Texas Bankers Hall of Fame and Bank Executives’ & Directors’ Seminar

On April 27 and 28, I had the privilege of attending the Texas Bankers Hall of Fame and Bank Executives’ & Directors’ Seminar hosted by Sam Houston State University. I would like to congratulate the five Hall of Fame honorees: B.A. Donelson, Jack Griggs, George Martinez, Milton McGee, Jr., and the late Milton Payne. I enjoyed hearing about all of their incredible accomplishments and contributions to community banking in Texas. Congratulations on the well-deserved recognition!

Just like last year, the Seminar provided valuable information to the community bankers in attendance. As an attorney representing community banks, I was most interested in the bank regulatory panel. The panel was again moderated by Sam Golden, formerly with the OCC and now a bank consultant with Alvarez & Marsal. The panelists were Bobby Davenport (Texas Department of Banking), Nathan Heizer (FDIC), Bernadette Hernandez (OCC), and Robert Triplett (Federal Reserve). For those who were not able to make it to the Seminar, I have recapped some of the most helpful information that the regulators shared:

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Home Depot settles data breach litigation with banks

Home Depot has agreed to pay more than $25 million to settle a class action lawsuit brought by banks and credit unions stemming from the store’s 2014 data breach. Home Depot previously settled with credit card issuers and some financial institutions, but other banks filed a separate lawsuit to recoup their costs of reissuing debit and credit cards and other losses. This is one of the more successful settlements in data breach litigation and demonstrates that such litigation may be a useful way for banks to recoup losses.

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Recent developments in data security regulations

Cybersecurity remains a top concern for banks and regulators, as data breaches pose substantial regulatory risk and high costs. As I have written in recent posts, banks must develop comprehensive cybersecurity policies to protect against data breaches and avoid adverse action from the regulators. Recent guidance and statements from the regulators provide additional insight into best practices in data security.

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Bank sues payday lender for lax security

A few months ago, I wrote about banks’ recent attempts to recoup losses from retailers following data breaches. Now, a bank has filed suit against a payday lender for negligence stemming from a failure to safeguard financial information from checks cashed by the payday lender. USAA filed the lawsuit against PLS Financial Services and The Payday Loan Store in Chicago federal court on August 5.

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Holding retailers accountable for bank losses caused by data breaches

Data breaches have become an all-too-common occurrence, with headlines announcing a new data breach nearly every week. While the impact of a data breach on consumers has been widely reported, the media often overlooks the impact on banks. When a data breach occurs, banks are on the hook for the costs of reissuing cards, notifying customers, and monitoring accounts for fraud. By some estimates, that costs around $8 per customer card. In large-scale data breaches such as the Target and Home Depot data breaches, that means hundreds of millions or even billions of dollars in bank losses. Instead of absorbing all of these costs, banks have started to fight back to hold retailers responsible for losses caused by a retailer’s lax data security.

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Recap: Sam Houston State Bank Executives’ & Directors’ Seminar

On Thursday and Friday, I had the privilege of attending the Texas Bankers Hall of Fame Gala and the 20th Annual Bank Executives’ & Directors’ Seminar hosted by the Smith-Hutson Endowed Chair of Banking at Sam Houston State. First, I’d like to thank Sam Houston State (including Pam Thaler and my grandfather, Dr. Jim Bexley) for hosting these great events. Second, I want to congratulate the new inductees into the Texas Bankers Hall of Fame: Charlie Cheever, Bookman Peters, Stretch Smith, and Terry Tuggle. I don’t know them personally, but their introductions made clear that they have had a tremendous impact on the banking industry and their communities. I also want to congratulate my grandfather, Dr. Bexley, on his receipt of the first ever Texas Bankers Association Lifetime Achievement Award in honor of his contributions to community banking and in particular to educating future bankers. Lastly, I want to recap some of the interesting and useful information that we learned from a panel of regulators who graciously took the time to come answer questions.

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Managing vendor security risks

Last week, the CFPB brought its first enforcement action related to a data breach. Although the CFPB action involves an online payment system operator, it serves as a reminder that data breaches put banks at risk of regulatory action. While most banks have prioritized the security of their own IT systems, they may overlook data security issues when selecting third-party vendors. Given the volume of tasks that community banks outsource to vendors, it is critical that banks thoroughly vet any potential vendor to ensure strong data security practices.

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