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Security Breach Hits Credit CardsR).F>K
By  Robin Sidel and Christopher ConkeyH\b
Wall Street Journal , April 14, 2005  U
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HSBC Notifies 180,000 People Who Shopped At Ralph Lauren; Other Banks May Be Affected 

British financial giant HSBC PLC is notifying at least 180,000 people who used MasterCard credit cards to make purchases at Polo Ralph Lauren Corp. that criminals may have obtained access to their credit-card information, and that they should replace their cards. 

The situation -- which involves a General Motors-branded MasterCard that is one of the most widely held credit cards in the U.S. -- is the latest in a string of high-profile incidents in which personal data were stolen from retailers or financial institutions. Although HSBC and MasterCard declined to discuss when or how the apparent theft occurred, people with knowledge of the matter identified the retailer as Polo Ralph Lauren. A Polo spokeswoman declined to comment. 

The incident, which is thought to have taken place more than a month ago, is likely to further highlight the issue among regulators and politicians who are considering new rules to deal with identity theft. 

Although HSBC so far appears to be the only financial institution to disclose that it is alerting cardholders of the incident, credit cards issued by other banks also could be vulnerable. Under current rules, however, banks aren't necessarily required to alert their cardholders to the potential fraud. 

In a statement, Visa USA Inc. said it was aware of a "data security breach" and is "working with the merchant, law enforcement and the affected member financial institutions to monitor and prevent card-related fraud." 

HSBC said it was sending letters to 180,000 holders of cards branded by MasterCard and GM. The British bank manages six million GM-MasterCard branded cards in circulation. GM referred calls to HSBC. 

Stephen Cohen, an HSBC spokesman in New York, said the bank is "alerting cardholders as quickly as possible because we take the security of their accounts very seriously." He also said the bank is continuing to evaluate its other cards to determine if they may have been affected. 

The HSBC letter, which was sent to cardholders last week, reads in part: "A national retailer's computer system has had a security breach and your credit card account number may be among those that were compromised." It was signed by "GM Cardmember Services" and noted that HSBC issues the card and provides administrative and processing services for it. The letter went on to say that "we are unaware of any fraudulent activity on your account." 

A spokeswoman for MasterCard, an association that has thousands of banks as members, said it has "taken the necessary steps to inform all the [credt-card] issuers that could possibly be impacted by the potential database compromise." MasterCard and Visa both said U.S. cardholders are protected from liability for unauthorized transactions. 

Identity theft is a growing problem. Typically, criminals use stolen information to then fraudulently obtain credit cards, mortgage loans and auto loans, or simply to charge purchases to existing accounts. The Federal Trade Commission says 10 million people -- nearly 5% of the adult population -- discovered they were victims of identity theft in 2003. Other studies put the cost to consumers, banks and credit-card companies at more than $11 billion a year. 

Currently, only two laws mandate consumer notification when a breach occurs. The first is a two-year-old California statute requiring notification whenever electronic personal data are stolen. The second, a federal regulation requiring banks to inform consumers of breaches if it is "reasonably possible" that identity theft will result, took effect last month. 

While banks also are required to report breaches that occur in-house or at financial-service providers with whom they do business, HSBC technically wasn't required to notify GM MasterCard holders because the breach in question occurred at a separate retailer, not within the bank or the credit-card company. 

More than 20 states are considering legislation similar to the California law, which this year exposed a scandal involving ChoicePoint Inc., an Alpharetta, Ga., company that collects consumer data, and which said thieves had obtained information on about 145,000 people by posing as legitimate customers. This week, LexisNexis said 310,000 Americans, nearly 10 times its original estimate, had their personal and financial data accessed by unauthorized individuals via its computer systems. 

Sensitive data also have been compromised at some banks, mutual funds and universities. Last month, DSW Shoe Warehouse reported the theft of credit-card information from a database for 103 of the chain's 175 stores. 

Congress seems likely to put data brokers like LexisNexis and ChoicePoint under greater scrutiny this year, but debate is heating up over whether to impose a broader notification requirement on any business or government agency that handles personal information. 

At a Senate Judiciary Committee hearing yesterday, one frequent topic of discussion was a bill put forward by Democratic Sen. Dianne Feinstein of California that goes even further than the California law by expanding the definition of a breach to include encrypted data and paper records. Business groups are resigned to some kind of notification standard, but they are pushing hard for something along the lines of the banking regulations, which preserve some latitude for a bank to decide when a breach poses a threat to consumers. 

--- 

--Robin Sidel and Christopher Conkey 

Ellen Byron and Teri Agins contributed to this report. 

--- 

Foiling the Thieves 

Here are some steps to take if you learn that someone may have gotten access to your personal data: 

-- Contact the three major credit bureaus to place a fraud alert on your file. 

-- Check the compromised account to look for signs of fraudulent activity (and if you see any, call the company involved for help). 

-- Check your credit report frequently after the breach occurs in case thieves manage to open new accounts in your name. 
 
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LexisNexis Reveals Further Breaches of Databaset
By  David Pringle and Rachel Zimmerman98sJ
Wall Street Journal , April 13, 2005 

LexisNexis said 310,000 Americans, nearly 10 times its,x8
original estimate, have had their personal data-wJ;
accessed by unauthorized individuals via its computerlzS
systems, raising fresh concerns about theJL
data-collection industry's ability to guard againstA/k!
hackers amid a surge in identity-theft crimes. 
Separately, Tufts University sent a "precautionary"^za`
letter to alumni last week warning them that personal-ee
information may have been stolen from a computere
database used for fund raising. The letter, sent toX(
about 106,000 graduates and other donors, says Tufts]D
"detected abnormal activity" on a computer thatxwuVU.
included names, addresses, Social Security and9t$q
credit-card numbers. 

The latest revelations are likely to give new urgencyLm
to the clamor for laws to prevent data brokers from= j
amassing sensitive personal information withoutN
consent and for better safeguards of other databases.L
Recently, data broker ChoicePoint Inc. of Alpharetta,|
Ga., said identity thieves had obtained information onDM
about 145,000 people by posing as legitimate>|4O>
customers. Sensitive data also have been compromised1*v/8I
at some banks, mutual funds and other universities. 

LexisNexis, a legal- and business-information provider]6q|L
owned by Reed Elsevier PLC of the United Kingdom, said+c
it has identified 59 security breaches over two yearslH5p
-- a rate of about one every two weeks -- making the_[x*Rl
problem far more pervasive than it had previouslyC_|f
realized. The accessed information included Socialmd
Security, driver's license numbers and other personal+/
information. 

U.S. law-enforcement agencies are investigating the_m
breach, and Reed said it is offering fraud insurancev
and other services such as credit checks, free of2
charge, to individuals whose data were accessed byn
unauthorized people. Reed's latest announcement comes}Ac
five weeks after its initial disclosure that breachesB[REml
had affected about 30,000 people. 

Once individual information has been purloined, it canRy
be used by identity thieves to fraudulently obtain)UK>
credit cards, mortgage loans and car loans, amongG?!t
other things. The Federal Trade Commission estimates5n^
27.3 million Americans were affected by identity theft9D9I
in the five years through 2003, with the pace of theft49R]U
quickening toward the end of that period. 

Data brokers, which collect and sell personalPvX0.
information, represent a new and still largely^=q\
unregulated industry -- but virtually every state is3
considering some kind of privacy legislation. In atS
least 20 states, the law would require companies toG|^T"Z
notify individuals when their personal information is,
compromised, according to the Electronic Privacy8Lqu
Information Center, a public-interest research groupq7}5
in Washington, D.C. Congress is also considering a1{
federal notification standard, based on a California(",:|
law that exposed the ChoicePoint breach. 

The Senate Judiciary Committee plans to hold a hearing<^hKJP
today on the recent wave of data breaches and on thegK#[x
proposed legislation. 

Laws governing the collection and movement of personalu08\
data are much stricter in Europe and the region hasn'tC4R|KH
had the spate of security breaches experienced in the!M:w
U.S. 

Data brokers such as LexisNexis promote theirq;4T4
"risk-management" services to banks, insurance-}MF?
companies, law-enforcement agencies and other5_ouy
legitimate organizations that need to guard againstL2
financial fraud. Banks, for instance, buy the data sof
they can run checks when deciding whether to approve a@(5
mortgage application. Reed executives say the+p
data-brokering business is an important tool inb'
preventing fraud. 

LexisNexis said it began investigating thousands of24
customers' accounts last month, after announcing thatw{.A>
information on 30,000 people held by its SeisintxU
data-brokering division may have been accessed byY
criminals. Yesterday Reed said that it had uncoveredcW"{~
dozens of Seisint security breaches that predated its[B!.
acquisition of the company late last year, as well astGjl
a handful of incidents in other parts of LexisNexis.j2;
Kurt Sanford, head of U.S. corporate and federal\D)}
markets for LexisNexis, said the company didn't havekLG?C0
any idea of the extent of the problem before the1
investigation. 

The security breaches typically took one of three[2$.9\
forms, Mr. Sanford said, all related toK
misappropriation of passwords. In some cases, an,W'Rq
unauthorized individual was able to access LexisNexistP`!v
databases after figuring out a legitimate customer'sM
too-obvious password. In others, a former employee of?Z
a legitimate customer was able to continue accessingAYz
the LexisNexis databases because the customer didn'tEuh8K
change the account details after the employee left. InUAml9J
still others, criminals obtained an accountHX_zhR
administrator's identification details, allowing themL#{j#
to create unauthorized accounts. 

LexisNexis executives say they are now monitoringu
customers' usage patterns closely to spot any*j8hS`
irregular activity. They say they are also trying to-pY)
force customers to beef up their security by reviewing>
passwords monthly and requiring authorizations from7AZd
two managers for each new account. 

LexisNexis said that so far none of the 30,000 peopleA-2
notified of a breach in December and January have come,
back to report instances of identity theft. PrivacyX
advocates, however, say criminals don't alwaysE5:`+
immediately use data they obtain, preferring sometimes7|y2$
to sell them on the Internet. Or, they say, a criminal5>n
may open a credit card in an individual's name, butE
use a different address, so the individual doesn't see:
the credit-card statements and isn't aware of the4E:W
fraud. 

Reed's LexisNexis unit pushed deeply into dataC8j
brokering when it purchased Seisint Inc. of Boca*{
Raton, Fla., for $775 million late last year. Seisint_W>=Pf
was known for having some of the top software for 
searching databases. It also sold data searches for asUgT&V
little as 25 cents apiece. 

Reed said the financial cost of the breaches will beuci^
manageable and didn't change its earnings forecasts. 

At Tufts, Betsey Jay, director of advancement=#
communications and donor relations, said there is "noAyH"
evidence that any data is being misused." Still, the CmPJ?
letter urged alumni to contact their banks and check;:U\{
credit reports for any signs of unauthorized activity.5qmqz
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Ms. Jay said analysts detected "unusual activity,"s@
during routine checks on a server used for telephone#&Z|7s
fund raising that is owned by Tufts but managed by an0o.
outside vendor. The suspicious activity --G5cQCN
specifically, large amounts of data moving through theg:h
machine -- occurred Oct. 31 and Dec. 19, she said. Onea
theory was that someone was using the computer as a':@*
distribution point for movies and other entertainmentFv/&op
media, Ms. Jay said. At the time, Tufts decided thereX']uv|
wasn't enough evidence to notify alumni about they/nU
unusual activity. But, she said, after recentdju:
revelations about security breaches at financial and6rY
educational institutions, Tufts decided to alert itszEXf
donors. She said there is no evidence that theE)MmM 
break-in was carried out by students, faculty membersJTN(S
or employees. 

--- 

--David Pringle and Rachel Zimmerman 

Christopher Conkey contributed to this article.