Credit card companies can keep data ID theft secret

Credit card companies can keep data ID theft secret

Andrew Orlowski / The Register | Sept 24 2005

Credit card companies don't have to notify customers their personal information has been stolen, a California Judge ruled today.

The Rothken law firm in Marin County, Ca had brought a class action suit on behalf of cardholders and merchants against CardSystems Solutions, Visa and MasterCard following a high profile data ID heist in June. [PDF, 200kb]

The suit accused the defendents of violating California state law by failing to notify them that personal data had been viewed by hackers, or the data obtained by the intruders.

In June, CardSystems admitted intruders had compromised the confidentiality of 40 million credit card holders, and 200,000 records had left the network. CardSystems had refused to notify the card holders. The Rothken suit also requested that chargeback fees or penalties on hapless card holders who were the victims of ID theft should be waived.

But a San Francisco Superior Court Judge, Richard Kramer, disagreed. "I don't see the emergency," he said. "I don't think there is an immediate threat of irreparable injury" to consumers.

Visa and MasterCard argued that because their relationship is with the issuing banks, not the customers, they don't have to notify the victims.

The Californian disclosure law, passed in January 2003 and a template for disclosure legislation in other states, says that consumers should be notified in the case of ID theft, although it's riddled with loopholes.

The effects of online security fears are already being felt. Analyst firm Gartner Group has revised its 2005 ecommerce prediction downwards this year after 42 per cent of consumers said they were spending less online because of security fears. Some 14 per cent have stopped paying bills online altogether.