http://www.businessweek.com/articles/2014-09-16/home-depot-breach-why-small-merchants-will-pay
By Patrick Clark
Businessweek.com
September 16, 2014
Federal law protects consumers from the cost of fraudulent charges
incurred when thieves steal credit-card and debit-card numbers. That’s
good for the millions of Americans who had their payments data exposed by
the hackers who breached Home Depot’s (HD) computer system earlier this
year. And it’s bad for merchants, who often take losses on sales made to
crooks with stolen cards.
When a credit-card company identifies fraud, it wipes the payment off the
cardholder’s account and notifies the merchant. Unless the store can prove
the payment was authorized, the credit-card company debits money from a
merchant’s checking account, leaving the vendor on the hook for the cost
of items that were fraudulently purchased. Merchants also pay penalties,
called chargeback fees, for accepting unauthorized charges. Accrue too
many chargebacks and you’ll pay higher processing fees or lose the ability
to accept certain credit cards.
Those costs add up. The average merchant lost .68 percent of annual
revenue to fraud in 2013, but the total cost is a multiple of that,
according to a survey published (PDF) last month by LexisNexis. For every
dollar lost to fraud, merchants spend a further $3.08, to replace lost
inventory and cover chargeback fees and other penalties, according to the
survey.
The Home Depot hack left as many as 60 million credit cards and debit
cards exposed, according to a report in the New York Times. Add those to
the 40 million accounts affected by a hacker assault on Target (TGT) last
year, plus the cards pilfered from Chinese restaurant chain P.F. Chang,
luxury retailer Neiman Marcus, and others. A lot of stolen identities are
floating around.
[...]
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