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RETAILERS ASSOCIATION 980 9th Street, Suite 2100 Sacramento, CA 95814

CALIFORNIA GROCERS ASSOCIATION 1215 K Street, Suite 700 Sacramento, CA 95814
LATINO CONSUMER FEDERATION 1205 W. 5th Street, Ste M-140 Los Angeles, CA 90017

Aug 6, 2015
The Honorable Jerry Brown
State Capitol, Suite 1173
Sacramento, CA 95814

Dear Governor Brown:

As you are undoubtedly aware, data breaches and the resulting financial fraud that normally
occurs has been a persistent problem in the United States in recent years. While private and
public institutions are taking some steps to bolster data security measures to prevent breaches
and adopting measures to minimize their fallout, they are failing in the critical aspect of
payment systems. The credit card industry has thus far been unwilling to implement the best
available technology to safeguard consumer transactions chip and PIN cards.

Recent high-profile cyber-attacks at large companies and government networks have
compromised millions of Americans sensitive personal and financial records. These security
challenges are especially concerning because financial fraud can have particularly damaging
consequences on working families budgets. Even when they are eventually reimbursed after
fraud occurs, most Americans have to face the arduous task of working with fraud investigators,
sorting out their finances, and reestablishing frozen accounts.

In order to move beyond the outdated and fraud-prone magnetic strip credit cards we are all
accustomed to, credit card issuers have started rolling-out new credit cards that contain an
embedded microchip. The microchips are encrypted and create a unique code for each
transaction that is conducted with the card so they cannot be counterfeited using stolen
financial data. While a step in the right direction, these newer chip-equipped cards, otherwise
known as EMV cards, still rely on exceedingly fallible signatures as a secondary means of
verifying a transaction is legitimate.

Instead, card issuers should be deploying chip-equipped cards that require consumers to enter a
PIN (personal identification number). Widely used around the world, chip and PIN cards have
contributed to exponential reductions in credit card fraud where they are used. Unlike a
signature that is often ignored or can easily be forged, it is much more difficult for thieves to
bypass a PIN. Therefore, while chip and PIN cards will not prevent data breaches from occurring,
thieves will have less financial incentive to steal Americans credit card information because the
dual security measures are insurmountable.

Whether driven by self-serving financial motives or an unwillingness to invest in the more secure
chip and PIN technology, the credit card industry has insisted on relying on signatures even
though the overwhelming body of evidence shows PINs are more secure when paired with
microchip-enabled cards.

Fortunately, others are acting where the credit card industry is not. Last year, President Obama
issued an executive order mandating all federally issued credit cards be equipped with chip and
PIN technology and that all point-of-sale terminals in federal buildings be upgraded to accept
them. The shift is a strong signal by security experts and Administration officials that chip and
PIN should be the standard going forward.

While the Presidents actions are an important step in insuring more American consumers are
protected by the best available payment security technology, we believe more must be done to
hasten the transition to chip and PIN cards. For that reason, we respectfully urge your
administration to explore an executive order or other ways the state can mandate chip and PIN
technology for all transactions that involve the state government, and to upgrade point-of-sale
terminals at state buildings to accept chip and PIN cards.

California has long been a pioneer in advancing policies that shape the economy and the rest of
the country. This is another opportunity to demonstrate our leadership. Mandating chip and PIN
technology for state cards like the ones in the Cal-Card Program would not only secure more
transactions that take place, but it would also better protect state finances. More importantly,
decisive action by your administration would send a strong message and further encourage the
implementation of chip and PIN nationwide. If one of the countrys most populous and
economically prosperous states moves toward chip and PIN, it will continue to build pressure on
the credit card industry to invest in deploying chip and PIN technology for all Americans.

Thank you for your time and consideration.

Bill Dombrowski

Michael Bustamante

President and Chief Executive Officer
Executive Director & Board Chair
California Retailers Association
Latino Consumer Federation

Ronald Fong

President and CEO
California Grocers Association