President Obama Friday signed an executive order that calls for increased credit card protection measures for some federal benefits and expense cards distributed by the government. The President also formally endorsed the chip-and-PIN payment system for U.S. cards, a move opposed by many banking and commerce groups.
The President made the announcement in a speech given at the headquarters of the CFPB in Washington. “Identity theft is now America’s fastest-growing crime,” the President said. “You should be able to buy the things that you need without risking your identity, your credit score or your savings.”
The White House said the government would start distributing federal benefits with debit cards containing an identification chip. The named benefits included Social Security, Medicare and veterans’ payments. Cards issued to federal employees to pay for expenses will also contain the chip.
Obama also formally endorsed a national move to the so-called chip-and-PIN payment system to replace the current magnetic strip system and expanding on many banks’ move to chip-and-signature.
Chip-and-PIN, used for years in many European countries, is seen as a safer method for consumers. While the technology does not prevent identity theft, it makes it much harder for fraudsters to replicate debit and credit cards once card data has been stolen.
But the technology would require a large scale equipment upgrade at practically every business that accepts cards and in the nation’s ATM network. That transition is the main reason for broad opposition among banks, payment firms, and businesses.
To that end, the President called on Congress to act in considering legislation making the switch. Similar legislative efforts in states have failed, most notably in California, which tabled a bill this summer that would have mandated chip-and-PIN in the state.
The executive order also calls for new guidelines in identity theft remediation for consumers by reducing the amount of time victims have to wait to have their situations resolved. Most pointedly, the order directs the FTC to enhance the functionality of the government’s IdentityTheft.gov portal “by coordinating with the credit bureaus to streamline the reporting and remediation process with credit bureaus’ systems to the extent feasible, and in making the enhanced site available to the public by May 15, 2015.”
While the order and the new focus does not include the third party debt collection industry directly, it is a major step toward a new payment processing standard in the country. And that bears close watching.