Update: Scope of credit card security breach expands

HSBC Bank is just one of several institutions whose customers may be affected

Discover Financial Services Inc. today joined Mastercard International and Visa U.S.A. Inc. in confirming that some of its card holders were also affected by a security problem involving a point-of-sale (POS) system at retailer Polo Ralph Lauren Corp.

A spokeswoman from Discover said that the company has been informing affected card holders of the problem but declined to say how many cards are involved or how long the company has been sending out the letters.

"It was an incident that impacted the credit card industry as a whole," said Discover spokeswoman Jennifer Kang. "We have taken appropriate steps to ensure that card members are safe" from any potential fraud, she said.

The security breach came to light earlier this week when HSBC Bank PLC started sending out letters warning 180,000 of its credit card holders of potential ID thefts.

Visa and MasterCard both confirmed yesterday that they had been notified of the breach and had in turn notified several banks and credit card companies of the potential data compromise. They declined to say how many companies have been notified.

Since Monday, HSBC North America Holdings Inc., a division of London-based HSBC Holdings PLC, has been asking holders of its General Motors Corp.-branded MasterCard to replace their cards because their confidential information may have been compromised (see story).

Thomas Nicholson, an HSBC spokesman, said yesterday that the problem stemmed from a faulty POS system at a national U.S. retail chain, which he didn't identify.

Nancy Murray, a Polo Ralph Lauren spokeswoman, late yesterday confirmed the company's involvement in an e-mailed statement to Computerworld.

"The company did learn that certain credit card information may have been retained and stored in its point of sale software. The company took immediate steps to purge this data and cure the problem," the statement read.

The statement also noted that Polo Ralph Lauren has been working with law enforcement officials and credit card companies since fall 2004 to determine the origin and extent of the compromise. "The company is confident that its credit card system is secure, and that our customers' credit card information is properly protected," it added.

Foster City, Calif.-based Visa said in a statement that it has been working with "the merchant, law enforcement and the affected member financial institutions to monitor and prevent card-related fraud. While we must respect the sensitive nature of this ongoing investigation, it's important for cardholders to know they are fully protected against unauthorized purchases with Visa's zero liability fraud protection policy."

Kim Forde, a spokeswoman with American Express said the company is aware of a "potential data compromise" but has so far not seen "any out-of-pattern activity" indicating actual fraud.

"If we see anything unusual, we will contact the customer as appropriate," she said.

According to Nicholson, the retailer's POS systems retained and stored credit card information rather than purging the data immediately after processing each transaction. The problem affected all credit card transactions at the retailer between June 2002 and December 2004, not just those involving HSBC-issued credit cards, he said.

As a result, cards issued by other credit card companies and banks were likely to have been compromised in the same manner, he said. "It is a POS issue and not a problem with the GM MasterCard itself," Nicholson said. "We just happened to be the first bank to notify customers of the risk."

According to Nicholson, MasterCard informed HSBC of the problem about nine weeks ago and provided a file containing the names of those potentially affected by the breach.

A "first wave" of about 12,000 letters has already been mailed out by HSBC, with the rest scheduled to be sent by the end of the month, he added.

Jessica Antle, a MasterCard spokeswoman, confirmed that several banks in addition to HSBC have been notified of the problem. She refused to say how many banks have been contacted by MasterCard or how many consumers may have been affected.

In a statement, MasterCard said it has been working with the retailer and law-enforcement authorities to investigate the problem since it was first discovered in January.

"In keeping with our standards that focus on consumer protection and the safeguarding of sensitive information, we also immediately notified our customer banks of specific card accounts that may have been subject to compromise," MasterCard said. "Upon receiving notice from MasterCard, banks are able to take the appropriate steps to protect their cardholders from potential fraud."

The latest incidents add to a rapidly growing list of high-profile data compromises at major U.S. companies in recent months that has drawn the attention of U.S. lawmakers.

Just this week, more than 105,000 alumni and donors at Tufts University were notified that personal information stored on a university server may have been compromised (see story). Meanwhile, Miamisburg, Ohio-based LexisNexis Group announced that a review of data search activity at one of its subsidiaries revealed that personal information on more than 300,000 individuals may have been improperly accessed over the past two years (see story). The number was 10 times higher than the original estimate LexisNexis gave when it first disclosed the problem in March.

And last week, San Jose Medical Group Management Inc. reported that two laptops containing confidential information on nearly 185,000 people had been stolen from its administrative offices (see story).

Copyright © 2005 IDG Communications, Inc.

  
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