Credit Unions Pay Higher Price for Data Breaches

Posted January 21, 2015

Major Retail Data Breaches Hit C.U.s and Community Banks Harder Than the “Big Boys”

To a large financial institution such as JP Morgan Chase or B of A, breaches like the ones suffered by Target, Home Depot and Staples may be little more than an annoyance. But, to a credit union or community bank, a major retailer’s breach can turn out to be costly and time- and resource-consuming. That’s the message being delivered by Credit Union Association (CCA) President and CEO Jim Nussle.

In his article on bizjournals.com, Eric Jay Toll reports on credit union plans to help take the sting out of data breaches for C.U.s and community banks. The following has been excerpted from his story and edited to fit our format. You may find the full article by clicking on this link.

Getting the government involved

“Data breaches are one of the two most important issues we want to bring to Congress’ attention,” Nussle said. “We have to pay first and then wait to see how we’re going to get reimbursed. This needs to change for small organizations like credit unions and for community banks, too.”

Breaches costly for the little guy

Nussle and Scott Earl, Mountain West Credit Union Association president and CEO, both agreed that the constituent impact is serious.

“I talked with a CEO of a credit union that had to reissue cards three times last year,” said Nussle. “They must have had customers that shopped at Target, Home Depot and Jimmy John on the same day.”

[Earl observed,] “We’re not seeing a way to recoup the costs in time and expense for dealing with the breaches to protect our members. Those costs come out of funds we can use to provide member services.”

One example of the costs incurred

In 2013, Desert Schools Credit Union had to reissue 40,000 ATM and credit cards after the Bashas’ data breach, according to Vice President of Marketing Cathy Graham. The cost was not just for replacement credit cards, but the big hit was the dollars in fraudulent activity and the amount of reimbursement to members.

Can they make Congress act?

CUNA, which represents 90 percent of the 6,700 U.S. credit unions, plans to take the issue to Congress and seek legislation to protect members’ values.

Credit unions are also facing impacts from the Dodd-Frank legislation, said Nussle and Earl.

“Even though most credit unions are under the $10 billion threshold they still need to adapt the same kinds of record-keeping as large banks,” said Earl. “This is especially true with mortgage paperwork. The volume of paperwork and the cost is astounding.”

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