Data Security

Data security breaches are a serious problem for both consumers and businesses. Credit unions also bear a significant burden as they incur steep losses in order to reestablish member safety after a data breach occurs, whether online or otherwise. A February 2015 NAFCU survey reports credit unions, on average, spent $136,000 on data security measures and $226,000 in costs associated with merchant data breaches in 2014.

Despite the fact that many credit unions have implemented sophisticated and effective data security (including cybersecurity) safeguards, attackers adapt to constantly evolving technology and find new ways to penetrate systems. Credit unions must make efforts to stay one step ahead, a core function of their organization. In addition, all entities – not just financial institutions – that handle consumer information should comply with comprehensive federal data protection standards.

Recent Activity on Capitol Hill

In May 2015, Reps. Randy Neugebauer, R-Texas, and John Carney, D-Del. introduced a NAFCU-backed bipartisan bill, the Data Security Act of 2015 (H.R. 2205), setting data protection standards, outlining a process for notifications and recognizing financial institutions' compliance with the Gramm-Leach-Bliley Act. The bill closely aligns with legislation introduced a few weeks prior by Sens. Tom Carper, D-Del., and Roy Blunt, R-Mo. – Data Security Act of 2015 (S. 961). NAFCU supports their efforts and will continue to push for a data security bill that would create a strong national standard of protection for retailers, recognize credit unions' compliance with the Gramm-Leach-Bliley Act and hold retailers accountable for breaches occurring on their end. We urge credit unions to take action and ask their members of Congress to support the Data Security of 2015.

On May 14, 2015, the House Committee on Financial Services held a hearing entitled, “Protecting Consumers: Financial Data Security in the Age of Computer Hackers.”  Members of the committee discussed the pitfalls of the patchwork of state legislation addressing data security breaches and the comparative success of the Gramm-Leach-Bliley Act, which applies to credit unions and other financial institutions.  Several witnesses noted problems with conflicting state laws that require different information to be included in breach notifications, and which impose different timelines.  Another witness testified that Gramm-Leach-Bliley has worked for financial institutions and would work equally as well for other industries in the payments ecosystem because it is both scalable and flexible. 

On April 22, 2015, NAFCU President and CEO B. Dan Berger testified before the House Small Business Committee during a hearing titled "Small Business, Big Threat: Protecting Small Businesses from Cyber Attacks." In his testimony, Berger detailed how credit unions have successfully minimized data breaches and why it's important that others do the same. NAFCU continues to seek passage of a data security bill that would create a strong national standard of data protection for retailers, recognize credit unions' compliance with the Gramm-Leach-Bliley Act and hold retailers accountable for breaches occurring on their end.

VIDEO: Berger talks about his testimony on data security and the call for greater retailer accountability (5/8/15)

 

NAFCU's Position on Data Security

NAFCU was the first financial services trade association to weigh in on the data security issue on Capitol Hill in the wake of the 2013 Target data security breach. During hearings to discuss potential legislation that would better protect consumers from ongoing data breaches, we have asked for federal standards to ensure that merchants are responsible for breaches that occur on their end.

As the cybersecurity threat to national security grows, industry and agencies alike are urging federal action to establish national safeguards and standards.

The items NAFCU would like to see addressed in any comprehensive data security bill include:

  • Payment of Breach Costs by Breached Entities: NAFCU asks that credit union expenditures for breaches resulting from card use be reduced. A reasonable and equitable way of addressing this concern would be to require merchants to be accountable for costs of data breaches that result on their end, especially when their own negligence is to blame. The entity that is best situated to mitigate the risk to sensitive data should be the liable party when a breach occurs.
  • National Standards for Safekeeping Information: It is critical that sensitive personal information be safeguarded at all stages of transmission. Under Gramm-Leach-Bliley, credit unions and other financial institutions are required to meet certain criteria for safekeeping consumers' personal information. Unfortunately, there is no comprehensive regulatory structure akin to Gramm-Leach-Bliley that covers retailers, merchants, and others who collect and hold sensitive information. NAFCU strongly supports the passage of legislation requiring any business entity responsible for the storage of consumer data to meet standards similar to those imposed on financial institutions under the Gramm-Leach-Bliley Act.
  • Data Security Policy Disclosure: Many consumers are unaware of the risks they are exposed to by providing their personal information. NAFCU believes that this problem can be alleviated by simply requiring merchants to post their data security policies at the point of sale if they take sensitive financial data. Such a disclosure requirement would come at little or no cost to the merchant, but would provide an important benefit to the public at large.
  • Disclosure of Breached Entity: NAFCU believes that consumers should have the right to know which business entities have been breached. We urge Congress to mandate the timely disclosure of identities of companies and merchants whose data systems have been violated, so consumers are aware of those that place their personal information at risk.
  • Enforcement of Prohibition on Data Retention: NAFCU believes it is imperative to address the violation of existing agreements and law by merchants and retailers who retain payment card information electronically. Many entities do not respect this prohibition and store sensitive personal data in their systems, which can be breached.
  • Notification of the Account Servicer: The account servicer or owner is in the unique position of being able to monitor for suspicious activity and prevent fraudulent transactions before they occur. NAFCU believes that it would make sense to include entities such as financial institutions to the list of those to be informed of any compromised personally identifiable information when, associated accounts are involved.
  • Burden of Proof in Data Breach Cases: In line with the responsibility for making consumers whole after they are harmed by a data breach, NAFCU believes that the evidentiary burden of proving a lack of fault should rest with the merchant or retailer who incurred the breach. These parties should have the duty to demonstrate that they took all necessary precautions to guard consumers' personal information, but sustained a violation regardless. The law is currently vague on this issue, and NAFCU therefore asks that this burden of proof be clarified in statute.

NAFCU's work on data security and cybersecurity is ongoing and our team is committed to ensuring credit unions have the resources they need to address the cybersecurity environment financial institutions face.

Recent Media Outreach

NAFCU has stayed at the forefront of this issue and continued to advance the call for national data security standards for all parties and champion credit unions in major media nationwide.

Home Depot Moves to Dismiss Breach Suit (Credit Union Times, July 8, 2015)

Home Depot Wants Court To Toss Lawsuit By Banks, CUs (CUtoday.info, July 8, 2015)

Cybersecurity Legislation Holds Retailers Accountable (Credit Union Times, June 19, 2015)

House Holds Hearing On Cyber Threats (CUtoday.info, June 16, 2015)

Congress must act against cyber crime (The Hill, June 15, 2015)

Federal Worker CUs Brace For Impact From OPM Data Breach (Credit Union Journal, June 15, 2015)

NCUA Says Staff Records Not Involved In OPM Hack (CUtoday.info, June 8, 2015)

Data Breach Exposes 4 Million Government Workers (Credit Union Times, June 4, 2015)

Target's $19 million breach settlement with MasterCard falls through (FierceRetailIT, May 26, 2015)

MasterCard’s Target Breach Settlement Halted (PYMNTS.com, May 26, 2015)

Target and MasterCard just scrapped a $19 million deal to settle data breach claims (Business Insider, May 23, 2015)

Target and MasterCard’s $19M Deal to Compensate Data Breach Losses Falls Through (Trinity News Daily, May 23, 2015)

Target and MasterCard scrap Deal to Settle Claims of Data Breach (NY City News, May 23, 2015)

No bank support for Target's settlement with MasterCard (TH Online.com, May 23, 2015)

Target Settlement With MasterCard Fails to Get Bank Support (ABCNews.com, May 22, 2015)

Target's breach settlement with MasterCard collapses (CBSNews.com, May 22, 2015)

Settlement rejected in Target data breach (Washington Post, May 22, 2015)

Target settlement with MasterCard falls apart (Los Angeles Times, May 22, 2015)

Future of Target, MasterCard Data Breach Deal Remains in Flux (Nasdaq.com, May 22, 2015)

Card Issuers Get Combative as Target Breach Settlement Unravels (American Banker, May 22, 2015)

Report: $19M breach settlement between MasterCard, Target terminated (SC Magazine, May 22, 2015)

Target, MasterCard Settlement Failure Priceless to Plaintiffs (Credit Union Times, May 22, 2015)

MasterCard Fails To Reach Settlement With Target (CUtoday.info, May 22, 2015)

Will MasterCard, Target Renegotiate? (Data Breach Today, May 22, 2015)

MasterCard's $19m Target settlement falls through (Finextra, May 22, 2015)

MasterCard's settlement with Target fails to get bank support (The Augusta Chronicle, May 22, 2015)

Proposed $19 million data breach settlement between Target and MasterCard is voided (StarTribune, May 22, 2015)

MasterCard's $19M data breach settlement with Target dies after failing to get bank support (TribTown.com, May 22, 2015)

Target, MasterCard settlement fails to get bank support (SC Times, May 22, 2015)

Future of Target, MasterCard Data Breach Deal Remains in Flux (Morningstar, May 22, 2015)

Target Settlement: Deal with MasterCard falls through (The Berkshire Eagle, May 22, 2015)

Target facing bigger data breach payout as banks reject $19M settlement (BringMeTheNews, May 22, 2015)

NAFCU Statement In Response to Credit Union Times Report of the Dissolution of Proposed $19 Million Target Settlement with MasterCard on Data Breach (May 22, 2015) 

Critical that Congress pass national data security standards for retailers now (The Hill, May 19, 2015) 

The Federal Buzz: Data Security Proposal (E-Commerce Times, May 13, 2015) 

Chase’s Chip Tech Expands To Protect More Payments (PYMNTS.com, May 13, 2015)

EMV Shift Completion Expected in 2017 (Credit Union Times, May 4, 2015)

NAFCU: Hard Rock Hotel, Sally Beauty Holding Data Breaches Underscore Need for National Data Breach Standards For Retailers (May 5, 2015)  

NAFCU Hails Reps. Neugebauer and Carney Introduction of Data Security Bill (May 1, 2015)  

Recent Policy Letters

Read recent letters from NAFCU to members of Congress on key data security issues that affect credit unions and their members.

5-1-2015 Joint Trades Letter to the House in Support of the Data Security Act of 2015 (H.R. 2205)

5-1-2015 Joint Trades Letter to the Senate in Support of the Data Security Act of 2015 (S. 961)

4-2-2015 NAFCU Letter Regarding FMI's EMV Delay Request

2-4-2015 NAFCU Letter on the Importance of Data Security

2-3-2015 NAFCU Letter to the Senate Commerce Committee

1-27-2015 NAFCU Letter on How Congress Must Tackle Cybersecurity and Data Security Together

1-23-2015 NAFCU Letter on Data Security to the Subcommittee on Commerce, Manufacturing, and Trade

1-23-2015 Joint Trades Letter on Data Security to the Subcommittee on Commerce, Manufacturing, and Trade

1-23-2015 Joint Trades Letter on Data Security to the Senate

1-23-2015 Joint Trades Letter on Data Security to the House

1-14-2015 NAFCU Letter to Congressional Leadership Urging for a Bipartisan-Bicameral Working Group on Data Security

View all NAFCU policy letters

Additional Resources

In December 2014, the Payment Security Task Force (PST), of which NAFCU is a member, issued a white paper on protecting cardholder data at the merchant's physical or virtual point of sale. Download PST's "U.S. Payments Security Evolution and Strategic Road Map" paper.

Current cyber-related law and recent legislative proposals and action are outlined in the Congressional Research Service (CRS) report from June 20, 2013, titled Federal Laws Relating to Cybersecurity: Overview and Discussion of Proposed Revisions.

The National Credit Union Administration's cybersecurity guidance, 13-Risk-01, lists a number of mitigation practices that credit unions should implement, including:

  • Maintaining strong information security awareness programs for employees and members.
  • Utilizing transaction monitoring, verification procedures, and appropriate limits commensurate with the risk of applicable funds transfers.
  • Implementing strong controls over computers used to process commercial payments, including but not limited to:
    • Multifactor authentication
    • Removal of hardware tokens upon session completion.
    • Prohibited or highly filtered use of Internet browsing.
    • Dedicated, corporate-owned systems without administrator privileges.
  • Following network and application security best practices with regard to configuring systems, patch management, and security testing.

The following websites also offer resources that may help your credit union bolster the measures you have already taken:

Updated June 2015