TJX breach shows IT security lacks in retail industry

Breach shows why it's so vital to purge the Track 2 data from POS and other systems

The scope of the security breach disclosed this week by The TJX Companies is starting to make itself evident, with more than three dozen banks in Massachusetts alone now reporting that cards they issued have been compromised.

A spokesman for the Massachusetts Bankers Association said this afternoon that 40 of the MBA's 205 member banks have said they suffered card compromises as a result of the breach at TJX. That number is sure to grow as more banks report to the association, he added, noting that only about 60 have done so thus far.

In addition, the MBA spokesman said some of the banks affected by the breach have confirmed through credit card companies that the information stolen in the breach includes so-called Track 2 data taken from the magnetic stripes on the back of credit and debit cards.

Benson Bolling, assistant vice president of lending at the Alabama Credit Union in Tuscaloosa, also said this week that based on alerts from Visa U.S.A., Track 2 data appears to have been compromised in the breach.

Track 2 data includes account numbers, expiration dates and encrypted personal identification numbers, plus other information that card-issuing banks can include at their discretion. Its apparent inclusion in the breach at TJX provides fresh evidence that IT security remains fragile at some large retailers despite efforts by credit card companies to get them to better protect customer data.

Retailers are forbidden from storing such information under the Payment Card Industry (PCI) Data Security Standard being pushed by Visa, MasterCard International Inc. and other credit card companies. But many retailers continue to do so, often because their point-of-sale systems capture and store the data by default.

Bolling said Alabama Credit Union is recalling and replacing about 2,900 Visa debit and credit cards after having received the alerts from Visa about card information -- including Track 2 data -- being compromised in a retail breach. The alerts didn't identify the affected retailer, Bolling said.

TJX said last week that an "unauthorized intruder" gained access to its systems in mid-December and may have made off with the card data of an unspecified number of customers in the U.S., Canada and Puerto Rico, and possibly in the U.K. and Ireland as well.

The retailer, which owns chains such as TJ Maxx, Marshalls and Bob's Stores, didn't disclose the number of shoppers that may have been affected by the breach, saying that the full extent of the data theft "is not yet known."

Ben Cammarata, TJX's chairman and acting CEO, said in a letter to customers on the retailer's Web site that company officials were "extremely disappointed" when the intrusion was discovered. TJX has since hired both IBM and General Dynamics to help it evaluate the extent of the data compromises and implement unspecified security upgrades designed to better protect its systems.

In a statement released yesterday, Daniel Forte, CEO of the Boston-based MBA, criticized what he said was TJX's characterization of itself as a victim of the data breach, "when what it appears they may have been doing is capturing data that is unnecessary."

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