Visa and American Express informed CardSystems Solutions, Inc. that they will discontinue business with CardSystems effective October 31, 2005 due to the recent CardSystems security breach that exposed 40 million consumers to possible fraud. However, MasterCard and Discover intend to continue their business relationship with CardSystems as long as CardSystems will become fully compliant with the industry's security standards by August 31, 2005.
According to John Perry, President and CEO of CardSystems, the loss of Visa and American Express sponsorship will force CardSystems out of business. Perry urged Visa and American Express to reconsider stating that if CardSystems is forced to close, it will likely make other card processors reluctant to come forward in the future. Perry also stated that if CardSystems were terminated it would disrupt the operation of thousands of merchants. Perry claims that CardSystems has been working diligently to correct security issues since the breach was identified in May 2005.
Perry told a Congressional subcommittee that a Visa security assessor audited CardSystems in late fall 2003 and found no deficiencies. Based on the 2003 assessment, Visa qualified CardSystems compliant in June 2004. It was newly adopted security standards that CardSystems lacked at the time of the breach. Perry admitted to the committee that CardSystems kept certain transactions in readable form. Perry said that the files were kept for research purposes even though Visa and MaterCard security standards prohibited the files being kept in readable form.
As a security precaution, payment processors such as CardSystems do not have access to complete customer files with social security numbers, birth dates, or other information that would put consumers at a greater risk for identity theft. The account numbers that were taken have been identified and the issuing banks were notified. According to Perry, CardSystems has not been informed of any of the accounts that may have been affected being used fraudulently.
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