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 isbegin delete generally accepted within the payments industry as beingend delete more secure than microchip technology for card-present fraud prevention.begin delete 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 or any other technology that is generally accepted within the payments industry as being more secure than microchip technology for card-present fraud prevention.end delete
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 new or replacement payment card issued to a cardholder with a California mailing address have an embedded microchip or any other technology that isbegin delete generally accepted within the payments industry as beingend delete 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 after April 1, 2016, to a cardholder with a California
23mailing address by that financial institution with that payment card
24logo, have an embedded microchip or any other technology that
25isbegin delete generally accepted within the payments industry as beingend delete more
26secure than
microchip technology for card-present fraud prevention.
27(b) On and after January 1, 2017, any contract entered into
28between a small financial institution and a payment card network
29to govern the circumstances under which the logo of the payment
30card network is displayed on a payment card issued by that
31financial institution shall include a provision requiring that any
32new or replacement payment card issued on or after October 1,
332017, to a cardholder with a California mailing address by that
34financial institution with that payment card logo, have an embedded
35microchip or any other technology that isbegin delete generally accepted within more secure than microchip
36the payments industry as beingend delete
37technology for card-present fraud prevention.
38(c) A small financial institution that subsequently exceeds five
39billion dollars ($5,000,000,000) in assets shall be provided with
P4 1one year from the date it first exceeds the five-billion-dollar
2($5,000,000,000) threshold to comply with subdivision (a).
(a) On and after April 1, 2016, a retailer that accepts
4a payment card in a card-present, point-of-sale transaction shall
5provide a means of processing card-present, point-of-sale payment
6card transactions involving payment cards equipped with an
7embedded microchip or any other technology that isbegin delete generally more secure than
8accepted within the payments industry as beingend delete
9microchip technology for card-present fraud prevention.
10(b) A retailer that issues a payment card that lacks a payment
11network logo shall ensure that any new or replacement
payment
12card issued on or after October 1, 2017, has an embedded microchip
13or any other technology that is generally accepted within the
14payments industry as being more secure than microchip technology
15for card-present fraud prevention.
16(c)
end delete
17begin insert(b)end insert The requirements of subdivision (a) shall apply to small
18retailers and gas station pump payment terminals on and after
19October 1, 2017.
For purposes of this title, the following terms shall
21have the following meanings:
22(a) “Financial institution” means a depository institution or other
23entity that issues a payment card to a cardholder for use by that
24cardholder to purchase goods, services, or anything else of value.
25“Financial institution” can include a retailer.
26(b) “Payment card” means a credit or debit card.
27(c) “Payment card network” means an entity that facilitates the
28payment process between credit or debit card users, retailers, and
29credit or debit card issuers.
30(d) “Retailer” means a person or entity that furnishes money,
31goods, services, or anything else of value upon the presentation
32of a payment card by a cardholder. “Retailer” shall not mean the
33state, a county, city, city and county, or any other political
34subdivision of the state.
35(e) “Small financial institution” means a financial institution
36with assets of five billion dollars ($5,000,000,000) or less as of
37January 1, 2015.
38(f) “Small retailer” means a retailer with 10 or less employees.
It is the intent of the Legislature that this title provide
40consumer protection consistent with federalbegin delete law.end deletebegin insert law and not
P5 1impact private agreements between retailers, small retailers, and
2payment card networks relating to which party bears liability for
3fraudulent payment card usage.end insert
This title shall remain in effect only until January 1,
52020, and as of that date is repealed, unless a later enacted statute,
6that is enacted before January 1, 2020, deletes or extends that date.
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