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Visa Fines Ohio Bank $880 Thousand

[Author's note: title has been corrected and "Million" replaced with to "Thousand."]

From the Boston Globe newspaper:

"Fifth Third Bancorp, the Ohio bank that was fined $880,000 by Visa for its role in the customer data security breach at TJX Cos., the largest ever, also paid fines and compensation totaling $1.4 million following the loss of data from BJ's Wholesale Club Inc. several years ago, a court filing shows."

This news story is interesting because banks, retailers, and credit-card firms (e.g., Visa and MasterCard) have recently fought about data security issues and who pays the costs when credit cards must be re-issued to consumers after a retailer's data breach:

"Visa had threatened to levy fines when merchants didn't meet a Sept. 30 deadline to upgrade their systems to current security standards that spell out requirements like keeping data behind firewalls and using robust encryption systems for their wireless networks. By Visa's most recent count in October more than a third of the largest US stores didn't meet the requirements."

What makes these fines even more interesting:

"Technically, Visa and MasterCard can't fine merchants directly but rather levy penalties on banks the merchants pay to process transactions when customers pay with plastic... That Fifth Third was previously fined suggests the bank should have known better than to tolerate the issues at TJX..."

What caught my attention in this news story was a certain computing company mentioned:

"Details of the fine against Fifth Third in the BJ's case came in previous litigation in Pennsylvania filed against the bank, BJ's, and IBM Corp. by a Pennsylvania credit union seeking to recover the costs of replacing compromised cards."

Reportedly, Fifth Third was the fifth-largest processor of bank card transactions for merchants. That's about 2.5 billion bank credit card and debit transactions worth about $137 billion in 2006. Fifth Third operates more than 1,150 bank branches in the Midwest and Florida.

Comments

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William Morriss

As a note, the fine listed in the title ($880 million) is 1000 times the amount quoted in the article.

Not that $880,000 isn't a good deal of money to an individual, but I doubt it's much of a penalty to a major financial institution like Fifth Third.

George

William: thanks for pointing out the typepo. I have corrected the post's title.

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