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TMCNet:  NAFCU Urges Congress to Tackle Data Security

[December 19, 2013]

NAFCU Urges Congress to Tackle Data Security

WASHINGTON --(Business Wire)--

NAFCU today issued the following statement:

Good evening,

Below is NAFCU President and CEO Dan Berger's letter to House Speaker John Boehner and Minority Leader Nancy Pelosi reiterating NAFCU's call for Congress to tackle the issue of data security and to make it a priority in 2014. Members of the United States House of Representatives were copied on the letter.

This same letter was sent to Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell. Members of the United States Senate were copied on the letter.

If you would like more information on this matter or would like to speak about this with a NAFCU expert, please let me know.

Thank you.

Dana Kauffman
Communications Coordinator
National Association of Federal Credit Unions
3138 10th Street North
Arlington, VA 22201
Phone (News - Alert): 703-842-2235
Fax: 703-524-1082

December 19, 2013

The Honorable John Boehner
U.S. House of Representatives
Washington, D.C. 20515

The Honorable Nancy Pelosi
Minority Leader
U.S. House of Representatives
Washington, D.C. 20515

Re: Congress Must Make Data Security a Priority in 2014

Dear Speaker Boehner and Leader Pelosi:

On behalf of the National Association of Federal Credit Unions (NAFCU), the only trade association exclusively representing our nation's federal credit unions, I write today to reiterate our call for Congress to tackle the issue of data security. As we first wrote to you back in February of this year as part of NAFCU's five-point plan on regulatory relief, we urge the House to tackle the issue of data security for personally identifiable and financial information.

Just this morning, the Wall Street Journal reported Target (News - Alert) Corporation confirmed that nearly 40 million credit card and debit card accounts were compromised between November 27 and December 15, 2013. Data affected in the breach includes customer names, credit and debit card numbers, expiration dates, and CVV security codes. Now millions of American consumers will spend the holidays worrying that their personal financial data has been swiped because of where they did their holiday shopping. This massive data breach follows a host of others in recent years, not to mention smaller scale breaches that may not be picked up by the national media.

Needless to say, the risk of a data breach continues to be a serious problem for both consumers and businesses. Every time consumers choose to use plastic cards for payments at a register or make online payments from their accounts, they unwittingly put themselves at risk. Many are not aware that their financial and personal identities could be stolen or that fraudulent charges could appear on their accounts, in turn damaging their credit scores and reputations. Consumers trust that entities collecting this type of information will, at the very least, make a minimal effort to protect them from such risks. Unfortunately, this is no always true.

Financial institutions, including credit unions, have been subject to standards on data security since the passage of Gramm-Leach-Bliley. However, retailers and many other entities that handle sensitive personal financial data are not subject to these same standards, and they become victims of data breaches and data theft all too often. While these entities still get paid, financial institutions bear a significant burden as the issuers of payment cards used by millions of consumers. Credit unions suffer steep losses in re-establishing member safety after a data breach occurs. They are often forced to charge off fraud-related losses, many of which stem from a negligent entity's failure to protect sensitive financial and personal information or the illegal maintenance of such information in their systems. Moreover, as many cases of identity theft have been attributed to data breaches, and as identity theft continues to rise, any entity that stores financial or personally identifiable information should be held to minimum standards for protecting such data.

Again, Target Corporation is just the latest in a string of several large-scale data breaches impacting millions of American consumers. The aftermath of these previous breaches demonstrate what we have been communicating to Congress all along: credit unions and other financial institutions - not retailers and other entities - are out front protecting consumers, picking up the pieces after a data breach occurs. It is the credit union or other financial institution that must notify its account holders, issue new cards, replenish stolen funds, change account numbers and accommodate increased customer service demands that inevitably follow a major data breach. Unfortunately, too often the negligent entity that caused these expenses by failing to protect consumer data loses nothing and is often undisclosed to the consumer.

NAFCU urges Congress to make the issue of data security a priority in 2014, including convening hearings on the data protection standards of merchants and what can be done to strengthen them. Furthermore, we recommend Congress take action to enact provisions to protect consumers from breaches that compromise their financial and personally identifiable information. Data security is a common-sense bipartisan issue that must be addressed.

With that in mind, NAFCU specifically recommends that the House make it a priority to consider and act on the following issues related to data security:

  • Payment of Breach Costs by Breached Entities: NAFCU asks that credit union expenditures for breaches resulting from card use be reduced. A reasonable and equitable way of addressing this concern would be to require entities to be accountable for costs of data breaches that result on their end, especially when their own negligence is to blame.
  • National Standards for Safekeeping Information: It is critical that sensitive personal information be safeguarded at all stages of transmission. Under Gramm-Leach-Bliley, credit unions and other financial institutions are required to meet certain criteria for safekeeping consumers' personal information. Unfortunately, there is no comprehensive regulatory structure akin to Gramm-Leach-Bliley that covers retailers, merchants and others who collect and hold sensitive information. NAFCU strongly supports the passage of legislation requiring any entity responsible for the storage of consumer data to meet standards similar to those imposed on financial institutions under the Gramm-Leach-Bliley Act.
  • Data Security Policy Disclosure: Many consumers are unaware of the risks they are exposed to when they provide their personal information. NAFCU believes this problem can be alleviated by simply requiring merchants to post their data security policies at the point of sale if they take sensitive financial data. Such a disclosure requirement would come at little or no cost to the merchant but would provide an important benefit to the public at large.
  • Notification of the Account Servicer: The account servicer or owner is in the unique position of being able to monitor for suspicious activity and prevent fraudulent transactions before they occur. NAFCU believes that it would make sense to include entities such as financial institutions on the list of those to be informed of any compromised personally identifiable information when associated accounts are involved.
  • Disclosure of Breached Entity: NAFCU believes that consumers should have the right to know which business entities have been breached. We urge Congress to mandate the disclosure of identities of companies and merchants whose data systems have been violated so consumers are aware of the ones that place their personal information at risk.
  • Enforcement of Prohibition on Data Retention: NAFCU believes it is imperative to address the violation of existing agreements and law by merchants and retailers who retain payment card information electronically. Many entities do not respect this prohibition and store sensitive personal data in their systems, which can be breached easily in many cases.
  • Burden of Proof in Data Breach Cases: In line with the responsibility for making consumers whole after they are harmed by a data breach, NAFCU believes that the evidentiary burden of proving a lack of fault should rest with the merchant or retailer who incurred the breach. These parties should have the duty to demonstrate that they took all necessary precautions to guard consumers' personal information but sustained a violation nonetheless. The law is currently vague on this issue, and NAFCU asks that this burden of proof be clarified in statute.

On behalf of our nation's credit unions and their 97 million members we thank you for your attention to this important matter. If my staff or I can be of assistance to you, or if you have any questions regarding this issue, please feel free to contact myself, or NAFCU's Vice President of Legislative Affairs, Brad Thaler, at (703) 842-2204.


B. Dan Berger
President and CEO

cc: Members of the United States House of Representatives

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