US Citizen? Your credit is in doubt…

I was introduced to a very subtle effect of the Heartland breach. Remember, card processor Heartland has screwed up and, as some sources say, 100 million credit card numbers were stolen from them via a Trojan. That fact spread big news and, among others, started a discussion if PCI has been proven to be useless. But there seem to be additional effects: US customers seem to have lost a lot of credibility in international shopping.

In Adiscon’s office, I heard today that we got a call from one of our card processors. Keep in mind that we are based in Germany. The card processor inquired about a recent transaction and asked us to check whether this could be credit card fraud. It was not, but he left us his phone number so that we could check with him in the future when we suspected fraud on transactions.

This is quite unusual and immediately drew my attention. I gave that guy a call. He explained that they are routinely checking US credit card transactions because some problems have been seen recently with US cards. He explained to me that the processor would like to protect merchants, because “if you ship the goods and the cardholder protests the charge … weeks later … you will be charged back but unable to recover the goods” (good point, btw). So I came up and asked if they were calling because of the Heartland breach. Not only, he said, but that would be an example (I deciphered this as a “yes”). So then I asked if they had not blacklisted the affected card numbers. Some statements followed, which I deciphered to mean “no”. So the cards are still active and seem to cause issues (why else would a card processor begin to call its merchants?).

I know that heartland does not know exactly which card numbers have been stolen. But it is known that most probably any card processed within the past 10 month is highly suspect. So wouldn’t it have been fair security practice to put these cards on the blacklist and issue new ones to the cardholders? Sure, that would be inconvenient (read: costly) and, probably more important, would have shown to everyone that someone has screwed up, but would that not be much better than putting both consumer and vendors at risk? Without an automatic blacklisting, consumers need to pay much more attention to their credit card bill.

An interesting side-effect is that US customers seem to have lost credit outside of the US. For example, it was suggested to me that we check each US-order in depth before delivering anything. If everyone else gets this advise, US customer’s will probably find shopping overseas quite inconvenient…

If you loose your credit card, you are legally required to call your card issuer and report that loss. As long as you do not notify them, you are liable. If, on the other hand, someone in the card industry looses your card (number), nobody seems to be liable: Customers must check their statements and vendors must do in-depth checks (sigh) on their customers. Is this really good practice?

And what if a card is used to commit credit card fraud? No problem at all (for the card industry): either the cardholder will not notice it (and pay the fraud) or the cardholder protests the charge, in which case the merchant needs to pay. The later case involves some manual processing by the card industry: again, no problem! The merchant is charged a hefty protest fee. Looking at how hefty the fee is, it seems to be even profitable for the card industry if it takes that route.

Bottom line: who is responsible? Card industry (Heartland in this case). Who pays? Everyone else! Isn’t that a nice business model? Where is the motivation to keep such a system really secure?

I think that really questions if the card industry is interested in security. PCI may not have failed (I tend to agree to Anton Chuvakin here). But it smells a bit like PCI and whetever else efforts can not succeed, because they are not deployed in a honestly security-aware environment but rather in one that needs good execuses for sloppy security. As long as the card industry does not do the right thing as soon as it costs the card industrie’s money, real security can not be achieved.