SAN DIEGO -- Star System Inc., the largest automated teller machine network in California, is considering a new membership rule designed to improve ATM card security.
The rule, which could take effect in the first quarter, would require institutions with automated teller machines in the network to choose between truncating the account numbers on each ATM receipt or installing an option on every cash machine that allows customers to choose not to receive a receipt.
With every member bank taking one or both of these measures, Star hopes to reduce the number of scams that make use of discarded receipts.
Over the last year, several schemes have combined information from ATM receipts with stolen personal identification numbers to create counterfeit ATM cards that could be used in virtually any cash machine in the United States.
A recent such scam in California netted more than $200,000 in illegal ATM withdrawals and involved several major banks, including BankAmerica Corp. and Wells Fargo & Co., experts said.
"The idea is to reduce fraud by making full-blown account numbers a lot harder to come by," said James McCarthy, a vice president with Star System, which is based in San Diego.
Possible Stumbling Block
Star executives said they are waiting for regulatory approval before making a move to implement the rule.
The network faces a potential obstacle in Regulation E, which requires that ATM receipts carry enough account information for customers to be able to identify themselves to a bank based solely on data on the receipt, network executives said.
After talks with Federal Reserve Board lawyers, Mr. McCarthy believes that their planned fraud prevention efforts are admissible under the federal regulation. Nonetheless, Star System will not make a move to formalize the network rule until it has received written approval from the Fed.
"We hope to have something to put to our owners by January or February," said Ronald Congemi, president of Star System, the largest regional electronic banking network in the United States, in terms of numbers of ATMs.
Star already has started to get some institutions to stop printing full customer account numbers on receipts, but the network declined to name them.
Offering a Choice
The hope is that those implementing the procedures early will work out the glitches that might arise in modifying ATMs to carry out the truncation.
"When the rule comes out, we want to be able to immediately say, 'These are the hitches on Diebold machines, these are the hitches on NCR machines,"' Mr. McCarthy said.
He noted that on older model ATMs, truncation might not technically be possible. Banks with these ATMs will be able to avoid the truncation requirement by rigging their ATM software to give customers at the beginning of a transaction a choice whether or not to receive a printed record.
By offering a choice, Star executives say they believe they can reduce the number of receipts that are discarded immediately after a transaction. These receipts are the ones most frequently exploited, Star executives said.
Most older-model ATMs are already configured to display a screen that allows the customer to cancel or proceed with the transaction when the machine has run out of paper. "It is only a small step from here to giving the customer a choice about receiving a receipt at the beginning of the transaction," Mr. McCarthy said.
He noted that reducing the number of recepits dispensed by ATMs may have some small operational benefits as well. These include lengthening the time between restocking receipt paper and reducing the wear on the receipt printer, perhaps the part of an ATM most vulnerable to service problems.