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Bank fined in TJX breach also was fined in BJs case
BOSTON (11/27/07)--Fifth Third Bancorp, the bank that recently was fined $880,000 by Visa for its role in the historic TJX Cos. data breach, also paid more than $1.4 million in fines and compensation after the BJ's Wholesale Club Inc. data breach several years ago (Boston Globe Nov. 24). The earlier fines in the BJ's Wholesale case came to light in court filings against TJX in a U.S. District Court in Boston by banks who argue TJX didn't do enough to protect its data against hackers. The Globe said details of the BJ's fine came from litigation filed in Pennsylvania against the bank, BJ's and IBM Corp. by a Pennsylvania credit union seeking to recover costs of replacing the compromised cards. Both data breach cases cost credit unions and other financial institutions millions of dollars to replace compromised credit and debit cards and in losses from fraudulent purchases. TJX's breach, discovered in December of 2006, compromised nearly 100 million customers' data. Visa levied $880,000 in penalties against Fifth Third including an "egregious fine" of $500,000 for the TJX data breach. TJX plans to appeal the fine, which indicates the bank presented the bill to TJX, said the Globe. Visa had threatened to levy fines when merchants didn't meet a Sept. 30 deadline to upgrade their systems to meet security standards. The standards require data to be kept behind firewalls and wireless networks to be encrypted. More than one-third of merchants had not met the requirements as of October, Visa said. Visa and MasterCard can't fine merchants directly. Instead, they levy penalties against banks the merchants use to process the transactions. That Fifth Third was fined for the BJ's case suggests it should have known better than to tolerate the security issues at TJX, said Michael Gavin, strategist with Security Innovation, Wilmington. In 2006, Fifth Third, the fifth-largest processor of bank card transactions for merchants, processed 2.5 billion bank credit and debit card transactions worth $137 billion--a 19% increase from 2005 transactions, according to a Nilson Report study. Fifth Third operates more than 1,150 bank branches in the Midwest and Florida.
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