Small Bank Takes Drastic Step With Debit

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PROVO, Utah – Bonneville Bancorp is taking an unusually drastic – and seemingly counterintuitive – approach to fighting fraud.

To make sure its customers use their PIN codes, it is prohibiting signature debit payments in some states. Though PIN codes provide an additional layer of security, signature debit transactions generally earn issuers more money, and observers told American Banker, an affiliate of Credit Union Journal, that it is unheard of for a bank to consider its fraud losses severe enough to switch off that revenue stream.

According to a notice on Bonneville's website warning of “high amounts of fraudulent card activity in California, Florida and Georgia,” customers in those states must use their PIN codes for any debit transactions. “No signature transactions will be allowed,” the notice asserts.

Ryan Nielsen, a vice president at Bonneville, said the $34-million bank, which has one branch, is going to keep signature transactions switched off in the three states for the foreseeable future, and that the approach was suggested by its processor, First Data Corp.

“We had several fraud activities in those states in a short amount of time,” Nielsen said. Although Bonneville is evaluating other methods of addressing that fraud, it does not know when it will change its approach.


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