Tags: data | consumers | card | retail

Senate Banking Subcommittee Opens Data Security Issue

By    |   Monday, 10 February 2014 06:55 AM

The Senate Banking Committee's Subcommittee on National Security and International Trade and Finance, chaired by Mark Warner, D-Va., held a hearing titled "Safeguarding Consumers' Financial Data."

The impetus for the hearing comes from a spate of press reports of data breaches at major retailers such as Target. Issues that gain prominent press attention are like candy for ambitious legislators, and in his opening statement, Warner predicted interest would only grow. He called on the industry witnesses not to resort to pointing fingers at each other. The hearing degenerated into bad political theater as the leading industry witnesses proceeded to do exactly that.

On the first panel, William Noonan, deputy special agent in charge of the U.S. Secret Service, explained that his agency has power under the Comprehensive Crime Control Act of 1984 to investigate crimes associated with unauthorized access to computers. The agency pursues this mission in cooperation with a long list of other domestic and international agencies.

The consumer angle was covered by Jessica Rich, director of the Bureau of Consumer Protection of the FTC. She reported that in 2012, 7 percent of Americans over 16 were victims of identity theft. The FTC calls itself "the nation's leading privacy enforcement agency," and it has settled 50 enforcement actions against businesses for alleged failure to adequately protect consumer data.

On the second panel, James Reuter, executive vice president of FirstBank in Lakewood, Co., testifying for the American Bankers Association, defended the current state of bank card security on the ground that banks have made consumers whole when breaches have occurred, and that they usually take place at the retailers.

Mallory Duncan, general counsel of the National Retail Federation, blamed the banks for using obsolete technology while at the same time arguing that it is not feasible for retailers to upgrade their own technology, because this would cost $3 billion.

Ed Mierzwinski, consumer program director of the U. S. Public Interest Research Group, cited an estimate by the Privacy Rights Clearinghouse that since 2005, 663 million records have been breached in over 4,000 incidents. In the contest between the bankers and the merchants, Mierzwinski concluded that while Target should be held accountable for its breach, the underlying fault lies with the bankers, because the "card monopolies" have forced customers and retailers "to use an unsafe payment card system that relies on obsolete magnetic stripe technology."

Troy Leach, chief technology officer of the PCI Security Standards Council, stated that the problem is complex and requires the collaboration of all parties, but it cannot be solved by any single technology.

In spite of this testimony, Sen. Robert Menendez, D-N.J., served notice, both at this hearing and at the subsequent hearing three days later, that he would press for legislation to establish a performance standard that would boost the adoption of so-called "chip and pin" security technology, currently in use in Europe, to replace the obsolete magnetic stripe.

(Archived video and witness statements can be found here.)

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The Senate Banking Committee's Subcommittee on National Security and International Trade and Finance, chaired by Mark Warner, D-Va., held a hearing titled "Safeguarding Consumers' Financial Data."
Monday, 10 February 2014 06:55 AM
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