Massive Data Breach Occurs as Senator Dick Durbin Works to Eliminate Fraud Protection Funding for Banks, Credit Unions
WASHINGTON, May 24, 2011 /PRNewswire/ -- The Electronic Payments Coalition issued the following statement in response to the recent Michaels data breach:
Michaels craft stores urged thousands of their customers who recently had their debit card PIN numbers stolen to "immediately contact your bank" and "seek their advice on how to protect your account," even as their Senator Dick Durbin works in Washingtonto eliminate the revenue that banks and credit unions use to cover such breaches.
The massive data breach, in which customers in 20 states had their PIN numbers stolen and their bank accounts looted, began inIllinois – the home state of Senator Durbin, who sponsored legislation in the U.S. Senate last year that would severely hinder the ability of banks and credit unions to prevent or to recover from this type of fraud.
Under the current system, losses from data breaches at retailers such as Michaels are absorbed by the banks and credit unions that issue these cards – including reimbursing the customers and re-issuing the cards themselves. These institutions use the interchange revenue they receive from merchants to help cover those costs, which are a significant part of any debit program. In fact, banks and credit unions in 2009 incurred approximately $1.4 billion in fraud losses related to debit card transactions in order to ensure the safety of consumers and retailers.
Under a new rule proposed by the Federal Reserve as directed by the Durbin amendment, the current interchange rate would be slashed by up to 90 percent – without taking into account a single penny of the fraud recovery costs that debit card issuers face in the event of a breach like Michaels. Community banks and credit unions in particular would be unable to afford the same level of fraud protection and recovery, and would be forced to raise fees on their customers as a result.
"This letter from Michaels to their customers makes it crystal clear – merchants want fraud protection, they just don't want to pay for it," said Trish Wexler, spokeswoman for the Electronic Payments Coalition. "They want consumers to pick up the tab instead, and that's not fair."
About the Electronic Payments Coalition
The Electronic Payments Coalition (EPC) includes credit unions, banks, and payment card networks that move electronic payments quickly and securely between millions of merchants and millions of consumers across the globe. EPC's goal is to protect the value, innovation, convenience and competition in today's growing electronic payments system. EPC educates policymakers, consumers and the media on the system's role in economic growth, and the importance of protecting consumer choice and stability for the continued growth of global commerce.
SOURCE Electronic Payments Coalition
