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The Honorable Arnold Schwarzenegger Governor, State of California State Capitol Sacramento, CA 95814 Dear Governor Schwarzenegger: I respectfully request your VETO of AB 779 (Jones) that places financial liability on businesses for the cost of replacing credit or debit cards even if they comply with the data security requirements of the bill. - AB 779 would do little to improve data security, but would significantly expand wasteful, frivolous litigation over security breaches. - AB 779 contains numerous undefined terms and potential conflicts with private sector data security standards that apply to every entity that takes debit and/or credit cards. The uncertainty surrounding the language will only increase as the private sector standards evolve over time. - AB 779 forces businesses and government agencies to reimburse credit card issuers for replacing cards that are “reasonably believed” to have been compromised in a data breach. Card issuers do not have to prove that the cards have actually been acquired by a fraudster or used fraudulently. - AB 779 imposes liability on entirely innocent small businesses, who, in fact, could be the victim of criminal behavior. - Under the bill’s liability provisions, small businesses in California could be required to reimburse multi-billion dollar credit unions for credit card related expenses even when those credit unions make an enormous profit on their credit card operations. The reimbursement provision only encourages credit unions to continue their practice of unnecessary card replacement instead of implementing responsible fraud prevention and detection practices. - AB 779 needlessly regulates in an area governed by private contracts between financial institutions, entities that accept credit cards and the card associations (e.g. Visa). The State should not interfere in these business-to-business relationships. For these and other reasons, I respectfully request your VETO of AB 779 (Jones) when it comes before you for consideration.