News

Community FIs reissue 4M cards in the wake of data breaches

February 19, 2014

Following a spate of high profile card data thefts, America's community banks have so far reissued more than 4 million bank cards at a total cost of more than $40 million, the Independent Community Bankers of America announced today in a news release.

By taking quick action on card reissuance, community banks have incurred relatively low costs due to fraud — less than 1 percent of community bank customers have reported fraud on their accounts following the breaches at Target and Neiman Marcus.

Bill Loving, who is ICBA chairman and president and CEO of Pendleton Community Bank of Franklin, W.Va., said that banks should not have to bear the cost from a breach for which they did not bear responsibility.

Community banks absorb the costs of data breaches upfront because their primary concern is to protect their customers. However, in the long-term the lion's share of costs associated with data breaches should ultimately be borne by the party that experiences the breach. This is critical to aligning incentives to maximize data security by all parties that store consumer data — making the payments system stronger over time, which is a win for everyone, especially consumers.

ICBA is pressing Congress and payment card networks to address its key data security principles, which state that:

• the costs of data breaches should ultimately be borne by the party at fault for the breach;
• all participants in the payments system — including merchants — should be subject to Gramm-Leach-Bliley Act–like data security standards;
• a national data-security breach and notification standard should be implemented to replace the current patchwork of state laws;
• unnecessary barriers to effective threat-information sharing between law enforcement and the financial and retail sectors should be removed; and
• while FIs continue to move to chip cards, this technology alone might not have prevented the recent retailer breaches and will not protect against fraud in card-not-present transactions.

"ICBA ... will not rest until these key principles are addressed for the betterment of our payments system, community banks and, most importantly, consumers," Loving said.