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Security Breach Hits Credit CardsPIdlz
By  Robin Sidel and Christopher Conkeyd
Wall Street Journal , April 14, 2005  (
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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. 

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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 DatabaseM7Y
By  David Pringle and Rachel ZimmermanVq!
Wall Street Journal , April 13, 2005 

LexisNexis said 310,000 Americans, nearly 10 times its<K
original estimate, have had their personal dataWf
accessed by unauthorized individuals via its computer_(*
systems, raising fresh concerns about thevI-
data-collection industry's ability to guard against1/%D
hackers amid a surge in identity-theft crimes. 
Separately, Tufts University sent a "precautionary"i?$A"\
letter to alumni last week warning them that personalSQt'=
information may have been stolen from a computerf
database used for fund raising. The letter, sent toVyM
about 106,000 graduates and other donors, says Tufts2Hn%*_
"detected abnormal activity" on a computer that"{:>1f
included names, addresses, Social Security and/A,
credit-card numbers. 

The latest revelations are likely to give new urgencyHt
to the clamor for laws to prevent data brokers from?9
amassing sensitive personal information withoutNr ?z
consent and for better safeguards of other databases.09c9
Recently, data broker ChoicePoint Inc. of Alpharetta,nmK`
Ga., said identity thieves had obtained information onHc+=ig
about 145,000 people by posing as legitimate"mJ
customers. Sensitive data also have been compromisedYhg.`
at some banks, mutual funds and other universities. 

LexisNexis, a legal- and business-information providerj
owned by Reed Elsevier PLC of the United Kingdom, said=.NT
it has identified 59 security breaches over two yearsy8
-- a rate of about one every two weeks -- making theM2Dw
problem far more pervasive than it had previouslyZLIg
realized. The accessed information included Social#
Security, driver's license numbers and other personal"]N8\
information. 

U.S. law-enforcement agencies are investigating thee
breach, and Reed said it is offering fraud insuranceu
and other services such as credit checks, free ofO+!&2
charge, to individuals whose data were accessed byk',A
unauthorized people. Reed's latest announcement comesRo6+
five weeks after its initial disclosure that breachesH
had affected about 30,000 people. 

Once individual information has been purloined, it canj5
be used by identity thieves to fraudulently obtainD%KYLc
credit cards, mortgage loans and car loans, amongh7
other things. The Federal Trade Commission estimatesl>[S
27.3 million Americans were affected by identity theftg
in the five years through 2003, with the pace of theftL%
quickening toward the end of that period. 

Data brokers, which collect and sell personalTRo*
information, represent a new and still largelyz=z
unregulated industry -- but virtually every state is1W
considering some kind of privacy legislation. In at[J~>
least 20 states, the law would require companies toII
notify individuals when their personal information isLt
compromised, according to the Electronic Privacyb3pi43
Information Center, a public-interest research groupu:
in Washington, D.C. Congress is also considering aE'
federal notification standard, based on a CaliforniaWcEws
law that exposed the ChoicePoint breach. 

The Senate Judiciary Committee plans to hold a hearinghe0
today on the recent wave of data breaches and on theB\vQlz
proposed legislation. 

Laws governing the collection and movement of personal>"M~<
data are much stricter in Europe and the region hasn't[_3Pk
had the spate of security breaches experienced in the>M)o
U.S. 

Data brokers such as LexisNexis promote theirBgM@]
"risk-management" services to banks, insurance 5?of
companies, law-enforcement agencies and other*F
legitimate organizations that need to guard againstv]<Q)}
financial fraud. Banks, for instance, buy the data so`yTn2
they can run checks when deciding whether to approve aK(2XVs
mortgage application. Reed executives say theo%$NY
data-brokering business is an important tool in>+r/4)
preventing fraud. 

LexisNexis said it began investigating thousands ofig3p
customers' accounts last month, after announcing thatiQHv
information on 30,000 people held by its Seisint;7\
data-brokering division may have been accessed by'2
criminals. Yesterday Reed said that it had uncovered1F"Wxp
dozens of Seisint security breaches that predated itsz!
acquisition of the company late last year, as well as}
a handful of incidents in other parts of LexisNexis.H[8a
Kurt Sanford, head of U.S. corporate and federalJuuE*
markets for LexisNexis, said the company didn't have){
any idea of the extent of the problem before the)KbRF%
investigation. 

The security breaches typically took one of threemD1pK
forms, Mr. Sanford said, all related to5y
misappropriation of passwords. In some cases, an/2h@
unauthorized individual was able to access LexisNexisT
databases after figuring out a legitimate customer's_}}
too-obvious password. In others, a former employee ofE
a legitimate customer was able to continue accessing7)m
the LexisNexis databases because the customer didn'tq}Z?D/
change the account details after the employee left. InD xT
still others, criminals obtained an accountM5a
administrator's identification details, allowing themFu1
to create unauthorized accounts. 

LexisNexis executives say they are now monitoringr
customers' usage patterns closely to spot any%Jb&K
irregular activity. They say they are also trying to-]J,\>
force customers to beef up their security by reviewing3-|v
passwords monthly and requiring authorizations fromu
two managers for each new account. 

LexisNexis said that so far none of the 30,000 peoplej/pAe
notified of a breach in December and January have comeW+: G
back to report instances of identity theft. Privacy?tpS`<
advocates, however, say criminals don't alwaysG6So"
immediately use data they obtain, preferring sometimesq.g
to sell them on the Internet. Or, they say, a criminalM3a
may open a credit card in an individual's name, but~F
use a different address, so the individual doesn't seeq%Cmhf
the credit-card statements and isn't aware of the#~E_O\
fraud. 

Reed's LexisNexis unit pushed deeply into datalbcj
brokering when it purchased Seisint Inc. of BocazYBiF
Raton, Fla., for $775 million late last year. Seisint+5b|f}
was known for having some of the top software for2n
searching databases. It also sold data searches for asKPxDo
little as 25 cents apiece. 

Reed said the financial cost of the breaches will be+Gd|I
manageable and didn't change its earnings forecasts. 

At Tufts, Betsey Jay, director of advancement%
communications and donor relations, said there is "no(u
evidence that any data is being misused." Still, theEEMw
letter urged alumni to contact their banks and check2w
credit reports for any signs of unauthorized activity.o;fJ,
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Ms. Jay said analysts detected "unusual activity,"Di&
during routine checks on a server used for telephoneRSBb%
fund raising that is owned by Tufts but managed by an'}*e$
outside vendor. The suspicious activity --1
specifically, large amounts of data moving through theXPso>
machine -- occurred Oct. 31 and Dec. 19, she said. Onezd! e
theory was that someone was using the computer as aY&Pc&
distribution point for movies and other entertainment?{e
media, Ms. Jay said. At the time, Tufts decided there_RP
wasn't enough evidence to notify alumni about theB6^4BC
unusual activity. But, she said, after recent^R<5^
revelations about security breaches at financial andm Y
educational institutions, Tufts decided to alert itsS&2
donors. She said there is no evidence that them
break-in was carried out by students, faculty members0|j2i
or employees. 

--- 

--David Pringle and Rachel Zimmerman 

Christopher Conkey contributed to this article.