Credit Card Cos. Watch Own Backs

The credit card industry focuses too much on reducing its own fraud costs and not enough on protecting consumers. That’s the central claim in a new report from research firm Gartner that slams credit card companies for failing to notify consumers when credit card records are compromised by malicious hackers. The report notes that while credit card companies’ “zero-liability” policies protect card holders from paying for unauthorized or fraudulent charges, they do not protect consumers from identity theft and the credit report hell that can follow. Avivah Litan, Gartner vice president and the report’s co-author, said when security breaches happen, banks that issue credit cards seldom notify consumers. “The issuers claim they don’t really know if a card was compromised after a merchant or transaction processing firm reports a problem, so they wait to see whether a consumer reports fraud against his or her card,” Litan said. “Of course the fact that closing potentially compromised accounts and providing consumers with new cards costs the issuer about $35 per card is also a factor here. So the card issuers take a calculated risk that compromised cards won’t be used fraudulently.” Full Story