Friday, March 20, 2009

Heartland Annual Report Shows Breach Effects

Digital Transaction News

Breach-Related Woes Continue to Pile up for Beleaguered Heartland

The breach-related troubles just keep piling on for merchant acquirer Heartland Payment Systems Inc., according to the acquirer’s annual report filed on Monday with the U.S. Securities and Exchange Commission. In the filing, Heartland revealed the data breach it sustained last year is under investigation not only by the U.S. Department of Justice, the SEC, the Federal Trade Commission, and the Office of the Comptroller of the Currency, but also by the Federal Financial Institutions Examination Council, attorneys general of several states, including Louisiana, the Canadian Privacy Commission, and other government officials.

Negative publicity from the breach, which Heartland disclosed Jan. 20, also could cause an increase in merchant attrition, according to Heartland’s filing. During 2008, 2007, and 2006, Heartland experienced average annual attrition of 17.3%, 12.6% and 11.1%, respectively. Major causes of attrition included business closures, transfers of merchants’ accounts to competitors, account closures initiated by Heartland due to heightened credit risks, or contract breaches by merchants.

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StoreFront BackTalk on Duplicate Debit Debacle

Duplicate Debit Debacle Hits Best Buy, Macys. Who’s Next?

Written by Evan Schuman and Fred J. Aun
March 18th, 2009

Following a December glitch at Macys that saw 8,000 customers double- and tripled charged for debit transactions comes word of an eerily similar triple charge glitch at Best Buy this month.

In both cases, the retailers initially painted the problems as isolated incidents. In both cases, the retailers thought initial debit card swipes didn’t work and asked the customer to try again, sometimes twice more. And in both cases, the banks removed money from the consumer’s bank account equivalent to two and three times the price of the product.

Could these be coincidences? Might they indeed be isolated debit card incidents? Absolutely. But this also might be an initial heads up that the debit card system relied on by major retailers today has inherent flaws. What happened, with both Macys and Best Buy, with software specifically designed to look for and prevent these kinds of multiple identical charges? What about the systems at the card processors and the banks?

The most frightening part about debit card transactions today is that they subject retailers to a debit double whammy. Debit transactions are exponentially more delicate—and more prone to glitching—than their credit card counterparts. At the same time, an error with a debit transaction can deliver an order of magnitude more damage, potentially cleaning out a customer’s bank account and causing them to unknowingly bounce checks to everyone they’re trying to pay. Few IT glitches have the potential to get a loyal customer in trouble with the police, but debit card glitches have that distinction.

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