BILL NUMBER: SB 1351	AMENDED
	BILL TEXT

	AMENDED IN SENATE  MAY 22, 2014
	AMENDED IN SENATE  MAY 19, 2014
	AMENDED IN SENATE  MAY 13, 2014
	AMENDED IN SENATE  APRIL 23, 2014
	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 use of his or her credit or
debit card.
   This bill would require retailers, starting April 1, 2016, 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 or any other
technology that is more secure than  microchip  
static magnetic stripe  technology for card-present fraud
prevention. The bill would also require specified contracts entered
into between a financial institution and a payment card network, as
those terms are defined, to include a provision requiring that
 a   75% of  new or replacement payment
 card   cards  issued to a cardholder with
a California mailing address have an embedded microchip or any other
technology that is 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 $0.05 on every $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   75 percent of
 new or replacement payment  card   cards
 issued on or after April 1, 2016, to a cardholder with a
California mailing address by that financial institution with that
payment card logo, have an embedded microchip or any other technology
that is 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
  75 percent of  new or replacement payment
 card   cards  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 or any other technology that is 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 April 1, 2016, 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 or any other technology that is more secure than 
microchip   static magnetic stripe  technology for
card-present fraud prevention.
   (b) 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.
   (b) "Payment card" means a credit or debit card.
   (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.
   (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.
   (e) "Small financial institution" means a financial institution
with assets of five billion dollars ($5,000,000,000) or less as of
January 1, 2015.
   (f) "Small retailer" means a retailer with 10 or less employees.
   1748.85.  It is the intent of the Legislature that this title
provide consumer protection consistent with federal law and not
impact private agreements between retailers, small retailers, and
payment card networks relating to which party bears liability for
fraudulent payment card usage.
   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.