The data breach at retail giant Target late last year has cost banks and credit unions more than $200 million, according to trade associations representing both groups.
The Consumer Bankers Association (CBA) said the cost of card replacements for its members, and other expenses, stand at about $172 million. The Credit Union National Association (CUNA) said its members have shelled out $30.6 million.
A recent breach of Target’s point-of-sale system exposed about 40 million debit and credit cards from November 27 to December 15.
The trade associations said they have replaced 21.8 million of the 40 million cards affected by the breach. All costs are to be swallowed by the financial institutions.
“The banks are the hook—not Target,” CBA spokesman Tom Crosson told Advisen. “When they say customers have no liability for fraudulent charges, it is because the banks absorb that cost.”
The total costs do not include fraudulent activity that has or will occur on the cards. Crosson said banks may recoup some of these losses. However, he added, “It’s pennies on the dollar.”
CUNA in a statement said it predicts fraud losses will “greatly add to the total” of losses.
Crosson said CBA’s members—nearly 60 of the largest US banks—haven’t sued Target to recoup some of the costs related to card reissuance and other expenses.
CUNA members have filed lawsuits against Target since the retailer went public with the data breach. Six credit unions—one each in Alabama, Arkansas, Texas and Missouri, and two in Pennsylvania—are named plaintiffs in cases, CUNA confirms.
There are additionally several filed cases seeking to recover the losses financial institutions have suffered, with proposed classes that could include credit unions. CUNA said more cases could be filed—ultimately to be consolidated for trial.
“Although Target is ultimately responsible for this data breach, credit unions must solely cover these costs of their card program administration,” said Bill Cheney, CUNA president and CEO, in a statement. “It’s time for Target to step up and accept their fair share of the costs associated with these types of data breaches.”
A survey of 1,112 credit unions revealed the Target data breach has cost credit unions about $5.68 per card.
In addition to the 40 million credit and debit cards affected by the data breach, Target announced that as many as 70 million customers could have had personal information stolen during the breach.
Chad Hemenway is Managing Editor of Advisen News. He has more than 15 years of journalist experience at a variety of online, daily, and weekly publications. He has covered P&C insurance news since 2007, and he has experience writing about all P&C lines as well as regulation and litigation. Chad won a Jesse H. Neal Award for Best Single Article in 2014 for his coverage of the insurance implications of traumatic brain injuries and Best News Coverage in 2013 for coverage of Superstorm Sandy. Contact Chad at 212.897.4824 or [email protected].
