Credit Card Company Security Standards and Fines Challenged
On 27.01.12, In Legal Industry, by Blake Houser
A tiny celebrity-friendly restaurant located in Utah is at last doing what many other merchants have only thought about of doing for many years. It is legally challenging part of the payment card industry’s defective system for securing card data by charging merchants penalties for failing to secure their data.
The owners of Cisero’s Ristorante and Nightclub, Stephen and Theodora McComb, filed a lawsuit against U.S. Bank alleging that the financial entity, which used to process the credit and debit card transactions of the restaurant, unlawfully seized money from the merchant bank account of the McCombs.
Around $10,000 were seized by U.S. Bank from the account of the McCombs as partial payment of the $90,000 in fines that MasterCard and Visa imposed. This was after the credit card companies claimed that the restaurant had failed to protect its network and as a result, suffered a data breach that caused some fraudulent charges on their customers’ bank cards.
U.S. Bank filed a lawsuit against the McCombs to get the remaining balance on the fines, saying that the contract that the McCombs signed with the bank makes them legally responsible for such fines.
However, the McCombs, in their countersuit against U.S. Bank, claimed that the bank and the payment card industry compel the merchants to sign biased contracts which are based on information that randomly changes without notice. They also alleged in their countersuit that the bank, and the payment card industry in general, impose indiscriminate fines on merchants without showing proof of a breach or of losses due to fraud. They also do not allow merchants any meaningful opportunity to challenge claims seizing the money.