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Vulnerabilities / Threats

09:10 AM

Huge Breach Causes Little Pain at TJX

Despite exposing nearly 100M credit cards, retailer continues to do brisk business

5:10 PM -- In January, the TJX Companies announced that it had been hacked. Not just a little hack -- in fact, the company reported that approximately 45.7 million credit card accounts were hacked. The news hit Wall Street and the market punished TJX, with a drop from around $27 to $26 per share. For a company with a market cap north of $12 billion, that's nothing to sneeze at.

Over time, the stock recovered. The losses are still being calculated, and although a few arrests have occurred, the data should be considered irreparably lost. Once the punishment was over, however, people didn't stop shopping at TJ Maxx, Marshall's, or other TJX stores. In fact, recent results have shown nothing but profit for the giant.

Interestingly, we collected anecdotal evidence from some users who said that they won't stop shopping at TJX stores, but they will stop using their credit cards there. That's a double win for TJX. Not only are they retaining their customers, but they are cutting their credit card chargebacks and processing fees for a percentage of their clients.

Recently, bad news stuck again. The reported number of stolen credit cards skyrocketed from the original report of 45.7 million accounts to more than 94 million accounts. With the arrival of such news, you'd expect the market to punish TJX twice as much as before. Twice the breach, twice the loss in valuation, right?

Wrong. In the last week, TJX's share price has dropped slightly, but only half as much as it fell following the original announcement (about $0.50 per share, from $29 to $28.50).

So what does all of this tell the largest enterprises in the world? Their breaches can be in the millions of records, they can fail to meet nine of the 12 PCI controls, and they can report wildly inaccurate numbers about the extent of the breach -- all with little to no punishment.

Sure, there is still lots of fallout to come from this, and I wouldn't want to be in the shoes of TJX's executive management. But the money is still rolling in, the bonuses will probably still get paid out, and the company's profits may actually increase.

So one of the largest security breaches in history ends up being a win for the company that caused it. This is going to make it a lot harder for the crowd selling fear, uncertainty, and doubt. I guess in the future, the security community will have to discuss other types of losses when trying to justify security sales to retailers.

Have the payment processors punished TJX by refusing to handle its payments? It would seem a reasonable course of action, given how many consumers are at risk from TJX's outrageous security issues. But of course they won't take such actions -- in the end, it's all about money. TJX will only pay some fines, without losing its credit card processing privileges. In the end, TJX will continue to do business, securely or not, in whatever way it wants.

Yes, the fines will roll in, and TJX will have to make the necessary improvements to fill its security requirements and get the penalties to stop. But consumers will continue to get screwed, as they always do, and the retailer will continue to make money. Is PCI cutting it?

In the end, the paradox is that TJ Maxx will continue to make as much money, if not more, than it did before it lost nearly 100 million credit card records. In this case, I think a lot of consumers would agree that TJX's punishment hasn't fit the crime of negligence.

At least not yet -- we'll see how the current cases with the Massachusetts Bankers Association, Connecticut Bankers Association, the Maine Association of Community Banks, and AmeriFirst Banks turn out. But whatever happens with those cases, I'm willing to bet that TJX still shows a profit this year.

— RSnake is a red-blooded lumberjack whose rants can also be found at Ha.ckers and F*the.net. Special to Dark Reading

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