Learn how a credit card security law holds retailers accountable for storing account numbers stolen for fraudulent purposes.
The Minnesota Plastic Card Security Act is a bill that would prevent retailers from storing customers’ credit card information. In instances where credit card data is then stolen, retailers would be held financially liable.
The bill comes alongside a batch of legislation that seeks to increase consumer protection, addressing issues from predatory mortgage lending to gift-card policies. The Plastic Card Security Act builds upon a law passed in 2005 that requires financial corporation to alert customers in the event of a security breach.
While financial institutions support the bill, which they explain simply holds retailers responsible for any security breaches they allow, many merchants are none too pleased with it.
Retailers counter that since credit card firms already forbid them from saving security information, the bill unfairly blames retailers for security breakdowns when there are several parties involved in credit card transactions.
Under the proposed law, merchants would be barred from retaining the three- or four-digit access code, PIN or the entire contents of magnetic-stripe data from any credit cards or debit cards used in a transaction.Furthermore, the Plastic Card Security Act would force merchants to pay for s security breach involving private data, such as taking on the costs of replacing credit cards and any fraudulent transactions connected to the breach.
Financial institutions would also be allowed to sue a retailer that broke the rules in the event the financial institutions suffered as a result of a security mishap.
The bill’s main author, Democratic Rep. Jim Davnie of Minneapolis, referred to agreements with Visa that restrict financial institutions for informing customer when a security violation took place, which can result in the customer perception that the financial institution is liable. He explained that the Plastic Card Security Act would place the blame where it is due.
Massachusetts is weighing a bill similar to the Plastic Card Security Act, while other states and the federal government are also expected to take on the matter.