Colleges fight payment fraud in digital age

February 8, 2013

From usatoday.com: “Colleges fight payment fraud in digital age” — GREEN BAY, Wis. — Not every day does a woman from Nebraska pay for two students from Egypt to attend the University of Wisconsin-Green Bay.

Staff became suspicious after one of the students wanted a refund because his account was overpaid. The woman’s credit card was used online in April to pay more than $3,300 on the students’ accounts, and university employees later determined the woman never gave anyone permission to use her card.

After a months long probe, the two students — ages 18 and 20 — were cited in November for theft and a computer data offense. University police decided to issue citations rather than arrest them; however, such cases often can be prosecuted as felonies.

If the students are convicted of both noncriminal charges, they each would have to pay almost $750 in fines.

Colleges and universities are making efforts to prevent crimes in which someone’s Social Security or credit card numbers are used to commit fraud.

While the most common cases of identity theft on college campuses occur when students use fake IDs to buy alcohol, online crimes are occurring more frequently, said Lt. Jeff Gross of University of Wisconsin-Green Bay campus police.

Cases often involve using stolen credit-card numbers or making a payment on a student account using a bogus e-check, which has bank routing and account numbers. The electronic payments often are accepted and then later determined to be worthless, he said.

The boldest cases involve fraudulent payments to get cash or check refunds.

“The computer is a wonderful thing. It opens a lot of possibilities, but it shouldn’t be a substitute for people’s caution,” Gross said.

It’s unknown how many universities have become victims of payment fraud. But the Federal Trade Commission and other federal banking regulators created the Red Flags Rule that took effect in 2011 to require most colleges and universities, many businesses, and other organizations to design programs that detect the warning signs of identity theft before a payment is completed.

As many as 9 million Americans have their identities stolen each year, the FTC said.

“The trouble is if no one realizes the credit card has been stolen, then nothing raises a red flag,” said David Kieper, University of Wisconsin-Green Bay information technology security officer.

“We’re as vulnerable to this as the next business,” he said.

About three years ago, someone from Nigeria registered online for a $5,625 Web seminar at Northeast Wisconsin Technical College, paying with a credit card, said Clark Wagner, financial operations director at the college here.

However, that person later tried to drop the seminar and wanted the refund on a different card or through a check, Wagner said.

A similar incident occurred around the same time, he said. Both requests were denied and the payments were refunded to the original cards used even though the purchasers insisted those cards were canceled.

More than half of student payments occur online, Wagner said, and the incidents gave staff a chance to re-establish an important college policy.

“If you make a payment in one form, that’s how you get it back,” he said. “There’s just too much allowance for fraud to occur so you can’t do it (another way).”

Curtis Kowaleski, finance director at St. Norbert College in De Pere, Wis., said refund checks are sent to the address a student has on file. If someone wants money to go elsewhere, he or she must provide proof of a change of address, such as driver’s license or a utility bill.

The college’s Red Flag rules also require all students to show an ID when picking up a check in person, he said.

Fraud attempts targeting the college have occurred when criminals get the institution’s bank routing and checking account numbers, which then are printed on fake checks and sent to unsuspecting parties as a payment, he said.

Suspects using the scam typically pay more than the price of items, then ask sellers to take a small amount of the overpayment for their trouble before sending the suspect a check for the rest. Banks typically cash the fraudulent checks but won’t process the payment later after verifying information.

Sellers then lose any money they sent.

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