Credit Card Data, A Hack, And A Rush To Contain The Damage

TJX was refreshingly forthcoming about last month's computer hack, but the company's troubles may be just beginning as it works with investigators to sort out what happened. The retailer could face penalties under Visa's and MasterCard's Payment Card Industry data security standard, which stipulates that cardholder information must be protected.

Given TJX's size--its assets include 826 T.J. 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 proportionately worrisome. The company knows some customer information was stolen but admitted in a statement that the extent of the theft is unknown.

An intruder accessed systems that process and store information related to customer transactions for its T.J. Maxx, Marshalls, HomeGoods, and A.J. Wright stores in the United States and Puerto Rico and its Winners and HomeSense stores in Canada. The pilfered information may include credit and debit card transactions dating back to 2003.

TJX learned of the breach in mid-December but sat on the information at the request of law enforcement. It has since hired General Dynamics and IBM to evaluate the intrusion and identify affected data.

NO SAFETY IN NUMBERS
The security fiasco comes at a transitional time, as TJX chairman, founder, and acting CEO Ben Cammarata prepares to turn over the CEO post to president Carol Meyrowitz. "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," Cammarata said in a statement.

But who can feel safe given the poor track record that businesses and government agencies have securing data? Since the infamous ChoicePoint data theft two years ago, 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 companies to protect sensitive information rather than one that simply determines when and how customers will be notified after the fact, but there's been no agreement on how to do that.

In addition to damaged customer confidence, TJX may have to worry about its relationship with Visa and MasterCard, creators of the PCI security standard that applies to banks, clearinghouses, and merchants that issue or accept credit cards. In effect, the PCI guidelines stipulate that merchants not in compliance can't process Visa or MasterCard payments.

Last year Visa issued a set of guidelines for partners to follow if they suspect customer data has been compromised, and it's serious about those guidelines being followed. If Visa determines that a member or its agent has been deficient or negligent in securing account information or reporting or investigating the loss of information, Visa reserves the right to require that the offending company immediately fix the problem.

Still, PCI standard compliance takes time, and it's unclear whether Visa or MasterCard actually have punished any companies for noncompliance. "Standards like PCI ensure high levels of security, but there's no such thing as ultimate and complete security," says Liz Gasster, acting executive director and general counsel for the Cyber Security Industry Alliance.

With encryption, network security, and the unfortunate experiences of others as a regular reminder, businesses can hardly use that as an excuse.