Posted on February 11, 2010 by Mark McCreary

Payment Card Industry (PCI) Standards Council Speaks

I came across an insightful interview with Bob Russo, general manager of the Payment Card Industry Security Standards Council (the “Council”), that was conducted by cnet news. The interview can be found here and it is a strongly suggested read.

The Council was created by Visa, MasterCard, American Express, Discover, and JCB for the purpose of creating a unified compliance program for organizations accepting and processing payment card transactions. The Payment Card Industry Data Security Standard (the “Standard”), available here, was created by the Council to deter credit card fraud. Many view these efforts as an industry-wide effort to apply uniform security practices, which largely has been the effect.

All organizations that enter into a merchant processing agreement to accept credit and payment card transactions must comply with the Standard in some manner. While the reporting requirements may be less onerous for organizations accepting payments below some fixed amount, in any event all such organizations must comply.
 

It is widely reported and accepted that most affected organizations have failed to meet full compliance with the Standard. Compliance with the Standard can be extremely onerous and expensive, and many large organizations simply weigh the costs of being out of compliance with the costs of gradually inching toward compliance.

What is impossible to predict are the costs of having a data breach while not being compliant. The merchant processor agreements have placed the liability on merchant for breaches occurring during non-compliant periods. This possibility is the greatest drive, and motivation, for merchants to become compliant as soon as possible.

In addition to the Standard, merchants and processors must also be aware of, and comply with if applicable, the Pin Entry Device (PED) Security Requirements and the Payment Application Data Security Standard (PA-DSS).

While efforts are continually undertaken to avoid data breaches and plug potential security weaknesses, a breach that leads to a loss of payment card information while not in compliance with the Standard, PED or PA-DSS creates issues that have the potential to be even more problematic that traditionally considered. The problems realized by Heartland and TJX were further exacerbated by failing to be PCI compliant.
 
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Posted on June 24, 2009 by Amy C. Purcell

TJX Reaches Settlement In Data Security Breach Investigation

TJX agreed to pay $9.75 million to forty-one states to settle an investigation of a data breach that it reported in January 2007.  $2.5 million of the settlement amount will be used to create a data security fund for those states whose residents were affected by the data breach.  TJX will pay $7.25 million in settlement and investigation costs.  The settlement requires TJX, among other items, to take specific steps to tighten data security and to provide notice to consumers within ten days in the event of another data security breach.  The settlement also allows state governments to monitor TJX's data security efforts for three years.
 
TJX continues to emphasize that it "firmly believes it did not violate any consumer protection or data security laws."  TJX's chief financial officer, Jeffrey Naylor, stated that the settlement will allow TJX and state attorneys general to take "leadership roles in exploring new technologies and approaches to solving systematic problems in the U.S. payment card industry." 
 
TJX reported that eleven people were arrested on hacking charges, two people pleaded guilty to hacking charges and two people have pleaded guilty to related charges in connection with the data security breach.
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Posted on May 13, 2009 by Scott L. Vernick

Federal Circuit Court Of Appeals Rules That TJX Litigation May Proceed On State Law Claims

The First Circuit Court of Appeals has ruled that, by accepting credit cards for payment, retailer TJX and its processing bank, Fifth Third, could have negligently misrepresented to credit and debit card issuers that their data security practices were in compliance with the security protocols established by VISA and MasterCard operating regulations. The First Circuit also ruled that, based on either on the issuers' claim of negligent misrepresentation or a possible violation of Section 5 of the Federal Trade Commission Act, TJX and Fifth Third could have engaged in deceptive practices in violation of Chapter 93A of Massachusetts General Law. While Chapter 93A may require egregious conduct, systemic recklessness, as distinct from deliberate wrongdoing or self-benefit, may be sufficient to sustain a claim.

After a security breach in 2005, in which computer hackers gained access to TJX's wireless network and compromised the security of more than 45 million customer accounts, credit and debit card issuers filed suit against TJX and Fifth Third to recover losses they sustained as a result of fraudulent use of cardholder information.

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