InsideSources recently reported on how credit card security may be taking a back seat as Congress considers data security legislation. But as noted in that piece, the Senate was preparing to hold hearings on the issue and that could provide indications of the direction the debate would be headed.

Yesterday, a Senate Commerce subcommittee hearing had one lawmaker pressing banks on why enhanced security measures are not being implemented.

As InsideSources previously noted, the banks have argued the more-secure chip-and-pin technology supported by consumer groups and retailers can be confusing for consumers because they have to remember a four-digit pin to make a purchase. This, of course, is exactly what consumers do when they use a debit card.

Doug Johnson, of the American Bankers Association, made a slightly different argument on the Hill yesterday, explaining that if consumers want more security they can just use a debit card:

JOHNSON: “One of the things when we have this conversation that we forget sometimes is the fact that the card market is really two different markets to some degree.  It’s the debit card market as well as the credit card market, and debit cards have PINs.  So you essentially have more than 50 percent of the card market already that’s PIN-enabled.  But what we’ve learned from the credit side is that on the retail side, as well as our customer behavior, in the credit environment, our customers prefer to use the signature.  If they want to be protected by a PIN, they can use their debit card.  So they have effective choice to really accomplish that.”

That argument didn’t make sense to Minnesota Sen. Amy Klobuchar (D):

KLOBUCHAR: “[Y]ou get more protection, and certainly with the situation that we saw with Home Depot where the Canadian cards were less valuable because they had that full technology – I can imagine that everyone would like ease.  It’s just like when we know that technology protects better it seems like we wouldn’t just want it for debit card and sometimes I just know from having a bunch of cards in my purse, I don’t really think through what kind of card it is or if it has a signature or not.”

The debate comes down to a question of liability for the banks. They have more liability on fraud for debit cards than for credit, which is passed on to consumers and retailers. Thus, without prodding from Congress, they lack incentive to institute a safer system on credit cards.

(Alternatively, cash is also very secure, with 100% liability on the consumer.)

“Congressional recognition of chip-and-PIN brings us one step closer to institutionalizing the system once and for all,” said Debra Berlyn, President of Consumer Policy Solutions. “As retailers and merchants begin upgrading their payment terminals to accept these changes, it is now up to banks and card issuers to manufacture and distribute cards outfitted with both chip and PIN. We are urging Congress to continue this dialogue and to encourage the private sector to make the necessary changes to our payment technology. American consumers deserve the strongest safeguard available—and that safeguard is chip-and-PIN.”