Bank Lawyer's Blog: The High Price of Privacy Breaches

The Bank Lawyer's Blog has some things to say about the latest CardSystems news, not surprisingly from the perspective of a bank's lawyer:

Bank Lawyer's Blog: The High Price of Privacy Breaches:

"...A couple of obvious points: (1) make certain that the bank's contracts with payment processors contain provisions that meet not only the privacy and security requirements of the law (for example, those imposed by Gramm-Leach-Bliley and its implementing regulations), but the privacy and security requirements of other interested parties that might be imposed upon the bank and its contractors, such as VISA and Amex, and that permit the bank to terminate in a timely manner the processing agreement for a breach of those obligations; and (2) that even though a bank builds obligations into the contract, ongoing monitoring by the bank and/or a third party (such as an annual SAS 70 audit), is an essential part of a vendor management program.

This incident also demonstrates that 'reputational risk' is real. The processor retained and used 'for research purposes' personal data that it had agreed not to retain and use. Existing and future customers will have to consider carefully whether such an organization is to be trusted not to renege on its obligations in the future. That's an ugly fact of life...."