Considering the frequency with which major U.S. retailers, most recently Neiman Marcus and Target, have incurred a data security breach, with Michaels potentially becoming the latest victim, this news of the U.S. Senate banking panel having scheduled a subcommittee hearing next week on safeguarding consumers' financial information is timely. The article states, “The incidents have raised the stakes for data security discussions in Congress and have caused banks and retailers to argue about whose job it is to protect consumers from cyber attacks.”
Clearly, both parties are frustrated and want to figure out the best course of action for themselves and their clients: the retailers are concerned about the costs of recovery and potential loss of new business due to concerned consumers while banks whose clients were affected by the data security breaches are concerned about the costs of maintaining their client base by paying for any fraudulent charges incurred on the latter’s accounts. Ultimately, there needs to be an agreement on who should be responsible for maintaining privacy of the financial information of end customers and who should pay for fraudulent charges.
In the meanwhile, the U.S. Consumer Financial Protection Bureau has provided guidance on four steps to take if you believe your credit or debit card data was hacked. One of the steps is, “Submit a complaint if you have an issue with your bank or card provider’s response.”
Banks: Does Yours Take the Financial Burden?
As a consumer who purchased from Target prior to the data breach, I did receive an email from Target suggesting I check my credit and debit card accounts for potential fraudulent charges, and was fortunate to not have incurred any such charges. I didn’t have to take advantage of the offer from my credit card provider to retract any fraudulent charges. However, I am glad I had this option. I can but sympathize with others who weren’t as fortunate and are possibly fighting with their credit card/debit card providers to pay for fraudulent charges and, in the worst case, ended up having to pay even though they weren’t liable.
Following next week’s hearing and likely follow-on meetings and debates galore, it remains to be seen if consumers can continue holding banks responsible for “taking care of” fraudulent charges. If banks are no longer responsible for this, and retailers cannot allay our fears of data compromise, we consumers may have to think hard about how comfortable we are using credit and debit cards to pay for goods.
A Whole New Way to Take Care?
Some of us may decide to stop using cards altogether and instead pay by cash or check. Considering how many people in the U.S. alone use credit cards, which according to this site was about 391 million as of Q3 2013, it would be a big deal if there were a massive decline in the usage base over time.
With the total U.S. outstanding consumer debt currently estimated at more than $3 trillion, maybe paying with cash or check could not only make consumers more aware of their buying behaviors, but could also start a trend that would help lower our national consumer debt. How’s that for a 2014 New Year’s resolution?