Given TJX's gargantuan size and worldwide reach -- its assets include 826 TJ Maxx, 751 Marshalls, and 271 HomeGoods locations -- the security breach into the portion of its computer network handling credit card, debit card, check, and merchandise return transactions is likely to be equally gargantuan in nature, touching nearly all of the company's brands. TJX admitted in a statement that, while the company has identified some customer information that has been stolen from its systems, the full extent of the theft and affected customers isn't yet known.
The cost of data breaches, whether the information is lost or stolen, continues to escalate. Data breaches last year cost companies an average of $182 per compromised record, up 31% over 2005, according to an October 2006 study conducted by the Ponemon Institute, PGP Corp., and Vontu.
Visa and the U.S. Chamber of Commerce last September identified the five leading causes of card-related data breaches:
(1) the storage of sensitive information on a card's magnetic stripe in violation of the PCI data security standard,
(2) missing or outdated software security patches,
(3) the use of vendor-supplied or default system settings and passwords,
(4) the exploitation by attackers of poorly written Web-based applications such as online shopping cards, and
(5) the presence of vulnerable applications pre-loaded onto systems shipped by vendors.
While it's unclear whether TJX fell victim to any of these scenarios, the company does know that an intruder accessed TJX's computer systems that process and store information related to customer transactions for its T.J. Maxx, Marshalls, HomeGoods and A.J. Wright stores in the U.S. and Puerto Rico, and its Winners and HomeSense stores in Canada. The company has also expressed concern that the breach might affect customers of its T.K. Maxx brand in the U.K. and Ireland as well as Bob's Stores in the U.S. The information stolen may include credit and debit card sales transaction data from 2003 as well as data from mid-May through Dec. 2, 2006.
TJX first learned of the breach in mid-December but sat on the information at the request of law enforcement, which included the U.S. Justice Department, Secret Service, and the Royal Canadian Mounted Police. TJX has since hired General Dynamics and IBM to monitor and evaluate the intrusion, assess possible data compromise, and seek to identify affected information.
The security fiasco comes at a transitional time for the company, as chairman, founder, and acting CEO Ben Cammarata prepares to hand over the CEO post to TJX President Carol Meyrowitz. In a statement Cammarata said, "Since discovering this crime, we have been working diligently to further protect our customers and strengthen the security of our computer systems and we believe customers should feel safe shopping in our stores."
Given the poor track record that businesses and government have with data protection over the past few years, "safe" has become a relative term. Since the infamous February 2005 ChoicePoint data theft, more than 100 million customer records have been lost or stolen, according to the Privacy Rights ClearingHouse.
One recommendation is that Congress pass a law that compels organizations to protect sensitive information rather than one that simply determines when and how customers will be notified after the fact. There's been a consensus in Congress that standards are needed to safeguard personal information, but there's been a lack of unanimity in the details of how this should be done, says, Liz Gasster, acting executive director and general counsel for the Cyber Security Industry Alliance. "It was a real letdown for the citizens of this county that legislators weren't able to overcome their differences last year and pass a law," she says, adding that one big sticking point was Congress not wanting IT security improvements to create additional costs for industries operating in their constituencies.
Of the 35 states that have passed breach notification laws, only six states -- Arkansas, California, Nevada, Rhode Island, Texas, and Utah -- require organizations to take proactive security measures, Gasster says.
In addition to the trust issues that TJX customers are likely to develop, the company may have to worry about its relationship with Visa and MasterCard, creators of the PCI data security standard that applies to banks, credit unions, clearing houses and merchants that issue or accept credit cards. In effect since December 2004 and updated this past September, the PCI guidelines stipulate that merchants not in compliance can't process Visa or MasterCard payments.
From its original draft, the PCI standard spells out the steps that must be taken to create a secure environment for cardholder data. This includes the implementation and maintenance of firewalls, the encryption of cardholder data and sensitive information across public networks, and restricting physical access to cardholder data.
Visa last year also issued a set of guidelines for its partners to follow if they suspect customer data has been compromised. And they're serious about these guidelines being followed. If Visa determines that a member or its agent has been deficient or negligent in securely maintaining account information or reporting or investigating the loss of this information, Visa reserves the right to require the offending company to immediately fix the problem.
Still, PCI standard compliance takes time and it's unclear whether Visa or MasterCard have actually punished any companies for noncompliance, Gasster says, adding, "Standards like PCI ensure high levels of security, but there's no such thing as ultimate and complete security."
With encryption, network security, and the unfortunate experiences of others at their disposal, businesses can hardly use this as an excuse.