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, startingbegin delete October 1, 2015,end deletebegin insert April 1, 2016,end insert 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 microchipsbegin delete capable of storing a personal identification number (PIN)end delete
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 microchipbegin delete capable of storing a PINend delete 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 microchipbegin delete capable of storing a personal identification numberend delete
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:
The Legislature finds and declares all of the
2following:
3(a) Over 80 countries utilize microchip technology for credit
4cards, including, but not limited to, Canada, Mexico, Brazil, and
5countries throughout Europe and Asia.
6(b) The United States is one of the few remaining countries that
7relies almost exclusively on magnetic stripe technology for credit
8and debit cards.
9(c) Credit and debit cards with microchip technology are
10preferred to magnetic stripe cards because identifying information
11is encrypted on an embedded
microchip, which is more difficult
12to counterfeit than a magnetic stripe.
13(d) Adoption of microchip technology in Britain has helped
14reduce fraud from counterfeit cards by 70 percent from 2007 to
152012, inclusive, according to the UK Card Association.
16(e) By contrast, breaches have more than doubled since 2007
17at retailers in the United States, affecting more than 5,000 records,
18according to a survey by the Ponemon Institute, a research firm
19located in Michigan.
20(f) In 2012, United States merchants and banks suffered losses
21of $11.3 billion due to credit card fraud, or $0.05 on every $100
P3 1spent, according to the Nilson Report, a payment-industry
2newsletter based in California.
3(g) If credit and debit cards with microchip technology were
4used in the United States, fraud losses could be reduced by 50
5percent, according to estimates by Aite Group, an independent
6research and advisory firm focused on business, technology, and
7regulatory issues and their impact on the financial services industry.
8(h) It has been widely reported that retailers, banks, financial
9institutions, and credit unions are planning on voluntarily adopting
10microchip technology beginning in October 2015.
Title 1.3E (commencing with Section 1748.70) is
12added to Part 4 of Division 3 of the Civil Code, to read:
13
(a) Except as specified in subdivision (b), on and
17after January 1, 2015, any contract entered into between a financial
18institution and a payment card network to govern the circumstances
19under which the logo of the payment card network is displayed on
20a payment card issued by that financial institution shall include a
21provision requiring that any new or replacement payment card
22issued on or afterbegin delete October 1, 2015,end deletebegin insert April 1, 2016,end insert to a cardholder
23with a California mailing address by that financial institution with
24that payment card logo, have an embedded
microchipbegin delete capable of or any other technology
25storing a personal identification numberend delete
26that is generally accepted within the payments industry as being
27more secure than microchip technology for card-present fraud
28prevention.
29(b) On and after January 1, 2017, any contract entered into
30between a small financial institution and a payment card network
31to govern the circumstances under which the logo of the payment
32card network is displayed on a payment card issued by that
33financial institution shall include a provision requiring that any
34new or replacement payment card issued on or after October 1,
352017, to a cardholder with a California mailing address by that
36financial institution with that payment card logo, have an embedded
37microchipbegin delete capable of storing a personal identification numberend delete
or
38any other technology that is generally accepted within the payments
39industry as being more secure than microchip technology for
40card-present fraud prevention.
P4 1(c) A small financial institution that subsequently exceeds five
2billion dollars ($5,000,000,000) in assets shall be provided with
3one year from the date it first exceeds the five-billion-dollar
4($5,000,000,000) threshold to comply with subdivision (a).
(a) On and afterbegin delete October 1, 2015,end deletebegin insert April 1, 2016,end insert a
6retailer that accepts a payment card in a card-present, point-of-sale
7transaction shall provide a means of processing card-present,
8point-of-sale payment card transactions involving payment cards
9equipped with an embedded microchip capable of storing a
10personal identification number or any other technology that is
11generally accepted within the payments industry as being more
12secure than microchip technology for card-present fraud prevention.
13(b) A retailer that issues a payment card that lacks a payment
14network logo shall ensure that any new or replacement payment
15card issued on or after October 1, 2017, has an embedded microchip
16begin delete capable of storing a PINend delete or any other technology that is generally
17accepted within the payments industry as being more secure than
18microchip technology for card-present fraud prevention.
19(c) The requirements of subdivision (a) shall apply to small
20retailers and gas station pump payment terminals on and after
21October 1, 2017.
For purposes of this title, the following terms shall
23have the following meanings:
24(a) “Financial institution” means a depository institution or other
25entity that issues a payment card to a cardholder for use by that
26cardholder to purchase goods, services, or anything else of value.
27“Financial institution” can include a retailer.
28(b) “Payment card” means a credit or debit card.
29(c) “Payment card network” means an entity that facilitates the
30payment process between credit or debit card users, retailers, and
31credit or debit card issuers.
32(d) “Retailer” means a person or entity that furnishes money,
33goods, services, or anything else of value upon the presentation
34of a payment card by a cardholder. “Retailer” shall not mean the
35state, a county, city, city and county, or any other political
36subdivision of the state.
37(e) “Small financial institution” means a financial institution
38with assets of five billion dollars ($5,000,000,000) or less as of
39January 1, 2015.
40(f) “Small retailer” means a retailer with 10 or less employees.
It is the intent of the Legislature that this title provide
2consumer protection consistent with federal law.
This title shall remain in effect only until January 1,
42020, and as of that date is repealed, unless a later enacted statute,
5that is enacted before January 1, 2020, deletes or extends that date.
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