As was previously reported, October 1, 2015 signaled a fraud “liability shift” between credit card issuers and merchants, in which liability for fraudulent credit card transactions began falling on whichever party used the lower level of security and compliance with EMV standards. While merchants are not required to adopt EMV technology (which reads chip cards, as opposed to the less secure magnetic strip cards), in the event of a data breach, their failure to do so can now render them responsible for the costs associated with the fraudulent use of stolen credit card information. This liability shift has created a very strong incentive for merchants to implement EMV chip card readers.
For companies that have not opted to make the EMV transition, lawsuits may begin to abound. One of the first suits targeting a retailer for its failure to keep up with industry standards was filed on February 8, 2016, in the wake of a possible data breach at the nationwide fast food chain, Wendy’s.
On January 27, 2016, Wendy’s announced that it was investigating a possible breach of its point of sale systems, after the company was alerted of “unusual activity” involving customers’ credit or debit cards at some of its locations. Wendy’s hired a cybersecurity firm to investigate the potential breach – which involved transactions in late 2015 – who discovered malware designed to steal customer payment data on computers that operate Wendy’s payment processing systems in certain locations.
An Orlando, Florida man purporting to be a victim of the Wendy’s breach initiated a class action lawsuit against the company on February 8, 2016, claiming that Wendy’s “lackadaisical” and “cavalier” security measures allowed his debit card data to be stolen and used to purchase nearly $600.00 of merchandise from various retailers. The lawsuit alleges that Wendy’s could have prevented the breach, yet maintained a system that was insufficient and inadequate to protect customers’ data. An attorney representing the plaintiff suggested that Wendy’s failed to incorporate technology allowing for use of chip-enabled cards, and that the lawsuit may expose the danger of failing to adopt such a system.
The threat of similar class action litigation may serve as a wake-up call for retailers who have failed or otherwise delayed in implementing up-to-date security measures. The suit, Jonathan Torres vs. The Wendy’s Company, can be found here.