CARD INDUSTRY’S FALSE CLAIM: “When a data breach occurs, the merchants pay NONE of the costs to send individuals their new cards or the fraudulent charges an individual may have on their cards or accounts.” (http://www.stopthedatabreaches.com/)
FACT: In the wake of a breach, merchants pay various breach related penalties and fees as agreed upon by contract with the card networks. Fees paid by merchants include fraud fines assessed by the card brands, fraud transaction reimbursements and card reissuance fees. For example, according to the MasterCard Account Data Compromise User Guide, under a formula that card issuers and MasterCard have agreed to, a small financial institution is reimbursed by the merchant at a cost of $2.69 per magnetic stripe card
CARD INDUSTRY’S FALSE CLAIM: “In fact, the merchants are not required to pay ANY costs incurred from their own data breaches.” (http://www.stopthedatabreaches.com/)
FACT: Merchants are required to compensate card issuers for any fraud that occurs as a result of a breach based upon an agreed upon formula that the card issuer has negotiated with MasterCard and Visa. See 6.4.1 ADC Operational Reimbursement Factors, MasterCard Account Data Compromise User Guide, July 22, 2012. Additionally, each year retailers pay billions of dollars in swipe fees, a portion of which is designated for fraud losses, whether they ever actually are incurred or not.
CARD INDUSTRY’S FALSE CLAIM: “Credit unions have been there to protect their members.” (http://www.stopthedatabreaches.com/)
FACT: Chip cards and Chip terminals help make a secure transaction system even more secure by validating the cardholder’s Chip & PIN. Credit Unions may not even meet the deadline for Chip cards. According to the Credit Union Times, more than half of credit unions are expected to miss an October 2015 deadline to issue cards equipped with chips. (Credit Union Times, “Most Credit Unions will Miss EMV Deadline,” August 1, 2014, http://bit.ly/1uQfh8k)
PINs make cards 700 percent more secure; would do same for Chip cards. “Retailers are on track to have completed an enormous investment in order to be able to accept Chip and PIN cards next year. Yet, there is still little promise that banks will issue such cards. Instead, banks intend to begin issuing chip cards without the requiring PINs, a feature that is proven to reduce fraud by 700 percent, according to the Fed.” (Federal Reserve. “2011 Interchange Fee Revenue, Covered Issuer Costs, and Covered Issuer and Merchant Fraud Losses Related to Debit Card Transactions.” March 5, 2013, http://1.usa.gov/1xhPXph)
Chip and PIN cards reduce fraud. “One reason why Canadians may be less exposed to the Home Depot breach, said Toronto-Dominion Bank public affairs manager Meghan Thomas, is the prevalence of ‘chip and PIN’ technology in this country. Most cards in Canada have electronic chips and require cardholders to type in a personal identification number when they buy something, making them less exposed to fraud than clients in the United States where that technology is not in as widespread use.” (The Globe And Mail, “Canadians little affected by Home Depot data breach.” Sep. 25 2014, http://bit.ly/1voJ0Se)