Recent changes to credit card laws have created an ongoing debate between consumers, the credit card industry, merchants and banks. Everyone has their own opinion about how the rules should work and in whose best interest they really protect. Security in the industry is always a hot topic and some of the reform does address how consumers and merchants will be protected from fraud and security breaches, which is a good thing for them.
Threat of Hackers Affects Everyone
What the new credit card reform act fails to address however is what type of fraud and security protection measures should be mandated to protect the banks themselves. The laws designed to regulate the credit card industry and protect consumers best interest has not addressed how the banks will or will not be affected by these new regulations. There has been little mention of how banks will be protected in these changing circumstances.
Identity theft and credit card hackers have become a threat to the safety of confidential information. Hackers have victimized individuals, businesses and banks by stealing confidential information and using it to their advantage. No one who uses, processes or manages credit card transactions are exempt from the threat of a security breach, regardless of the measures of security they take. The banks are often times the ones left with the loss when theft occurs.
The credit card reform acts instituted in 2010 has taken measures to protect consumers against unlawful and unreasonable practices of what one was historically a highly unregulated industry. Prior to the reform, consumer credit card holders may have found themselves victims of countless frivolous charges, unreasonable time lines for payment arrangements and uninformed about changes to card agreements.
The credit card industry has been one of the areas that have been without any real concrete boundaries governing their practices. This is not to say that all credit card lenders have employed practices that were unethical, however, there were no regulations that stopped them from unethical practices. The new laws look to offer credit card users some insurance that they will be protected more so than they have in the past.
Protection for Credit Card Issuers and Merchants
The Payment Card Industry Data Security Standard or (PCI DSS) is an information security standard that applies worldwide standards for organizations that process credit card payments. This was put into effect to prevent credit card fraud through increased security measures. Compliance with this law is checked annually to ensure effectiveness. The PCI standard was initially implemented in 2004 with the last known update done in August of 2009.
Three states have passed legislation that is designed to protect credit card companies who have fallen victim to hackers. Nevada, Minnesota and now Washington State has new laws that will protect companies that have been victimized by security breaches due to credit card thieves.
Essentially this standard offers additional protection for consumers and credit card issuers in that it requires merchants who process credit cards to meet a minimum level of security in all facets of credit card use. As technology changes and the threat of hackers increase changes and updates are always made to this standard to ensure it provides maximum protection. This law in itself protects both the consumer and the credit card industry. If everyone does their part in the game, security will be tighter and losses will be minimal for all parties.
Protection for Banks
The laws and standards have been designed to protect and oversee the security measures that will protect consumers, credit card agencies and merchants. The banks who are the primary funders of the money necessary to make the cycle complete, have historically had little to no protection when a security breach occurs. Banks are often left dealing with the loss without recourse. Merchants who accept credit cards are relied upon heavily to ensure that credit card information is encrypted, systems are secure and that PCI standards are up to par.
Credit card agencies consumers and banks rely on the merchants to do their part to effectively protect card information. The truth is the position of the merchant can be the single most important factor in the protection of the data. If the system is not secure and the data is hacked into this in turn affects the individual, the credit card company and the bank. It makes sense that each piece of the process should be offered equal protection under legislation. Theft of credit card information offers severe consequences to every party involved.
Banks have been low on the totem pole for protection against breeches of data. The good news is that banks are finally gaining ground towards some level of financial protection from loss. The laws implemented in three states have also added a bonus component which is an outlet to proved banks some leverage to recoup their losses should they occur. Additional legislation is set to take effect on July 1, 2010 in Nevada, Minnesota and Washington State that will assist the banks to seek restitution from merchants who have failed to comply with PCI standards and ensure standards that protect confidential information. It is a small step towards protecting banks but one that offers some promise. If everyone shares the benefits of the credit card industry then everyone should be provided a level of protection against the risks.
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