Retail Ventures Inc. and Polo Ralph Lauren Corp. are the latest in a string of companies to report that customer credit-card information may have been stolen or lost. But a lawsuit involving IBM has highlighted the importance of what's known as Track II data, which contains customer and account information.
BJ's Wholesale Club sued IBM last year for allegedly failing to turn off a feature in its payment software that stored Track II data from a credit card's magnetic stripe after a transaction was approved. As a result, BJ's claims, Track II data on cards belonging to customers who made transactions between July 2003 and February 2004 may have been stolen and misused. A BJ's spokeswoman declined to comment, saying the case is pending.
Storage and retention of Track II data is expressly forbidden by Visa. "Track II data should never be stored," says Bill Pittman, president of TPI Software LLC, one of seven payment-software vendors whose applications have been validated by Visa.
Another of the companies, Radiant Systems Inc., modified its apps to delete Track II data, says Andy Heyman, president of Radiant's hospitality division. It has added 128-bit encryption to safeguard all other information.
All merchants are required to comply with credit-card company security rules. But some, known as level-four merchants, aren't required to validate their compliance. "Some of the recent breaches have occurred at level-four merchants," says Mike Petitti, senior VP of marketing at Ambiron TrustWave, which provides security assessments. "There's a need to address those risks."