Mongomery Ward's online retail data breach

June 27, 2008

By Chuck Miller

Mongomery Ward, an old-line merchant now operating as an internet retailer, suffered a breach of some 51,000 customer credit card numbers, and failed to report it to customers.

The retailer, which was once a fixture in towns across America, went belly-up in 2001, but came back, and lives on as an internet storefront under the name Hackers extracted the stolen information from an online database that held credit card account information.

The effect on the company is still unclear. Companies that do not notify their affected customers can be sued, though the exact legal measures vary state by state. Some 44 states have passed laws that call for organizations holding consumer data to notify affected consumers if their information has been compromised.

"It would seem that notifying the customer would be the prudent thing to do," Dan Clements, president of CardCops, a security research firm involved in uncovering the breach told on Friday. "Before these disclosure laws came out, nobody notified any consumers; the consumer was the last to know."

This is just the latest in a continuing string of data breaches involving lost consumer information. Why is this criminal activity cropping up more often? The reason seems to be market efficiency.

"In the early days of the internet there were few places where stolen consumer information could be bought and sold," Clements said. "Now what we call 'The Force,' or a professional criminal element, has pulled that data out of corporate America."

In other words the criminal marketplace has matured. And existing remedies are sometimes tedious.

According to Avivah Litan, Gartner vice president and distinguished analyst, "People do suffer in these when their information is stolen and used on the internet, because they still have to file a claim."

Moreover, the claim process can take a lot of time and effort, and is not always successful.

"Typically they get their money back, but sometimes they don't," she said.

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