Target data breach pits banks against retailers

Published: February 4, 2014
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WASHINGTON (AP) — Banks and big retailers are locked in a debate over the breach of consumer data that gripped Target Corp. during the holiday season. At issue: Which industry bears more responsibility for protecting consumers’ personal information?

The retailers’ argument: Banks must upgrade the security technology for the credit and debit cards they issue.

The banks’ counterargument: Newer electronic-chip technology wouldn’t have prevented the Target breach. And retailers must tighten their own security systems for processing card payments.

The finger-pointing is coming from two industries with considerable lobbying might. Their trade groups have been bombarding lawmakers with letters arguing why the other industry must do more — and spend more — to protect consumers.

“Nearly every retailer security breach in recent memory has revealed some violation of industry security agreements,” the Independent Community Bankers argued last month. “In some cases, retailers haven’t even had technology in place to alert them to the breach intrusion, and third parties like banks have had to notify the retailers that their information has been compromised.”

The National Retail Federation has fired back:

Retailers must accept “fraud-prone cards” issued by banks that are attractive to thieves, the federation’s general counsel testified at a Senate subcommittee hearing Monday. “Unlike the rest of the world, the U.S. cards still use a signature and magnetic stripe for authentication.”

Their antagonism aside, the two sides agree on one point: That Congress should create a national standard for notifying consumers of any data breaches. A uniform standard would replace the current hodgepodge of state guidelines.

In the middle are American consumers, many of whom say they’re alarmed about the safety of their personal information since the Target breach. In an Associated Press-GfK poll conducted Jan. 17-21, nearly half of those surveyed said they’ve become extremely concerned about the vulnerability of their personal data when shopping in stores since the incident.

This week, Congress is examining data security breaches and what to do about them. Four committees have scheduled hearings.

At a Senate Judiciary Committee hearing Tuesday, the head of the Federal Trade Commission and officials from the Secret Service and the Justice Department are set to testify. So are executives of Target and luxury retailer Neiman Marcus.

An estimated 40 million credit and debit card accounts were affected by the Target breach, which occurred between Nov. 27 and Dec. 15. Stolen were customers’ names, credit and debit card numbers, card expiration dates, debit-card personal identification numbers and the embedded codes on the cards’ magnetic strips.

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