Feeds

Retailer challenges Visa penalty fees in data security dust-up

Claims it was charged despite 'no evidence' of breach

High performance access to file storage

In a payment industry first, a sporting-goods retailer has filed a multimillion-dollar lawsuit against Visa, arguing that the penalties the credit card company charges its members for data security breaches are unfair.

As reported by Wired, retailer Genesco alleges that Visa seized some $13m in funds from its merchant bank accounts following an incident in which packet-sniffing software was discovered on its network, despite there being no evidence that any credit card data was stolen.

At the time of the security breach, which took place in 2010, Genesco said it believed the intrusion had been successfully contained, though it was still possible that "certain details" of payment cards might have been compromised.

But in court documents filed on March 7, Genesco's attorneys argued that although the company had been "the victim of a sophisticated cybercrime attack," Visa failed to prove that any accounts had actually been breached – and that in fact, in many instances the forensic evidence proved that specific data was not leaked.

Nonetheless, the suit alleges, Visa concluded that Genesco had experienced a "data compromise event" and an "account compromise event" as defined by the Payment Card Industry Data Security Standards (PCI DSS), and proceeded to charge the company's banks non-compliance fines and fees to cover fraud-recovery expenses.

All told, Visa collected $13,298,900.16 in the incident, the court documents show – and all of that ultimately came out of Genesco's pocket, because its contracts with its banks indemnified the banks against any Visa fees or penalties.

Genesco now alleges that Visa's imposition of the fines was a breach of contract under the Visa International Operating Regulations, and it wants all $13m back.

The company also claims that Visa knew there was no basis for the fines, and that its actions amounted to "unlawful, unfair or fraudulent business practices" under the California Unfair Business Practices Act, for which it says additional damages should be determined at trial.

Tennessee-based Genesco is the parent company of a variety of footwear and sports-apparel store chains, including Journeys, Lids, Schuh, and Johnston & Murphy, among others, which together operate some 2,440 retail stores across Canada, the UK, Ireland, and many US states – including California, where Visa is headquartered.

This is the first time a retailer has filed suit against a credit card company over PCI DSS fines related to a data security breach. As Wired points out, a restaurant and nightclub disputed similar fees in one earlier case, but in that incident the suit was brought against the banks that collected the fees, rather than the credit card company that imposed them.

According to Genesco, however, it is Visa that is clearly in the wrong in its case, and that to allow Visa to keep the $13m it collected from Genesco would be "against principles of right, justice, and morality" – strong words, indeed.

If the court finds in Genesco's favor, it could potentially set legal precedent that changes the ways in which credit card companies are allowed to levy fees for PCI DSS violations.

Visa has issued no statement on the matter. ®

High performance access to file storage

More from The Register

next story
Sorry London, Europe's top tech city is Munich
New 'Atlas of ICT Activity' finds innovation isn't happening at Silicon Roundabout
MtGox chief Karpelès refuses to come to US for g-men's grilling
Bitcoin baron says he needs another lawyer for FinCEN chat
Dropbox defends fantastically badly timed Condoleezza Rice appointment
'Nothing is going to change with Dr. Rice's appointment,' file sharer promises
Audio fans, prepare yourself for the Second Coming ... of Blu-ray
High Fidelity Pure Audio – is this what your ears have been waiting for?
Did a date calculation bug just cost hard-up Co-op Bank £110m?
And just when Brit banking org needs £400m to stay afloat
Zucker punched: Google gobbles Facebook-wooed Titan Aerospace
Up, up and away in my beautiful balloon flying broadband-bot
Apple DOMINATES the Valley, rakes in more profit than Google, HP, Intel, Cisco COMBINED
Cook & Co. also pay more taxes than those four worthies PLUS eBay and Oracle
It may be ILLEGAL to run Heartbleed health checks – IT lawyer
Do the right thing, earn up to 10 years in clink
prev story

Whitepapers

Securing web applications made simple and scalable
In this whitepaper learn how automated security testing can provide a simple and scalable way to protect your web applications.
Five 3D headsets to be won!
We were so impressed by the Durovis Dive headset we’ve asked the company to give some away to Reg readers.
HP ArcSight ESM solution helps Finansbank
Based on their experience using HP ArcSight Enterprise Security Manager for IT security operations, Finansbank moved to HP ArcSight ESM for fraud management.
The benefits of software based PBX
Why you should break free from your proprietary PBX and how to leverage your existing server hardware.
Mobile application security study
Download this report to see the alarming realities regarding the sheer number of applications vulnerable to attack, as well as the most common and easily addressable vulnerability errors.