Credit-Union Group Not Happy With Massachusetts Breach Ruling

CUNA MutualGroup officials expressed regret yesterday at this week's Massachusetts Supreme Court ruling that the major card brands' compliance processes provided an adequate remedy for credit unions that suffered huge losses in the BJ's Wholesale Club breach, reports Credit Union Journal, a PaymentsSource sister publication. "This is an unfortunate ruling and one which we, and likely our credit-union partners in this litigation, do not agree with," says Chuck Cashman, CUNA Mutual plastic card product executive. In its decision, the state's high court affirmed a lower-court ruling dismissing the multi-million dollar lawsuit by CUNA Mutual's CUMIS Insurance Society affiliate on behalf of 130 credit unions whose credit cards were breached in the 2005 hacking of BJ's Wholesale Club. The credit-union insurer had sued BJ’s for breach of a third-party contract, based on BJ's agreement with merchant acquirer Fifth Third Bancorp not to store customers's card magnetic stripe data. The lower court sided with BJ's, and the state's high court affirmed, saying the contract was exclusively between BJ's and Fifth Third. The credit union wanted BJ's to pay compensation for the millions it cost to replace credit cards that were breached by the hackers. Meantime, Pennsylvania State Employees Credit Union, which spent almost $100,000 to replace cards breached in the BJ's case, says it has ended its legal pursuit of claims against Fifth Third. Greg Smith, president of the $3.5 billion credit union, says the institution agreed to settle the case out of court but could not discuss the terms under the settlement. A group of hackers has confessed to the 2005 BJ&'s breach and others involving TJX Cos., Barnes & Nobles, Sports Authority , Hannaford Bros. supermarkets and Heartland Payment Systems", among others.