By Larry Greenemeier
March 13, 2007
The U.S. Federal Trade Commission Tuesday confirmed that it has launched
an investigation of TJX, the parent company of T.J. Maxx, Marshalls,
HomeGoods, and other stores. While the FTC wouldn't reveal the nature of
the investigation or when it began, it's likely the result of a large
data breach that allowed cyberintruders to steal customer data.
Should TJX be worried? During the past few years, ChoicePoint showed
everyone just how much power the FTC wields. That company wound up
paying $10 million in civil penalties and $5 million in customer redress
after it handed over consumers' names, addresses, Social Security
numbers, and credit reports to fraudsters working out of Los Angeles
County. But the monetary penalty is just the beginning, says Jo Anne
Adlerstein, an attorney with Thelen Reid Brown Raysman & Steiner LLP.
ChoicePoint also had to implement a new IT security system, and their
security systems will be audited every two years for the next 20 years.
If TJX is found to be in violation of privacy laws, "it will be the
beginning of an ongoing relationship with the FTC," she says.
The FTC's investigation of TJX should put all companies that handle
customer data on notice. "Companies must think in terms of, 'What if the
FTC stops by to see me tomorrow? What will they find?'" Adlerstein says.
Neither TJX nor investigators have revealed just how many data records
were compromised or how much fraud has been committed against using
these data records, but the company recently revealed that the first
intrusion most likely took place starting July 2005. The company also
believes that credit and debit card transactions at its United States,
Puerto Rico, and Canada stores from January 2003 through June 2004 --
excluding debit card transactions with cards issued by Canadian banks --
were compromised. Even worse, a number of documents sent by Visa to
financial institutions that issue cards and manage Visa transactions
indicate TJX was storing credit and debit card data in violation of the
Payment Card Industry Data Security Standard created by Visa and
Both banks and retailers will be paying close attention to the FTC's
investigation for the ramifications it may have on which of them
ultimately bears the cost of a customer data breach. "We're looking for
the FTC to put some weight on the issue and keep the [credit and debit
card] issuer banks from absorbing the cost," says J. B. Rambaud, senior
VP and chief security and risk officer for financial services industry
technology provider Fiserv EFT.
Not that the investigation into the data breach has slowed down TJX. The
company last week reported February sales were $1.2 billion, up 6% over
the sales figures for the same period a year ago. Identity theft is a
serious matter, but so is a good bargain.
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