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Attacks/Breaches

9/28/2007
06:30 AM
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Retail Security: No Sale

Despite harsh lessons at TJX and redoubled efforts by credit card companies to push PCI, customer data remains at risk

2:30 PM -- Since TJX Companies disclosed the loss of millions of credit card records in January, there has been a magnifying glass on the security of retail systems. While many retailers have taken public steps to ensure customers that they won't become the next TJX, the entire industry has put new emphasis on implementing the Payment Card Industry Data Security Standards (PCI DSS).

After nine months, however, the question remains: Is the customer's credit card information really any safer now than it was last year? The signs aren't good.

The fact is that while TJX has received a black eye for the startling lack of attention it paid to customers' credit card security, it is only just now beginning to reveal the extent of its slipshod practices. A Canadian government investigation just this week censured the retailer for failing to detect an attack that likely took place over the course of many months. (See Canadian Government Sheds Light On TJX Breach.)

And, for the most part, TJX so far has paid a surprisingly small penalty for its negligence. Earlier this week, the company revealed that it is seeking to settle a class action lawsuit with its customers for a total of $6.5 million. That boils down to a $30 voucher and a few days of discount prices for each customer who is now at risk of identity theft. News flash: It ain't enough. (See TJX Proposes to Settle Customer Lawsuit for $6.5M.)

You'd think the public outcry over TJX would spur retailers to move faster on the implementation of PCI, the credit card companies' requirements for storing sensitive information. PCI, which was barely a blip on security vendors' radar screens a year ago, is now a hot topic at every conference and Webinar. Retailers are under pressure to achieve PCI compliance quickly, right?

Wrong, according to the latest data. With the PCI compliance deadline just days away, many retailers – even the largest Level 1 merchants – still have not met the credit card security standards. Some, particularly smaller retailers and non-U.S. companies, say they are more than two years away. (See Many Retailers Will Not Make PCI Compliance Deadline.)

The slow boat to PCI is surprising – not just because of the sensation created by TJX, but because the credit card companies have been threatening fines and penalties for non-complying retailers since 2005. In fact, the Sept. 30 deadline is the third PCI compliance "deadline" in three years, yet more than a third of the largest retailers still haven't met the security requirements.

You'd think that, with all the scrutiny surrounding TJX and PCI, retailers would be moving faster to get their credit card security act together. You'd think that, with so many credit card breaches coming to light each week, companies would put a premium on protecting customer data.

You'd think so. But you'd be wrong. The fact is that although some progress has been made in the last nine months, customer credit card data is still at risk all over the retail industry, and particularly in small retail sites. Because, despite all the hype, many small retailers haven't done anything at all to improve credit card security. And the situation isn't much better in some larger retail holdouts.

If the industry is really serious about protecting customer credit card data, it's going to have to do better. If it doesn't, you can bet the government will get involved. Maybe laws prohibiting the storage of credit card information, such as the one recently pushed forward by the state of Minnesota, will spur more definitive action. (See Cyber Law Cuts Two Ways.)

Until then, hold on – we'll likely see some more big breaches before the situation gets much better.

— Tim Wilson, Site Editor, Dark Reading

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