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Security Breach Hits Credit CardsPry
By  Robin Sidel and Christopher Conkey(h1$iT
Wall Street Journal , April 14, 2005  pyHV%
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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 DatabaseaY
By  David Pringle and Rachel Zimmerman1
Wall Street Journal , April 13, 2005 

LexisNexis said 310,000 Americans, nearly 10 times itsS
original estimate, have had their personal data?8
accessed by unauthorized individuals via its computerBF8tx
systems, raising fresh concerns about the">
data-collection industry's ability to guard against[}~8c
hackers amid a surge in identity-theft crimes. 
Separately, Tufts University sent a "precautionary"0B9
letter to alumni last week warning them that personalph>)"
information may have been stolen from a computer(d>
database used for fund raising. The letter, sent tobfc]g
about 106,000 graduates and other donors, says Tuftsz5
"detected abnormal activity" on a computer thatW>O_I
included names, addresses, Social Security and?(-
credit-card numbers. 

The latest revelations are likely to give new urgency=
to the clamor for laws to prevent data brokers fromhpk[gt
amassing sensitive personal information withoutJ3z1
consent and for better safeguards of other databases.|5B\
Recently, data broker ChoicePoint Inc. of Alpharetta,WU>r
Ga., said identity thieves had obtained information onG
about 145,000 people by posing as legitimatev&{$'y
customers. Sensitive data also have been compromisedwg0
at some banks, mutual funds and other universities. 

LexisNexis, a legal- and business-information provider7+
owned by Reed Elsevier PLC of the United Kingdom, saidDX^b
it has identified 59 security breaches over two yearsMF\
-- a rate of about one every two weeks -- making the6
problem far more pervasive than it had previouslyt<Ew
realized. The accessed information included SocialP;C9
Security, driver's license numbers and other personal'~z
information. 

U.S. law-enforcement agencies are investigating them
breach, and Reed said it is offering fraud insurance]
and other services such as credit checks, free of~SI 
charge, to individuals whose data were accessed by$Di3B'
unauthorized people. Reed's latest announcement comesMoP
five weeks after its initial disclosure that breaches+Ef$
had affected about 30,000 people. 

Once individual information has been purloined, it canK6V
be used by identity thieves to fraudulently obtainl).p]z
credit cards, mortgage loans and car loans, amongx
other things. The Federal Trade Commission estimatestvNN
27.3 million Americans were affected by identity theft=s8;h+
in the five years through 2003, with the pace of theftS-9zH
quickening toward the end of that period. 

Data brokers, which collect and sell personalz
information, represent a new and still largelyMF{
unregulated industry -- but virtually every state is^yHJ
considering some kind of privacy legislation. In at$f
least 20 states, the law would require companies to%Y
notify individuals when their personal information isz$l:D*
compromised, according to the Electronic PrivacyO
Information Center, a public-interest research groupa
in Washington, D.C. Congress is also considering aPH
federal notification standard, based on a Californiai(%{/B
law that exposed the ChoicePoint breach. 

The Senate Judiciary Committee plans to hold a hearing~!
today on the recent wave of data breaches and on theu
proposed legislation. 

Laws governing the collection and movement of personal8NryK|
data are much stricter in Europe and the region hasn't;
had the spate of security breaches experienced in the n}2h
U.S. 

Data brokers such as LexisNexis promote theirCA
"risk-management" services to banks, insurance4"<
companies, law-enforcement agencies and otherI
legitimate organizations that need to guard against(ohNA
financial fraud. Banks, for instance, buy the data soe6%?l
they can run checks when deciding whether to approve aV
mortgage application. Reed executives say the}#
data-brokering business is an important tool in+#$4mb
preventing fraud. 

LexisNexis said it began investigating thousands ofcB
customers' accounts last month, after announcing thatOd9
information on 30,000 people held by its Seisintf
data-brokering division may have been accessed by-
criminals. Yesterday Reed said that it had uncoveredEw\
dozens of Seisint security breaches that predated its7RSmB
acquisition of the company late last year, as well as&{fakO
a handful of incidents in other parts of LexisNexis.C^
Kurt Sanford, head of U.S. corporate and federal-ZFS
markets for LexisNexis, said the company didn't haveFc-
any idea of the extent of the problem before theT>%r'
investigation. 

The security breaches typically took one of threeEJ:P?
forms, Mr. Sanford said, all related topC>Dm
misappropriation of passwords. In some cases, an$"5V
unauthorized individual was able to access LexisNexisIt &
databases after figuring out a legitimate customer's8s:
too-obvious password. In others, a former employee of%U:t3
a legitimate customer was able to continue accessing2f"$
the LexisNexis databases because the customer didn'txx
change the account details after the employee left. In)!6D
still others, criminals obtained an account cU
administrator's identification details, allowing themr\TO
to create unauthorized accounts. 

LexisNexis executives say they are now monitoring_")O&C
customers' usage patterns closely to spot anyF0^
irregular activity. They say they are also trying to=
force customers to beef up their security by reviewing`BJ+
passwords monthly and requiring authorizations fromp
two managers for each new account. 

LexisNexis said that so far none of the 30,000 peopleR
notified of a breach in December and January have comev?/e"
back to report instances of identity theft. PrivacyS 4_X[
advocates, however, say criminals don't always!RP
immediately use data they obtain, preferring sometimesD"`l-W
to sell them on the Internet. Or, they say, a criminal3"
may open a credit card in an individual's name, but.A
use a different address, so the individual doesn't seey
the credit-card statements and isn't aware of the?xpu9!
fraud. 

Reed's LexisNexis unit pushed deeply into data/!
brokering when it purchased Seisint Inc. of BocaDZ7
Raton, Fla., for $775 million late last year. SeisintZ2E#R#
was known for having some of the top software for[fU1
searching databases. It also sold data searches for as"x|f
little as 25 cents apiece. 

Reed said the financial cost of the breaches will beV)GW(@
manageable and didn't change its earnings forecasts. 

At Tufts, Betsey Jay, director of advancementU)6p
communications and donor relations, said there is "no(z>3
evidence that any data is being misused." Still, theF
letter urged alumni to contact their banks and checkyoQoe)
credit reports for any signs of unauthorized activity.={
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Ms. Jay said analysts detected "unusual activity,"0V#oC
during routine checks on a server used for telephone~*2;@f
fund raising that is owned by Tufts but managed by an _WUaO
outside vendor. The suspicious activity --:\pU
specifically, large amounts of data moving through theq
machine -- occurred Oct. 31 and Dec. 19, she said. Oned3ky<G
theory was that someone was using the computer as a+sO1
distribution point for movies and other entertainmentMFhr
media, Ms. Jay said. At the time, Tufts decided there-r&uZ6
wasn't enough evidence to notify alumni about theg1FeiV
unusual activity. But, she said, after recentgP8B9
revelations about security breaches at financial and=#
educational institutions, Tufts decided to alert itsQt,n
donors. She said there is no evidence that the&yM"Q
break-in was carried out by students, faculty membersNf:h
or employees. 

--- 

--David Pringle and Rachel Zimmerman 

Christopher Conkey contributed to this article.