Feeds

FTC settles with CardSystems over data breach

Forced to tighten security measures and undergo audit

The Power of One eBook: Top reasons to choose HP BladeSystem

A payment processor that exposed 40m credit cards to the risk of fraud when a hacker took advantages of security failures has agreed to settle Federal Trade Commission (FTC) charges. Independent security audits will now be required every other year for 20 years.

CardSystems Solutions and its successor Solidus Networks (which does business as Pay By Touch) are also obliged to implement a comprehensive information security programme.

The case hit the headlines in June last year after it was revealed that security vulnerabilities in the systems of Tucson-based CardSystems had allowed a hacker to infiltrate its network and access cardholder data, putting cards of all brands at the risk of fraud.

According to the FTC, CardSystems provided merchants with products and services used in "authorisation processing" – obtaining approval for credit and debit card purchases from the banks that issued the cards. In processing these transactions, CardSystems collected personal information from the magnetic strip of the card, including the card number, expiry date, and other data. CardSystems then stored this information on its computer network.

The watchdog charges that CardSystems failed to provide reasonable and appropriate security for this sensitive consumer information.

According to the complaint, CardSystems not only created unnecessary risks to the information by storing it, but it did not then adequately assess the vulnerability of its computer network to commonly known or reasonably foreseeable attacks.

The company did not implement simple, low-cost, and readily available defences to such attacks, nor did it use strong passwords to prevent a hacker from gaining control over computers on its computer network and access to personal information stored on the network.

In addition, the FTC says, CardSystems did not use readily available security measures to limit access between computers on its network and between its computers and the internet, nor did it employ sufficient measures to detect unauthorised access to personal information or to conduct security investigations.

"CardSystems kept information it had no reason to keep and then stored it in a way that put consumers' financial information at risk," FTC chairman Deborah Platt Majoras said. "Any company that keeps sensitive consumer information must take steps to ensure that the data is held in a secure manner."

The security breach resulted in millions of dollars in fraudulent purchases and caused banks to cancel and re-issue thousands of credit cards. On top of this, consumers experienced inconvenience, worry, and time loss dealing with the affected cards, according to the FTC.

See The FTC complaint.

Copyright © 2006, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

The Power of One eBook: Top reasons to choose HP BladeSystem

More from The Register

next story
HIDDEN packet sniffer spy tech in MILLIONS of iPhones, iPads – expert
Don't panic though – Apple's backdoor is not wide open to all, guru tells us
BMW's ConnectedDrive falls over, bosses blame upgrade snafu
Traffic flows up 20% as motorway middle lanes miraculously unclog
LibreSSL RNG bug fix: What's all the forking fuss about, ask devs
Blow to bit-spitter 'tis but a flesh wound, claim team
Mozilla fixes CRITICAL security holes in Firefox, urges v31 upgrade
Misc memory hazards 'could be exploited' - and guess what, one's a Javascript vuln
Putin: Crack Tor for me and I'll make you a MILLIONAIRE
Russian Interior Ministry offers big pile o' roubles for busting pro-privacy browser
Manic malware Mayhem spreads through Linux, FreeBSD web servers
And how Google could cripple infection rate in a second
Don't look, Snowden: Security biz chases Tails with zero-day flaws alert
Exodus vows not to sell secrets of whistleblower's favorite OS
Researcher sat on critical IE bugs for THREE YEARS
VUPEN waited for Pwn2Own cash while IE's sandbox leaked
prev story

Whitepapers

Top three mobile application threats
Prevent sensitive data leakage over insecure channels or stolen mobile devices.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Top 8 considerations to enable and simplify mobility
In this whitepaper learn how to successfully add mobile capabilities simply and cost effectively.
Application security programs and practises
Follow a few strategies and your organization can gain the full benefits of open source and the cloud without compromising the security of your applications.
The Essential Guide to IT Transformation
ServiceNow discusses three IT transformations that can help CIO's automate IT services to transform IT and the enterprise.