Credit Card Regulations Getting Mixed Reviews

There appears to be little debate that the payment card industry's latest data security standard is improving the protection of electronic customer records. Some enterprise IT leaders, however, complain that the guidelines remain inconsistent and hard to interpret.

Finalized in Sept. 2006, the Version 1.1 iteration of the Payment Card Industry (PCI) Data Security Standard (DSS) added new requirements to the initial set of data protection rules that major credit card issuers began demanding of their business partners beginning in 2005.

Among the modifications to the regulations -- conceived by a consortium of card industry players including American Express, MasterCard, and Visa -- the 1.1 version of the PCI standard adds so-called "compensating controls" that establish specific technological requirements for adherence to some of the rules.

Even those who remain critical about elements of PCI DSS agree that the standard has greatly improved data security across the retail and finance services sectors. However, some argue that the newest requirements also handcuff enterprise companies' efforts to comply with the mandate.

The standard's increasingly strict financial penalties, combined with uncertainty over the manner in which third-party auditors will interpret the rules, have made tackling PCI 1.1 a tricky proposition to manage, some large credit card processors contend.

"With 1.1 there were dramatic changes in terms of the severity of the financial penalties that could be applied and customers of ours also began writing the language directly into their contracts, which only increases the pressure," said Rich Isenberg, director of security at CheckFree, an electronic bill payment firm whose customers include major U.S. banks and financial services companies.

New requirements established in PCI 1.1 make it particularly hard for enterprise businesses that share large amounts of computing infrastructure with partners and customers to meet its demands, Isenberg said.

The security expert maintains that the regulations weren't designed with such complex enterprise environments in mind.

"The mindset in 1.1 is obviously aimed at addressing smaller retailers and outlining things that are easier for those types of companies to do, but it's almost impossible for large organizations with shared infrastructure," said Isenberg. "We're trying to understand the spirit of the requirements, but that involves working with the auditors to figure out what makes sense."

Interacting with the auditors remains one of the biggest sticking points with the standard, said the executive. Isenberg contends that it remains unclear how many of the assessment firms -- who are certified by the PCI Security Standards Council -- arrive at their conclusions about what constitutes a passing or failing grade in judging compliance with the DSS guideline.

"You're always going to have to work with the auditors, but these companies can't tell you anything about what you're doing wrong, and the PCI Board just issues a seemingly arbitrary ruling," Isenberg said. "There's no published weighting system, so it's hard to understand if you're doing the right thing and every decision costs millions."

Isenberg said that specific issues arise around PCI 1.1's demand for separation between mobile device hard drive encryption tools and Microsoft's Active Directory user account management system. Maintaining such an array in today's IT environments creates major headaches, particularly around the management of end-user encryption key data, he said.

Another impracticality of PCI 1.1, said Isenberg, is the mandate's demand for Web applications firewalls for all of the online systems maintained by companies who fall under its statutes, even those applications that are in no way linked to credit card data.

Norcross, Ga.-based CheckFree -- which claims to process over one billion transactions per year on its networks -- is working with auditors to "find a happy medium" in addressing the troublesome requirement, Isenberg said. However, the executive indicated his belief that PCI-related headaches won't disappear soon for larger, more complex businesses.

Industry watchers agreed that there are serious questions regarding the practicality of adopting all of PCI 1.1's provisions, particularly among large organizations such as CheckFree that process huge volumes of data.

Both the technical parameters of the standard and the manner in which auditors are supplying customer assessments are issues that need to be addressed in future drafts of the rules said Avivah Litan, analyst with Stamford, Conn.-based researchers Gartner.

"PCI is really unique in terms of how specific it is with its requirements; you don't see this type of specificity in Sarbanes-Oxley or most of the other data protection rules we've seen emerge," Litan said. "That's not necessarily a bad thing, but retailers and other customers are getting frustrated with all the interpretation."

The analyst said that many enterprise firms affected by PCI have burned through multiple auditors, based on their concerns over the inconsistency of their assessments.

However, worried of becoming the next company embarrassed in news story headlines for having their customer credit card data exposed, firms continue to invest millions in additional technologies and services aimed at addressing the issue, she said.

The expert observed that one of the biggest problems that needs to be addressed by the PCI Security Standards Council -- which oversees all governance of the mandate -- is the perceived conflict of interest that exists with the current practice of having firms conducting PCI assessments that are also actively marketing services to the companies they audit.

"Many of the assessors are also selling PCI compliance and security services, so customers don't trust the fairness of the overall system," Litan said. "It's easy to become skeptical when you feel like you're being sold."

Despite its shortcomings, PCI DSS is having a widespread impact and vastly improving the overall security of electronic card processing systems, she said.

Bob Russo, general manager of the PCI Security Standards Council, said that the feedback the organization has received regarding the standard, including the newest additions, has been largely positive.

The same compensation controls that have caused concern among enterprise companies have been received as a significant improvement by smaller firms that had sought additional details of what was expected of them, he contends.

Like any industry standard, it will take time for all the parties involved to work out the best way to tackle individual nuances of the guidelines, but the oversight organization is pleased with the progress it has made in pushing PCI DSS forward thus far.

"It's a balancing act," said Russo. "Some people want to be told what to do, and the standard does that, but it also allows people who have had found other paths to the desired results to pass; at end of day we're only concerned with making the data secure why not allow someone to do things their way if it works."

The Security Standards Council is currently amassing a database of feedback from 275 different companies that are dealing with PCI compliance, and it is also continuing the development of its training programs aimed at getting all assessors on the same page, according to Russo.

As time passes and PCI DSS matures, the impact felt by companies operating under the mandate should become less dramatic, he said.

"Unfortunately some people think we live in an ivory tower and want to make them do things for the sake of it, but this is really a set of best practices, things you should be doing top protect data already," Russo said.

"With things like the compensating controls, we hear both sides, some say it is too open to interpretation, some say it is too prescriptive," the compliance expert said. "The reality is that it's the end result that we're looking for, as long as the cat gets skinned and the content is being protected, that's what we're driving at."

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