credit card payments Source: alice-photo/Shutterstock.

I would love to see federal law impose direct liability on merchants for the costs associated with data breaches that compromise credit and debit cards. After all, there is not only the direct cost of reissuing the cards but the reputational cost of being associated with a data breach for which you are not responsible.

But in the absence of my dream legislation, at least the card networks have the ability to indirectly shift costs to negligent merchants if they choose to do so. Now, however, the merchants are trying to get out of this obligation as well. Fortunately, in an extremely important ruling, [Paymentech v. Landry's, Docket No. 21-20447 (5th Cir. Aug 24, 2021), Court Docket] the Court of Appeals for the 5th Circuit ruled in a decision filed on Thursday that merchants can be made responsible for reimbursing financial institutions for costs related to data breaches.

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