HARRISBURG, Pa. — The $3.1 billion Pennsylvania State Employees Credit Union has won a chance to argue its case that it deserves to be repaid for losses it suffered during a major card breach.
The case stems from the card security breach suffered by the BJ's Wholesale Club retail chain that saw eight million card accounts potentially compromised. PSECU reissued 20,000 cards and sued BJs and its processing bank, Fifth Third, alleging that they had been damaged by BJ's and Fifth Third's failure to meet its contractual obligations with Visa.
The credit union lost the first round in the case in 2005 when a U.S. district judge ruled that the credit union did not have a right to damages as a third party to the Visa contract. But the CU appealed and the Third District Court of Appeals agreed that the CU should have had the chance to argue the breach of contract claim.
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Greg Smith, CEO of PSECU, said he expected the CU's case on breach of contract claim to go before a jury and that he looked forward to making the case that the retail chain should have honored its obligations not to keep cardholder data.
But Smith also warned that changes in Visa's standard operating rules precluded other credit unions taking a similar path to obtain damages from other breaches.
"Prior to our filing our case, the Visa rules were silent on third-party claims, but since then they have been changed to explicitly indicate that an issuer gives up third-party claims as a condition of issuing Visa," Smith explained.
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