Scam of the day – August 22, 2015 – Target and Visa settle data breach dispute

Visa and Target have come to an agreement by which Target will pay 67 million dollars to settle claims brought by Visa card issuers for losses suffered as a result of the massive data breach at Target in 2013 that affected more than 40 million customers.  Unlike a similar proposed settlement about which I reported to you in Scams of the day in April and May 2015, this settlement was approved by the major Visa card issuers.  A proposed settlement between Target and MasterCard was negotiated between the parties that would have paid MasterCard more than 19 million dollars to settle all claims by the MasterCard issuing banks against Target.  However, a condition of the settlement was that 90% of the banks involved had to approve the settlement and this did not happen.  The banks that rejected the settlement believed that the 19 million dollar settlement was far too low considering that the banks lost about 160 million dollars consisting of 79 million dollars in fraudulent purchases and 88 million dollars to reissue replacement cards.  This rejection of the settlement send the case back to the Federal District Court in Minnesota where that case is scheduled to go to trial unless a settlement more agreeable to the injured banks is reached.

TIPS

The same vulnerability to hacking of the credit and debit card processing equipment that was used in the Target hacking still exists today in most retailers who have been slow to adapt smart card technology and you can expect criminals to increasingly exploit this vulnerability.  The problem is essentially caused by the fact that the United States still uses outdated magnetic strip technology for the most part on credit and debit cards rather than the smart computer chip cards used throughout most of the rest of the world.  Regulations prompting companies to switch to the smart computer chip cards do not go into effect until October of 2015 and even then there is expected to be a further delay in implementing the new cards, which some credit card companies are already issuing and the switch to the card processing machines required to process the new cards.

So what should we as consumers do in the meantime?

First of all, never use your debit card for retail purchases.  Federal law does not provide the same level of consumer protection from liability that you get with the use of a credit card.  Second, you should get a new smart chip card as soon as possible and use it whenever possible. WalMart has already installed the new card readers and is processing the new smart cards.   These new cards also have magnetic strips so you can still use the same card through the old style credit card processors if the store where you are shopping does not yet have card readers capable of processing the sale using the computer chip.

Leave a Reply

Your email address will not be published. Required fields are marked *