Obama puts federal might behind chip-and-PIN card security
Social Security, other federal payment cards to switch in 2015
Banks, retailers and consumer watchdogs don't agree on much. But Friday they all got behind an array of payment security moves announced by President Obama -- a good sign for consumers that safeguards against data breaches and identity theft are on the way in 2015.
Obama signed an executive order for the federal government to start issuing benefit payment cards with chip-and-PIN security technology, one of several steps aimed at improving payment security. Replacement cards will start being issued in January, and more than 1 million will be sent out by the end of 2015, according to a White House statement.
The move, affecting the cards on which payments from Social Security and other benefits are issued, puts the government's shoulder behind industry efforts to adopt higher security standards for credit and debit cards.
"Identity theft is now America's fastest growing crime," Obama said during a signing ceremony. "The idea that someone halfway around the world could run up thousands of dollars of charges in our name is infuriating -- for victims, it's heartbreaking."
Government-issued credit cards will also be required to adopt the technology, as will payment terminals used at passport offices, national parks and other federal sites.
We applaud the administration for taking proactive and positive steps by adopting PIN-and-chip technology for government-issued debit and credit cards.
|-- Matthew Shay
National Retail Federation
Chip-embedded cards encode cardholder data that's more difficult for fraudsters to access and copy than magnetic-stripe cards, while PIN-protected card transactions provide an added layer of security.
'A big deal'
Putting the government's buying power behind chip-and-PIN systems is a "big deal," U.S. PIRG Consumer Program Director Ed Mierzwinski said on Twitter. "Smart chips only prevent cards from being cloned," he said in a statement. "Adding PIN requirements as well will ensure that cards are used by the right people."
Big payment networks including MasterCard and Visa are pushing retailers to adopt chip-card readers by Oct. 1, 2015, or be held responsible for fraudulent transactions.
Bank and retail groups, which are in a prolonged battle over swipe fees, both issued statements backing the White House move.
"We applaud the administration for taking proactive and positive steps by adopting PIN-and-chip technology for government-issued debit and credit cards," National Retail Federation President Matthew Shay said.
Security features of chip-embedded cards "can only be effective if merchants have the technology to accept the cards at the point of sale," Consumer Bankers Association President Richard Hunt's statement said.
Obama also announced:
- Home Depot, Target, Walgreens and Wal-Mart have committed to install chip-and- PIN-compatible card readers throughout their stores, most by January 2015.
- Citibank will start providing monthly FICO scores to its credit card holders for free online, joining several other card issuers. Sudden changes in credit scores can be a warning sign of identity theft.
- The government will streamline fraud reporting, which officials say will cut in half the time it takes to recover a stolen identity. The Federal Trade Commission's IdentityTheft.gov website will have new resources and will coordinate more closely with credit bureaus to speed fraud reporting.
EMV card technology
Chip cards with EMV technology issue a new verification code each time the card is used, making it unnecessary for retailers to handle sensitive account numbers and cardholders' identifying information. EMV, short for Europay, MasterCard and Visa, is a global card authentication standard.
"We know this technology works," Obama said. "Britain cut fraud in stores 70 percent after adopting this." Online sales and other card-not-present transactions are not protected by chip card technology.
Obama also repeated his call for Congress to write data breach legislation setting out nationwide rules for companies to inform customers when their sensitive information has been exposed.See related: 8 FAQs about the new EMV credit cards
- Credit freezes are now free – but do you need one? – Credit freezes, which keep lenders and other companies from viewing your credit, are now free. We compared them to other credit protection tools, including locks and monitoring services. Here's how to use them all to protect yourself ...
- Employer credit checks: Who does them, how they work and what laws apply – If you're applying for a new job, a credit check could determine your fate, depending on the position and where it's based. Here's how they work and what to expect ...
- My card issuer of 25 years suddenly wants to know more about me – Under the Patriot Act, banks are required to verify the identities of their customers and maintain accurate information on them. But my bank's demand to know how I earn my income is an invasion of my privacy ...