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Monday, September 8, 2014

ABA Survey Finds Target Breach Costly to Banks

The Target consumer data breach last year was costly for banks of all sizes — and especially for community banks — according to an ABA survey of more than 500 banks. More than 8% of debit cards and nearly 4% of credit cards were implicated in the breach, and banks reissued nearly every card so implicated, representing tens of millions of cards reissued in response to a single breach. Community banks experienced disproportionately higher costs in reissuing cards. Banks with under $1 billion in assets spent just over $11 per debit card and $12.75 per credit card, including mailing, card production and staff time. The largest banks — those with over $50 billion — spent under $3 per card. ABA President and CEO Frank Keating said:
These costs are deeply troubling for all banks, especially for community banks. As each new retailer breach occurs, these costs will be repeated over and over. Enough is enough.
Banks also bear the costs of retailer breaches through low reimbursement rates. Although the survey did not cover reimbursement specifically for the Target breach, only one third of banks reported receiving any reimbursement for fraud losses and reissue costs in the previous five years. Of those that did receive reimbursement, 83% said they received less than 10 cents on the dollar — and 46% reported receiving not even a penny on the dollar. Keating said:
We have engaged for the past year in discussions with the card associations on increasing bank reimbursement levels for data breach costs. These findings make it clear that banks bear too much of the cost of retailers’ data breaches. We will continue to push to get these reimbursement levels up.
View the survey results.

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