VISA, MasterCard Warn of 'Massive' Breach At Credit Card Processor

concealment writes with news that VISA and MasterCard have been warning banks of an incident at a U.S. card processor that may have compromised as many as 10 million credit card numbers. From the article: "Neither VISA nor MasterCard have said which U.S.-based processor was the source of the breach. But affected banks are now starting to analyze transaction data on the compromised cards, in hopes of finding a common point of purchase. Sources at two different major financial institutions said the transactions that most of the cards they analyzed seem to have in common are that they were used in parking garages in and around the New York City area." According to the Wall Street Journal, the breached company is Global Payments Inc.

Comments

No Source?

[MrJones]

The article has no credible source. Is this Spam?

Re:No Source?

[ohnocitizen]

This actually impacted me. I live in NY, and was contacted my my credit card company. They informed me I was getting a new card, that visa and mastercard said there was a breach - but were not required to report who had compromised my credit card number. "At least they tell us there is a breach". This right here is why "the market" is insufficient protection for consumer rights. We need a law requiring credit card companies to disclose businesses that compromise data.

Re:No Source?

[berashith]

100% agree. I just went through this a few weeks ago. VISA told my card issuer that there had been a breach. They actually sent me a new card, but didnt tell me until fraudulent use occured. This was before my new card arrived, which actually shortened the amount of time that I had no credit card. I wanted to know who had the breach, so I could avoid ever giving them business that wasnt cash based, but they would not tell me. That part pisses me off. There needs to be an awareness as to which vendors dont find it worth their time to protect me , so I can make a decision to not use them.

Re:No Source?

[wickerprints]

Because all borrowers end up indirectly paying for the cost of fraud. As is the case with many forms of financial risk, a lender typically insures against identity theft and credit card fraud. The cost of that insurance is factored into their interest rate and fee calculations and is passed on to the borrower.

Granted, insurance doesn't completely absolve the insured of all responsibility, in as much as a driver with car insurance would not think to be totally careless about driving. Lending institutions still have an interest in preventing fraud despite being insured. The point is that when fraud increases, or if there's a catastrophic breach (as in this case, opposed to isolated small-scale instances of ID theft), the associated financial costs eventually reach the borrowers.

Re:No Source?

[wickerprints]

Your response indicates you have entirely failed to grasp the meaning of my previous post.

Government regulation of the credit card industry prevents a lender from penalizing a fraud victim in the manner that you describe. A penalty in the form of a higher interest rate may only be applied if the borrower fails to pay an outstanding balance in a timely manner. A late fee may also be assessed. This is legal because a borrower's failure to repay the incurred debt is a reflection of their poor creditworthiness relative to other borrowers who pay their balance on time. However, a victim of fraud may not have had anything to do with the theft of the information that precipitated that fraud, which is the case with this data breach.

In relation to my previous post, then, the cost of insuring against losses due to fraud is passed on IN AGGREGATE to the entire pool of borrowers in the form of higher interest rates and/or fees, just like the way in which they factor in other costs of doing business (such as worker salaries, marketing, customer service, and legal representation). Competition between lenders exerts pressure to keep the interest rate low, but if the overall rate of fraud increases across ALL lenders, then the overall financial risk of lending money in this manner has also increased, and therefore the interest rate must also increase to reflect this risk trend.

To be absolutely clear, I am not talking about a scenario in which an individual borrower reports fraudulent activity on their account, and the lender then decides to punish that borrower by increasing their interest rate. What I am talking about is the big picture, in which the cost of credit card fraud and ID theft is spread out over the entire pool of borrowers because the risk of fraud is one component of the risk of lending money, and the risk of lending is part of why interest exists. Granted, this is a gross simplification of the way things actually work (as I do not discuss the role of merchants in this process, for example), but the basic point remains valid: the cost of fraud is eventually paid by the borrower. Even the merchants purchase insurance for their business, and factor these costs in the pricing of the goods and services they sell to consumers. All of it eventually falls on the shoulders of the consumer, who pays for it in the form of higher prices or higher interest.