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Two-Thirds of Shoppers Don't Trust Retailers After Data Breaches

 

By Brian O'Connell | April 29, 2014

Call it the "Target effect."

After consumers got wind of the data security breach that left customer credit card numbers open to identity thieves last year, many stopped using their credit and debt cards while shopping at the national big box retailer.

For Target, the ramifications were swift, as Standard & Poor's recently cut Target's investment-grade rating to A from A+. "We expect the data breach to have a somewhat lingering effect on customer traffic at least through the first half of fiscal 2014," S&P said in March. "We expect incremental expenses, penalties and litigations to emerge in fiscal 2014. We believe these expenses could be significant."

It's not fair to blame Target only. Giant retailers including Michaels Stores and Neiman Marcus also suffered big data breaches, and unsurprisingly U.S. payment cardholders are increasingly reluctant to trust retailers with their credit cards.

According to American Consumer Credit Counseling, a Boston debt counseling nonprofit service, 64% of U.S. adults "do not trust" major retailers with their payment cards, and 52% of consumers surveyed say they have already been affected by some form of payment card fraud.

That is turning the payment industry on its ears. In an era when plastic rules the shopping aisles, the ACCC says 42% of Americans are now paying for retail goods with either cash or a check.

It's up to retailers to regain the trust of shoppers by securing their payment cards, but it's an uphill fight.

"As technology and the digital age continue to advance, retailers need to find ways to improve their customers' security to minimize the likelihood and scope of a potential data breach," says Steve Trumble, chief executive of American Consumer Credit Counseling. "Identity theft is at an all-time high and retailers are rapidly losing consumers' trust, all of which is detrimental to the economy."

The key move for consumers right now? Don't wait for retailers to get their act together, and get ahead of the payment card data fraud threat.

Start by alerting the three major credit ratings agencies -- ExperianEquifax and TransUnion -- and have each put a data security alert on your report. That will help protect your credit rating in the event of a data breach.

The ACCC offers a thorough checklist on what to do if you think you've been victimized by payment card fraud.

"Data breaches have become a national epidemic, and it is necessary that consumers know how to protect their personal information and what to do in the case that their information is compromised," Trumble says. "By being proactive, consumers can avoid the potential for devastating financial ruin that comes as a result of identity theft."

American Consumer Credit Counseling (ACCC) is a non-profit organization providing free credit counseling, low-cost debt management services and homebuyer education to first time house buyers as well as those re-entering the housing market. Available on desktops, laptops and mobile devices, ACCC's online home buyer course provides help for first time buyers and the certification required to close on certain loans. ACCC's online home buyers course provides everything buyers need to know about purchasing a home – from working with realtors to preparing for closing. In addition to a first home buyers course, ACCC also offers counseling for consumers considering reverse mortgage solutions, with information about qualifying for a reverse mortgage and answers to questions like "How do reverse mortgages work?"

Better Business Bureau Mass Housing Approved National Industry Standards for Homeownership Education and Counseling Council on Accreditation NFCC Member