WASHINGTON, D.C. – Retailers and financial firms have begun working together to improve payment security, but credit unions have taken a different tack — lobbying Congress for legislation that would require retailers to pay the credit unions for re-issuing credit and debit cards.  Lyle Beckwith, NACS senior vice president of government relations, wrote an op-ed in The Hill on the topic. His thoughts are excerpted below. 

“Most glaring to merchants, however, is what the credit unions won’t tell you — that merchants already pay for the cost of re-issuing cards and for the fraud that results from a breach multiple times. … And these forced reimbursements that already take place ignore the fact that merchants already pre-pay banks and credit unions for the cost of re-issuing cards in the event of a data breach …

“Credit unions are prepaid the cost of re-issuing cards and then get reimbursed again for the same costs when merchants have a data breach due to Visa and MasterCard’s rules. So, they collect the costs of re-issuing cards from merchants twice.

“Not only that, but credit unions collect the costs of fraud from merchants more than once as well. When merchants have a data breach, they are required by the card networks to pay for the costs of the fraud that results from the breach. But, in the normal course of business, merchants already absorb more than half of the costs of card fraud through what are known as “chargebacks” – that is when merchants do not get the money on a transaction because the payment card networks decide the merchants must pay the cost of a fraudulent transaction. This happens more than 40% of the time on signature debit card transactions and more than half the time on credit card transactions…

“What credit unions are asking Congress is that merchants pay for card re-issuance three times over in addition to paying the cost of the actual fraud twice. Opportunism in the face of these crimes is one thing, but trying to turn data breaches into a profit center is quite another. Frankly, the credit unions’ attempt accomplishes the remarkable feat of making mere opportunism look restrained. 

“Instead of pointing fingers we should all find ways to prevent data breaches and fraud.”