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Security Breach Hits Credit Cardsqu%[Y#
By  Robin Sidel and Christopher Conkey8
Wall Street Journal , April 14, 2005  qnh{
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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 Database>[g`
By  David Pringle and Rachel ZimmermanAu,|o!
Wall Street Journal , April 13, 2005 

LexisNexis said 310,000 Americans, nearly 10 times itsH859
original estimate, have had their personal dataY
accessed by unauthorized individuals via its computer`R
systems, raising fresh concerns about theu
data-collection industry's ability to guard against`n]>/
hackers amid a surge in identity-theft crimes. 
Separately, Tufts University sent a "precautionary"tco
letter to alumni last week warning them that personal3Xj[Z!
information may have been stolen from a computer%O
database used for fund raising. The letter, sent toEf/_Y
about 106,000 graduates and other donors, says TuftsZjXa
"detected abnormal activity" on a computer thatin7
included names, addresses, Social Security and"wmMm
credit-card numbers. 

The latest revelations are likely to give new urgency!3;?f
to the clamor for laws to prevent data brokers fromj&"
amassing sensitive personal information withoutbs5""
consent and for better safeguards of other databases.S8
Recently, data broker ChoicePoint Inc. of Alpharetta,@E(B*
Ga., said identity thieves had obtained information onM#>
about 145,000 people by posing as legitimatezxH,W_
customers. Sensitive data also have been compromised/[
at some banks, mutual funds and other universities. 

LexisNexis, a legal- and business-information providerU8=4m
owned by Reed Elsevier PLC of the United Kingdom, said2tt%J
it has identified 59 security breaches over two yearsIinCM
-- a rate of about one every two weeks -- making theCX
problem far more pervasive than it had previouslyA
realized. The accessed information included SocialH
Security, driver's license numbers and other personalDO#?
information. 

U.S. law-enforcement agencies are investigating theV|T{:
breach, and Reed said it is offering fraud insuranceaKqM
and other services such as credit checks, free ofL
charge, to individuals whose data were accessed byYu5/4$
unauthorized people. Reed's latest announcement comesoR
five weeks after its initial disclosure that breachesKV9(rC
had affected about 30,000 people. 

Once individual information has been purloined, it can41
be used by identity thieves to fraudulently obtainUnY1p
credit cards, mortgage loans and car loans, among)&Z57
other things. The Federal Trade Commission estimatesy
27.3 million Americans were affected by identity theft:i[JZ
in the five years through 2003, with the pace of theft$z'Il
quickening toward the end of that period. 

Data brokers, which collect and sell personal{f
information, represent a new and still largelydY3wBL
unregulated industry -- but virtually every state isF+2
considering some kind of privacy legislation. In atUcQv
least 20 states, the law would require companies toed
notify individuals when their personal information isEV
compromised, according to the Electronic PrivacyJ
Information Center, a public-interest research group^=s_
in Washington, D.C. Congress is also considering a3Kf
federal notification standard, based on a CaliforniaL+[7 ,
law that exposed the ChoicePoint breach. 

The Senate Judiciary Committee plans to hold a hearing^gt
today on the recent wave of data breaches and on the,
proposed legislation. 

Laws governing the collection and movement of personal&&{
data are much stricter in Europe and the region hasn'tdZ
had the spate of security breaches experienced in theAW
U.S. 

Data brokers such as LexisNexis promote their5d'
"risk-management" services to banks, insuranceG0X
companies, law-enforcement agencies and other@
legitimate organizations that need to guard against3Rj<k
financial fraud. Banks, for instance, buy the data soIx0vP
they can run checks when deciding whether to approve aM2
mortgage application. Reed executives say thet~v\d
data-brokering business is an important tool inP[Rou2
preventing fraud. 

LexisNexis said it began investigating thousands ofqVjr7+
customers' accounts last month, after announcing that1P
information on 30,000 people held by its Seisint"y@
data-brokering division may have been accessed by=cw
criminals. Yesterday Reed said that it had uncovered[UJ+
dozens of Seisint security breaches that predated its"NVi<
acquisition of the company late last year, as well as3d0cV
a handful of incidents in other parts of LexisNexis.9zf
Kurt Sanford, head of U.S. corporate and federalP{zZVy
markets for LexisNexis, said the company didn't have9_Jw
any idea of the extent of the problem before thexF+=6
investigation. 

The security breaches typically took one of three=3S
forms, Mr. Sanford said, all related toL_sr
misappropriation of passwords. In some cases, ane5
unauthorized individual was able to access LexisNexis C,
databases after figuring out a legitimate customer's`[
too-obvious password. In others, a former employee ofB
a legitimate customer was able to continue accessing]'Pt}
the LexisNexis databases because the customer didn'tD~
change the account details after the employee left. Inz*
still others, criminals obtained an accountEpk8
administrator's identification details, allowing them]ZC.%
to create unauthorized accounts. 

LexisNexis executives say they are now monitoring|
customers' usage patterns closely to spot any{-qCch
irregular activity. They say they are also trying to0V0
force customers to beef up their security by reviewingtq
passwords monthly and requiring authorizations from>769b
two managers for each new account. 

LexisNexis said that so far none of the 30,000 people}@
notified of a breach in December and January have comehUJ3}
back to report instances of identity theft. Privacy0Z`k
advocates, however, say criminals don't alwaysh/A
immediately use data they obtain, preferring sometimes"C
to sell them on the Internet. Or, they say, a criminalki[&;w
may open a credit card in an individual's name, butJ9NE
use a different address, so the individual doesn't see'E$
the credit-card statements and isn't aware of theYkK-4
fraud. 

Reed's LexisNexis unit pushed deeply into data{0I}E1
brokering when it purchased Seisint Inc. of BocaTX1wi
Raton, Fla., for $775 million late last year. SeisintB!WE
was known for having some of the top software forHys
searching databases. It also sold data searches for as}2l[o(
little as 25 cents apiece. 

Reed said the financial cost of the breaches will beZ=T1"
manageable and didn't change its earnings forecasts. 

At Tufts, Betsey Jay, director of advancement'/8fNN
communications and donor relations, said there is "nodsh/
evidence that any data is being misused." Still, theC
letter urged alumni to contact their banks and check<|P5O
credit reports for any signs of unauthorized activity.|u`(E0
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Ms. Jay said analysts detected "unusual activity,"C
during routine checks on a server used for telephone}l
fund raising that is owned by Tufts but managed by anG**{I_
outside vendor. The suspicious activity --u2o!
specifically, large amounts of data moving through theq'(=V
machine -- occurred Oct. 31 and Dec. 19, she said. One@V
theory was that someone was using the computer as ake5
distribution point for movies and other entertainmentqcg
media, Ms. Jay said. At the time, Tufts decided theree#edyO
wasn't enough evidence to notify alumni about theP@o
unusual activity. But, she said, after recent7l_S
revelations about security breaches at financial andTG7bW
educational institutions, Tufts decided to alert itsa%
donors. She said there is no evidence that the@HD
break-in was carried out by students, faculty members>j}"w8
or employees. 

--- 

--David Pringle and Rachel Zimmerman 

Christopher Conkey contributed to this article.