E-Trade offers customers new fraud coverage, payment protection
NEW YORK – Customers of E-Trade Financial Corp. will be reimbursed if they fall victim to fraud or theft, whether their debit card is stolen right from their pocket or their online account is hacked into from another continent.E-Trade is believed to be the first brokerage to guarantee recovery for fraud victims.The online financial services company said Tuesday it has implemented a fraud coverage, bill payment protection and privacy protection policy in which customers will be completely reimbursed if someone gains unauthorized access to their accounts.Brokerage accounts, which remain E-Trade’s mainstay, are not protected by the Federal Deposit Insurance Corp. or other banking regulations. E-Trade President Jarrett Lilien said the company will pick up that risk. The program, which includes security upgrades to E-Trade’s technology, will cost “tens of millions of dollars” each year, Lilien said.”The cost of doing this is certainly going to be there when customers don’t take responsibility, don’t protect themselves online with antivirus or security programs,” Lilien said. “But when you’re easing concerns about transacting online, you can’t even estimate that.”Industry watchers praised the new guarantee.”I don’t like to be this positive, but I genuinely think E-Trade is doing something very good here,” said Avivah Litan, vice president at Gartner Inc., a business and technology research firm. “I think they’ve been targeted to a degree because they’ve made it easy for people to open brokerage accounts, but they’re not conservative. They really are innovative in security.”The move isn’t entirely altruistic. Last year, E-Trade launched an online bank, complete with checking accounts and debit cards, to transform itself from online broker to complete financial services firm.”E-Trade is often a complement to people’s primary banking accounts. We want to be the primary account,” Lilien said. “We want to have no excuse for why we wouldn’t be the primary place for people’s banking and investments.”The new guarantee comes even as malicious computer hackers have increased their efforts to obtain usernames and passwords from home computers through viruses and e-mail “phishing,” wherein customers are duped into entering their private information into a facsimile of their bank’s Web site.Lilien said the company has invested heavily in security, including various kinds of tracking systems that can tell where a computer order is coming from so that unusual locations and patterns can be flagged – such as one transaction occurring in New York, followed by one an hour later overseas.Last March, the company sent out digital tokens to a number of customers in a pilot security program. The tokens, which create a six-digit code that changes every minute and are needed to log in to their linked accounts, have received a mixed reaction from customers, Lilien said, some of whom appreciated the near-impregnable security, and others who hated having to carry the keychain-sized device around in order to view their accounts.Lilien said the company will introduce new identification and security authorization systems in late March that could increase security without using the tokens.Rival online broker Ameritrade Holding Corp. does not have a blanket policy in place, but spokeswoman Katrina Becker said the company does help in investigations and can, in some cases, offer reimbursement. Ameritrade also offers free security and identity tracking software.E-Trade shares closed down 20 cents at $22.15 Tuesday on the New York Stock Exchange.Vail, Colorado
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