steering wheel while sitting at a traffic light next to a cop.  ”Sneaky” cell phone users are actually a bigger risk, as they keep their phones down low, where a cop can’t spot it, and where they have to look far down and away from the windshield. I wouldn’t want any of these bans repealed, but I would like to know that tickets are given out only in episodes of real distracted driving.  (Of course, I’d be all for some stern warnings).  Americans often don’t like to hear this, but one-size-fits-all laws end up being tyrannical.  There is a difference between typing out an email while driving down on a busy city street and setting a GPS destination on an empty highway.

The real solution to the smartphone problem will come from technology. Apple, Google, and the rest of you — you got us into this mess, you’re going to have to get us out of this.  Car-safe user interfaces will be essential, allowing drivers to respond with quick “running late” texts without taking their hands off the wheel or their eyes off the road, and perhaps limiting use of more complex functions while driving.

My main concern is that we have become distracted and we’re focusing on the wrong problem. Consider the chart above again.  Cell phone use is only 20 percent of the distracted driving problem.  Like so many problems of our time, the issue is attention. Let’s focus on that.

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Click to read the lawsuit

Click to read the lawsuit

A Georgia firm called millions of consumers attempting to collect on “phantom” debts, and tricked consumers by citing personal information purchased from payday loan lead generators, federal investigators allege.

A lawsuit against Universal Debt and Payment solutions and a host of related companies was revealed Wednesday, alleging the firm’s tactics included purchasing personal information from data brokers that operators could use to convince victims to pay debt they didn’t owe. Agents would use names like “LRS Litigation Group,” “Worldwide Requisitions,” and “Arbitration Resolution,” and tell consumers they risked jail time if they didn’t pay immediately. The claims were bolstered by operators’ citing personal information, including bank account numbers, the CFPB alleges, that had originally been obtained by payday loanlead generation websites and sold to data brokers.

(This story first appeared on Read it there.)

“Our lawsuit asserts that consumers were harassed, threatened, and deceived as part of a reprehensible scheme to collect debt that was not even owed,” said CFPB Director Richard Cordray. “We are taking action against the many parties that allegedly contributed to this phantom debt collection operation. The ringleaders of the scheme, the telemarketing company that broadcast millions of robo-calls, and the companies that processed the payments should all be held accountable for taking advantage of vulnerable consumers.”

In one example cited in the lawsuit, a consumer complained that he received a threatening call while he was asleep.

“The caller stated that he had a ‘restraining order against (the consumer) to appear in court if I didn’t settle with them.’ The caller said the consumer had 24 hours to pay $500 on a $1,600 debt to Bank of America, or the collector would ‘contact (the consumer’s) employer to levy (his) wage, and they were also contacting the local police to serve papers,’” the lawsuit alleges. “According to the complaint, because he was scared, the consumer provided his bank card information. After making the payment, the consumer’s wife informed him that they had never done business with Bank of America.”

A phone call to the number listed for Universal Debt was answered by a man who said he was sick and was unable to answer questions about the lawsuit. Asked if he had a lawyer, he said he couldn’t afford one.

The CFPB lawsuit also names several service providers, including Global Payments, which processed the debt collector’s credit card payments.

“Payment processors provided substantial assistance … enabling the Debt Collectors to accept payment by consumers’ bank cards when the Payment Processors knew, or should have known, that the Debt Collectors were engaged in unlawful conduct,” the CFPB alleges.

The firm did not immediately respond to requests for interview.

The CFPB also named Global Connect, LLC in the lawsuit for enabling the debt collectors to initiate millions of calls.

“(It) provided this service when it knew, or should have known, that the messages it broadcast for the Debt Collectors were unfair or deceptive, and materially contributed to the Debt Collectors’ scheme,” the lawsuit says.

Global Connect did not immediately respond to a request for comment.

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Click for story

Click for story

There’s a huge blind-men-and-the-elephant problem when talking about the economy.  Writers can’t help but talk about it like’s it a single thing, that’s either doing well or poorly. Basically, if you’ve lost your job, the economy stinks. If you have a good job, it’s hard to understand what everybody is complaining about. In reality, all economics, like all politics, is local. Home prices are up a stunning 18 percent near Seattle, Washington.  That doesn’t mean the housing market is “fixed.”  And even if you are in Seattle, if you are a first-time home buyer, you sure don’t think it’s fixed.

People (like me) who want to comment on the economy intelligently are forced to try to examine more narrow slices of it, and make their judgments a little more nuanced.  That why data that segments the population into finer groups is a gold mine. Fine data can help explain why some people think the economy is like a pillar and others thing it’s like a tree branch.

A gold mine arrived recently. The Labor Department released new data from its Consumer Expenditures Survey, formed by panel of consumers who keep detailed diaries about all the money they spend.  The group is broken up into income groups of 10 — so the top 10 percent of Americans spend like this, Americans in the 81-90 percent income group spend like this, and so on.  Dividing into these 10 slices also helps get away from the bland upper-middle-lower class descriptions that are really too coarse to form the basis of an intelligent discussion. (What does middle class mean, anyway).

Thankfully, the Wall Street Street Journal’s excellent Real-Time Economics blog distilled the data down into an easy-to-understand chart.  It is above, but you should really go read the WSJ story.

The Journal piece focuses on the interesting accounting of the differences between how the rich and poor spend their money. But I found something else fascinating about the chart.  Fully five of the 10 groups — from the lowest 10 percent to the fifth 10 percent — spend more than half their money on food and housing.  More than half! Remember, this doesn’t include gas, or health insurance, or school, or….anything other than food and housing.  Until you earn above the median income in America, you can expect to devote half your spending to the most basic of basic life costs. That’s crazy.  And if you think about the fragile nature of our consumer-driven economy, it’s even more crazy. It’s a fair assumption that if you are spending half your money on subsistence, you don’t have a lot left over for cars or new clothes.  I’ve noted this repeatedly in The Restless Project: It’s not about jobs, it’s about wages. So long as Americans aren’t making enough money, the economy will continue to sputter. Even for you 1 percenters out there, stagnant wages are a recipe for trouble.    Meanwhile, this chart should help make obvious why so many Americans don’t have emergency or retirement savings.

Of course, as you go up the income chain, the percent of your income you spend on the basic is less important. If you take home $100,000 a year, you can drop $50,000 on mortgage payments and food and have plenty of cash left over for vacations and your 401(k). Still, it’s astonishing what people in the middle-income tiers of America spend just to get by every day, and how much of their budget is devoured by fixed costs. We have a lot of work to do to fix America.

Click to learn about The Restless Project

Click to learn about The Restless Project

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Click for report (PDF)

Click for report (PDF)

Victims of tax-refund identity theft have a nightmare on their hands — a long-term nightmare.  A government audit found that it takes an average of 278 days for the IRS to resolve ID theft complaints and issue tax refunds.  And that’s an improvement over the 312 days it took the last time an audit was performed.

Perhaps more maddening, auditors from the Treasury Inspector General for Tax Administration found that ID theft cases are shuttled around to an average of seven different case workers. And during 254 of the 278 days that taxpayers wait for their refunds, nothing happens to their cases.  That’s down from 277 days of “inactivity,” the auditors found.

Tax-related ID theft is a fast-growing crime. The IRS says it has stopped 19 million suspicious returns and protected more than $63 billion in fraudulent refunds; several states are also scrambling to deal with the issue.

“Refund fraud adversely affects the ability of innocent taxpayers to file their tax returns and timely receive their tax refunds, often imposing significant financial hardship,” said J. Russell George, Treasury Inspector General for Tax Administration. “While the IRS is making some progress in assisting victims of identity theft, those who have been affected by this devastating crime deserve better.”

The audit covered ID theft complaints from fiscal year 2013.

When taxpayers finally do get their refunds, the ordeal isn’t always over.  Of the sampling the auditors examined, 10 percent got the wrong refund or their case was otherwise incorrectly resolved.  The auditors estimate that means 25,565 cases were resolved with errors.

Some cases drag on far longer than 278 days. Roughly five percent of the cases were stuck in extreme limbo, averaging 390 days — longer than one year — before resolution.

“(We) believe that further actions are needed to improve its tracking of these timeframes. Until this is corrected, the IRS will continue to provide an inaccurate account resolution timeframe to taxpayers due a refund,” the agency said.

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Click to learn more about Starbucks' free college offer

Click to learn more about Starbucks’ free college offer

Starbucks said this week it is “doubling down” on its free college offer, expanding from two years to four years the ambitious tuition reimbursement program it announced in 2014.  The announcement also deals with criticism the program has received because student/employees had been required to shell out considerable sums and wait until they received 21 credits before reimbursement.  Now, students can be repaid for tuition costs at the end of each semester.

Earlier, the program only covered junior and senior year at Arizona State University through its online offerings. Now, it will cover all four years.

Perhaps in part because of the upfront cost, uptake of the Starbucks program might have been a bit slower than you’d imagine, In a letter to employees on Monday, CEO Howard Schultz disclosed that 2,000 workers had signed up, but “tens of thousands” are “actively” interested.

“By doubling down on our investment in our partners’ education, we are helping at least 25,000 Starbucks partners graduate by the year 2025 and giving access to higher education to all of our eligible U.S. partners,” Schultz wrote. “I am proud that we remain committed to creating opportunities for our people as well as for thousands of Americans, be it by offering life-changing benefits for our partners.”

Robery Kelhum, who studies higher education at Seton Hall University and had been critical of Starbucks’ earlier offer, gave praise to the firm for the enhancement in an email to

“However, if the pool of employees enrolling at A.S.U. Online is mostly students closer to completing a bachelor’s degree, extending the full benefit to more students may not be as impactful,” he said. “(K)udos to Starbucks for making the program more generous,” but added that “I look forward to seeing an evaluation of its effectiveness.”

I wrote about some of the problems with Starbucks’ initial offer for, here.  The changes address many of them, but one remains: Starbucks employees, to obtain the benefit, must attend Arizona State online.  Not necessarily a bad thing, but it is a limitation.

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YouTube KidsInternet firms have a tough time dealing with the kids issue.  The temptation to rope children into brand loyalty is great,  but many of the things that are most effective are at least immoral, if not illegal. After all, kids’ brains aren’t fully formed, and they are even easier to manipulate than the rest of us.  Still, parents are going to give their kids access to games and videos anyway, and no content company wants to get left behind in that space.  So, into this murky world stepped Google earlier this year with its YouTube Kids video tool.

The firm has made some serious missteps in doing so, a coalition of consumer groups, including Consumers Union, charged on Tuesday as it called on the Federal Trade Commission to investigate.  The group’s letter alleges that Google has engaged in:

  • Intermixing advertising and programming in ways that deceive young children, who, unlike adults, lack the cognitive ability to distinguish between the two;
  • Featuring numerous “branded channels” for McDonald’s, Barbie, Fisher-Price, and other companies, which are little more than program-length commercials;
  • Distributing so-called “user-generated” segments that feature toys, candy, and other products without disclosing the business relationships that many of the producers of these videos have with the manufacturers of the products, a likely violation of the FTC’s Endorsement Guidelines.

“YouTube Kids is the most hyper-commercialized media environment for children I have ever seen,” said Dale Kunkel, Professor of Communication, University of Arizona. “Many of these advertising tactics are considered illegal on television, and it’s sad to see Google trying to get away with using them in digital media.”

Organizations signing the complaint include: the Center for Digital Democracy, Campaign for a Commercial-Free Childhood, American Academy of Child and Adolescent Psychiatry, Center for Science in the Public Interest, Children Now, Consumer Federation of America, Consumer Watchdog, Consumers Union, Corporate Accountability International, and Public Citizen.

“Blending of children’s programming content with advertising material on television has long been prohibited because it is unfair and deceptive to children,” the group said. “The fact that children are viewing the videos on a tablet or smart phone screen instead of on a television screen does not make it any less unfair and deceptive.”

An unnamed spokesperson for Google’s YouTube told Reuters that the consumer groups never contact the firm to complain, and that it disagrees with the group’s assertions.

“We worked with numerous partners and child advocacy groups when developing YouTube Kids. While we are always open to feedback on ways to  improve the app, we were not contacted directly by the signers of this letter and strongly disagree with their contentions,” a YouTube spokeswoman told Reuters.

But Josh Golin, Associate Director of Campaign for a Commercial-Free Childhood, said the YouTube app was exploitative.


“There is nothing ‘child friendly’ about an app that obliterates long-standing principles designed to protect kids from commercialism,” Golin said.“YouTube Kids exploits children’s developmental vulnerabilities by delivering a steady stream of advertising that masquerades as programming. Furthermore, YouTube Kids’ advertising policy is incredibly deceptive. To cite just one example, Google claims it doesn’t accept food and beverage ads but McDonald’s actually has its own channel and the ‘content’ includes actual Happy Meal commercials.”

Have you used YouTube Kids? What do you think of it?

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Chip cards don't stop "card not present" fraud, which dominates now in teh U.K. Chart courtesy Mercator.

Chip cards don’t stop “card not present” fraud, which dominates now in the U.K. Chart courtesy Mercator.

The way Americans spend money is on the verge of its biggest change in decades, but the drumbeat of doubters continues to get louder.  New chip-enabled credit cards are slowly getting into consumers’ hands in advance of a looming deadline later this year. But a Walmart executive recently told CNN that U.S. chip cards are a “joke,” and a new report examining other countries’ changeovers suggests criminals around the globe merely switched tactics and kept right on stealing from consumers’ accounts.

The switch to chip cards goes by the shorthand EMV, which stands for Europay, Mastercard and Visa.  In Europe, when banks implemented the change, government rules forced consumers to start using credit cards like debit cards – requiring that PIN codes be entered each time a card is used. The change adds two important levels of security, or two-factor security.  To complete a transaction, buyers need to have in their hands a chip card, which is incredibly challenging to counterfeit. And they must know something — a PIN — that’s not on the card.

The U.S. is poised to implement only half this system.  Chip cards must be accepted by merchants by the fall deadline, but not PINs.  The so-called “chip & signature” system is a half-measure, according to  Mike Cook, Wal-Mart’s assistant treasurer and a senior vice president.

“The fact that we didn’t go to PIN is such a joke,” Cook told

For example, a criminal who physically steals a chip & signature credit card will have no trouble using it to commit fraud in a store by faking the consumers’ signature.

Meanwhile, a report issued recently by analyst firm Mercator raises even more concerns that the switch to chip cards might not reduce fraud, but simply nudge criminals towards different fraud.

“Unless the payment industry tackles other growing concerns like lost and stolen card fraud, overall fraud losses will continue to spiral up toward pre-EMV levels,” the report says.

Why?  So-called “card-not-present” fraud is on the rise in places that adopted EMV long ago, according Mercator’s Tristan Hugo-Webb, who is Associate Director of the Global Payments Advisory Service.

For example, the United Kingdom was one of the first countries in the E.U. to complete the switchover to EMV back in 2006.  While counterfeit card fraud has shrunk — from 27 percent of all fraud in 2003 to 13 percent in 2013 — other kinds of fraud have soared.  Card-not-present fraud, which includes online and telephone sales, has climbed from 29 percent of fraud in 2003 to 67 percent in 2013.  Chip cards have no impact on online or telephone sale fraud because the chips cannot be used for authentication.

So as e-commerce has risen, online fraud has risen right along with it. In the U.K., there has been a sharp increase since 2011, Hugo-Webb says.

New technologies that would add a layer of authentication to online purchases, such as electronic tokens that help verify consumers remotely, have been invented but have not been implemented.

“The hope is that with the creation of new security technologies like tokenization, the industry can begin to play offense rather than always having to play defense against payment fraud attacks,” Hugo-Webb says.

The trickiest part of the migration is that the U.S. is so far behind – at least a decade behind the U.K, for example – that new payment forms, such as mobile payments, may have overtaken old-fashioned plastic cards by the time the EMV adoption is complete.  To some observers that lessons the urgency of the changeover.

But Hugo-Webb says the U.S. must still migrate, even if the step doesn’t reduce fraud. It’s more a matter of holding serve, he said.

“If the U.S. decided to skip EMV….it would be more of a target than it is today,” he said.  “There is still value in migrating….it’s going to take a lot longer than people expect for mobile payments to really become commonplace. ”

Because of the decade-long delay, however, the value of the upgraded security will be less in the U.S. than it was in Europe, however, where banks enjoyed at least a few years of reduced fraud before criminals caught up.   Here in the U.S., criminals already have quite a head start on their EMV workarounds.

That fact should help inform banks and merchants as they consider how much to invest in new forms of security for the coming generation of payment systems.

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