BILL NUMBER: SB 1351 AMENDED
BILL TEXT
AMENDED IN SENATE APRIL 22, 2014
AMENDED IN SENATE MARCH 26, 2014
INTRODUCED BY Senator Hill
FEBRUARY 21, 2014
An act to add and repeal Title 1.3E (commencing with Section
1748.70) of Part 4 of Division 3 of the Civil Code, relating to
payment cards.
LEGISLATIVE COUNSEL'S DIGEST
SB 1351, as amended, Hill. Payment cards.
Existing law generally provides for the regulation of credit and
debit cards, including, but not limited to, limitations on the
methods for offering and denying a credit card, requirements for
listing the name appearing on a credit card, and restrictions on a
person's liability for an unauthorized used of his or her credit or
debit card.
This bill would require retailers, starting October 1, 2015,
except as specified, that accept a payment card, as defined, to
provide a means of processing card-present payment card transactions
involving payment cards equipped with embedded microchips capable of
storing a personal identification number (PIN) or any
other technology that is generally accepted within the payments
industry as being more secure than microchip technology for
card-present fraud prevention. The bill would require a retailer
that issues a payment card that lacks a payment network logo to
ensure that any new or replacement card issued on or after October 1,
2017, has an embedded microchip capable of storing a PIN or any
other technology that is generally accepted within the payments
industry as being more secure than microchip technology for
card-present fraud prevention. The bill would also require
specified contracts entered into between a financial institution
, as defined, and a payment card network, as those terms are
defined, to include a provision requiring that a new or replacement
payment card issued to a cardholder with a California mailing address
have an embedded microchip capable of storing a personal
identification number or any other technology that is generally
accepted within the payments industry as being more secure than
microchip technology for card-present fraud prevention. The bill
would make legislative findings and declarations in this regard and
would repeal these requirements on or before January 1, 2020, unless
a later enacted statute, that is enacted before January 1, 2020,
deletes or extends that date.
Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares all of the
following:
(a) Over 80 countries utilize microchip technology for credit
cards, including, but not limited to, Canada, Mexico, Brazil, and
countries throughout Europe and Asia.
(b) The United States is one of the few remaining countries that
relies almost exclusively on magnetic stripe technology for credit
and debit cards.
(c) Credit and debit cards with microchip technology are preferred
to magnetic stripe cards because identifying information is
encrypted on an embedded microchip, which is more difficult to
counterfeit than a magnetic stripe.
(d) Adoption of microchip technology in Britain has helped reduce
fraud from counterfeit cards by 70 percent from 2007 to 2012,
inclusive, according to the UK Card Association.
(e) By contrast, breaches have more than doubled since 2007 at
retailers in the United States, affecting more than 5,000 records,
according to a survey by the Ponemon Institute, a research firm
located in Michigan.
(f) In 2012, United States merchants and banks suffered losses of
$11.3 billion due to credit card fraud, or five cents
($0.05) $0.05 on every one hundred
dollars ($100) $100 spent, according to the
Nilson Report, a payment-industry newsletter based in California.
(g) If credit and debit cards with microchip technology were used
in the United States, fraud losses could be reduced by 50 percent,
according to estimates by Aite Group, an independent research and
advisory firm focused on business, technology, and regulatory issues
and their impact on the financial services industry.
(h) It has been widely reported that retailers, banks, financial
institutions, and credit unions are planning on voluntarily adopting
microchip technology beginning in October 2015.
SEC. 2. Title 1.3E (commencing with Section 1748.70) is added to
Part 4 of Division 3 of the Civil Code, to read:
TITLE 1.3E. Microchip Payment Cards
1748.70. (a) Except as specified in subdivision (b), on and after
January 1, 2015, any contract entered into between a financial
institution and a payment card network to govern the circumstances
under which the logo of the payment card network is displayed on a
payment card issued by that financial institution shall include a
provision requiring that any new or replacement payment card issued
on or after October 1, 2015, to a cardholder with a California
mailing address by that financial institution with that payment card
logo, have an embedded microchip capable of storing a personal
identification number or any other technology that is generally
accepted within the payments industry as being more secure than
microchip technology for card-present fraud prevention.
(b) On and after January 1, 2017, any contract entered into
between a small financial institution and a payment card network to
govern the circumstances under which the logo of the payment card
network is displayed on a payment card issued by that financial
institution shall include a provision requiring that any new or
replacement payment card issued on or after October 1, 2017, to a
cardholder with a California mailing address by that financial
institution with that payment card logo, have an embedded microchip
capable of storing a personal identification number or any other
technology that is generally accepted within the payments industry as
being more secure than microchip technology for card-present fraud
prevention.
(c) A small financial institution that subsequently exceeds five
billion dollars ($5,000,000,000) in assets shall be provided with one
year from the date it first exceeds the five-billion-dollar
($5,000,000,000) threshold to comply with subdivision (a).
1748.75. (a) On and after October 1 , 2015,
October 1, 2015, a retailer that accepts a payment card
in a card-present, point-of-sale transaction shall provide
a means of processing card-present , point-of-sale
payment card transactions involving payment cards equipped with an
embedded microchip capable of storing a personal identification
number or any other technology that is generally accepted within the
payments industry as being more secure than microchip technology for
card-present fraud prevention.
(b) A retailer that issues a payment card that lacks a payment
network logo shall ensure that any new or replacement payment card
issued on or after October 1, 2017, has an embedded microchip capable
of storing a PIN or any other technology that is generally accepted
within the payments industry as being more secure than microchip
technology for card-present fraud prevention.
(b)
(c) The requirements of subdivision (a) shall apply to
small retailers and gas station pump payment terminals on and after
October 1, 2017.
1748.80. For purposes of this title, the following terms shall
have the following meanings:
(a) "Financial institution" means a depository institution or
other entity that issues a payment card to a cardholder for use by
that cardholder to purchase goods, services, or anything else of
value. "Financial institution" can include a retailer.
(a)
(b) "Payment card" means a credit or debit card.
(b)
(c) "Payment card network" means an entity that
facilitates the payment process between credit or debit card users,
retailers, and credit or debit card issuers.
(c)
(d) "Retailer" means a person or entity that furnishes
money, goods, services, or anything else of value upon the
presentation of a payment card by a cardholder. "Retailer" shall not
mean the state, a county, city, city and county, or any other
political subdivision of the state.
(d)
(e) "Small financial institution" means a financial
institution with assets of $5 billion five
billion dollars ($5,000,000,000) or less as of January 1,
2015 .
(e)
(f) "Small retailer" means a retailer with 10 or less
employees.
1748.85. It is the intent of the Legislature that this
chapter title provide consumer protection
consistent with federal law.
1748.90. This title shall remain in effect only until January 1,
2020, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2020, deletes or extends
that date.