Payment System Issues on Forefront at 2007 Convention
The following is the fourth in a series of articles published in the Exchange this summer highlighting important state issues to be discussed in depth at the 2007 Legislative Policy Symposium at the IBA annual Convention.
Payment Card Fraud
A major issue emerging in the banking industry is that of debit/credit card fraud. IBA members have reported a significant increase in losses due to payment card fraud over the past year.
A specific area of concern that has garnered recent attention is that of merchant misuse of customer data. Fraud losses and merchant liability has been a big issue for the banking industry since TJX, Cos, which owns the TJ Maxx retail stores, announced what is now believed to be the largest data breach in U.S. history, where data from more than 45 million cards were stolen over an 18 month period. Investigators in Florida have charged six people in connection with the breach, claiming they used stolen credit card information in making over $8 million in stolen purchases. This breach has led at least one state – Minnesota, to pass the nation’s first state law requiring merchants who do not adequately protect customer data to reimburse financial institutions for losses associated with the breach.
The Minnesota legislation prohibits retailers from storing payment card magnetic strip or PIN information in their databases after the sale is completed (within a set time of the authorization of the transaction). Beginning in August of 2008, companies or retailers who fail to adhere to the new retention standards will be required to reimburse financial institutions for the following costs incurred in connection with any security breaches:
(1) The cancellation or reissuance of any access device affected by the breach;
(2) The closure of any deposit, transaction or other accounts affected by the breach and any action to stop payments or block transactions with respect to the accounts;
(3) The opening or reopening of any deposit, transaction, or other accounts affected by the breach;
(4) Any refund or credit made to a cardholder to cover the cost of any unauthorized transaction relating to the breach; and
(5) The notification of cardholders affected by the breach.
The legislation also entitles banks to recover costs for damages paid by the financial institution to cardholders injured by a breach of the security system of a company or retailer who has violated the law. Under current federal law, the responsibility for notification and fraud reimbursement generally falls on the financial institution issuing the card. A similar bill is also being considered in California, who led with the nation’s first data breach security law after passage of the Gramm-Leach-Bliley Act in 1999.
IBA Payment System Task Force
In effort to better understand and resolve the myriad of payment system issues the industry is currently facing, the IBA has assembled a payment system task force. The group will review the following issues and make recommendations to the Board:
(1) Should the IBA pursue statutory changes that would require merchants to share in security liability similar to what passed in Minnesota;
(2) What should the IBA response be to possible retailer/merchant legislation at the state and/or federal level to pursue caps or increase disclosure rules for interchange or merchant discount charges;
(3) An evaluation of the current state of Chapter 527 of the Iowa Code (Electronic Transfer of Funds) in relation to pricing and fraud concerns noted by Iowa banks during the past year;
(4) Obtaining an inventory/survey of the prevailing fraud issues affecting Iowa banks to make sure the Association responds in the most effective manner possible;
(5) How is the bank’s role in the payment system changing, and what are the immediate and future threats for the industry.
Look for many of these payment system issues to be covered during the Legislative Symposium, held during the IBA’s Annual convention September 16-18 in Des Moines. Your input will be needed on these important emerging issues.
Mark Your Calendars for Get Smart About Credit Day!
The kids may not be in school yet, but it’s the perfect time to start planning for your bank’s Get Smart About Credit program this fall. The fifth annual Get Smart About Credit Day is October 18, 2007! On this date, bankers like you will go to classrooms, connect with youth groups and visit college campuses to help young people in their communities get smart about credit now, so they can make smart financial choices later in life.
Here in Iowa, there is no state standard requiring students to complete a course with personal finance content prior to graduation. That decision is left up to individual districts. Bankers can step up to fill this gap. High school juniors and seniors are an ideal audience for money management lessons. Make plans for your bank staff to visit a college campus, high school classroom, freshman orientation session, youth group meeting or continuing education class in your community.
Designed to raise awareness among young people as to the risks and rewards involved with credit, Get Smart About Credit Day gives bankers around the country the opportunity to help educate students in their area. The program is sponsored by the Iowa Bankers Association and the American Bankers Association Education Foundation.
The Get Smart About Credit Resource Kit can get you started and is new and improved for 2007! The new kit includes updated lessons and resources and a CD of supplemental visual materials with PowerPoint slideshows and a Flash presentation to make your presentations more dynamic. Bankers can interweave electronic and hard copy materials to create an experience that informs – and engages – their teenage audience. The kit has guidelines on how to utilize the materials, as well as system requirements for the lesson site.
Kits are available to IBA member banks for $95.00. Please contact the IBA’s Cheryl Miller at 800.532.1423 or cmiller@iowabankers.com to order yours. Don’t forget to register your bank to be a part of the honor roll of participating banks for Get Smart About Credit. More information can be found on the IBA’s website, www.iowabankers.com.
FDIC Announces New Regional Ombudsman
The Kansas City Region of the FDIC, which includes Iowa and surrounding states, has a new Regional Ombudsman, Sandra (Sandy) E. Jesberger. Her background makes her well suited to addressing concerns resolved through the ombudsman role.
The FDIC’s Office of the Ombudsman was created by Congress in 1994 to serve as a confidential, neutral and independent resource for individuals who have a question, concern or complaint about the FDIC regulatory process. FDIC Ombudsman Cottrell Webster and his staff of Regional and Senior Ombudsmen are advocates for fair process and are available to help resolve banking issues in an informal, discreet manner.
FDIC Ombudsman staff in Washington, D.C. may be reached toll free at (877) ASK-FDIC. Regional Ombudsman Sandy Jesberger may be reached at (816) 234-8007 in Kansas City.
State General Fund Receipts Compiled and Released
General Fund receipts for July totaled $410.4 million, which is $56.7 million or 16.0 percent more than was collected during July 2006. July 2007 had 21 processing days as compared to 20 processing days in July 2006.
Fiscal Year 2008 started with strong growth in corporate income tax, cigarette tax and tobacco tax with the new increase in the cigarette and tobacco tax driving the growth. Personal income tax, inheritance tax and franchise tax showed very strong growth as well. These helped year-to-date growth post a 16.0 percent rate. The official estimate rate of growth is currently at 4.2 percent, for fiscal year 2008.
Read the entire report online at www.iowabankers.com.
Your Input Sought at Annual IBA Convention’s Legislative Policy Symposium
The IBA will once again host the Legislative Policy Symposium during convention to provide its member banks the opportunity to weigh in on the Association’s 2008 state legislative agenda. The Symposium is scheduled for Tuesday, September 18 from 7:30-9:30 a.m. Bankers do not have to be registered for Convention to attend.
The Association will discuss issues that have been highlighted in a series of articles published throughout the summer in the Exchange including: property tax reform, Iowa’s right to work law, predatory mortgage lending, consumer’s private right to sue businesses under the Consumer Fraud statute and payment system issues.
The Symposium is the first step of the IBA legislative issues development process and is used to increase our collective knowledge and awareness of emerging industry issues. The IBA legislative committee will then meet on October 17th to make final recommendations on Association policy for the coming year. Once approved by the IBA Board of Directors, the Association agenda is then communicated to state legislators and member banks at the Legislative Preview meetings in November.
Your input at this early stage of the process is critical. Come discuss the impact of these and other issues on your institution and how the industry can best communicate its message to elected officials.
Submit Photos for 2009 Scenes of Iowa Calendar
Don’t forget to submit your photos for the 2009 Iowa Bankers Scenes of Iowa calendar! We are looking for pictures that represent the history and beauty of our great state; Iowa landmarks, harvests, farm buildings, farming operations, historic locations, tourist attractions, county fairs, carnivals, parades, fall colors, winter snowfalls, spring flowers and summer fun are just a few ideas.
All bank employees, board of directors and their family members are eligible to submit photos for consideration. Both horizontal and vertical photos are accepted and they can be digital, 35mm color prints or slides.
Entry deadline is September 1st! Entry forms can be found in this week’s edition of Extras or on our website at www.iowabankers.com. Please contact the IBA’s Cheryl Miller at 800.532.1423 or cmiller@iowabankers.com.
Senators Grassley Holds Town Meetings
Senator Charles Grassley has been back in Iowa during the August recess to conduct town meetings around the state. These meetings, which are open to the public, provide an opportunity for the Senator to listen to the comments and concerns of Iowans.
The meetings will be held across Iowa in various locations. A complete listing of Senator Grassley’s remaining meeting dates can be found on the IBA’s website, www.iowabankers.com.
This is an excellent opportunity for bankers to express their feelings about current legislative issues especially those that directly affect the banking industry.
If Senator Grassley will be in your area, plan to attend and make your voice heard. Get involved and help show our elected representatives how Iowa bankers make a difference and are important in their communities.
For information about the latest legislative issues relating to the banking industry, visit the IBA’s website and click on Government Relations.
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