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Target discloses huge data-security breach affects up to 40 million cards

Target's data-security nightmare threatens to drive off holiday shoppers during the company's busiest time of year.

The nation's second-largest discounter acknowledged Thursday that data connected to about 40 million credit and debit card accounts was stolen as part of a breach that began over the Thanksgiving weekend.

The theft marks the second-largest credit card breach in U.S. history, exceeded only by a scam that began in 2005 involving retailer TJX Cos. and affected at least 45.7 million card users.

Target's disclosure came a day after reports that the company was investigating a breach.

Customers who made purchases by swiping their cards at its U.S. stores between Nov. 27 and Dec. 15 may have had their accounts exposed. The stolen data included customer names, credit and debit card numbers, card expiration dates and the embedded code on the magnetic strip on back of the card, Target said.

There was no indication that the three- or four-digit security numbers visible on the back of the card were affected.

The data breach did not affect online purchases, the company said.

Target has not disclosed exactly how the breach occurred but said it has fixed the problem.

Large companies spend millions of dollars each year on credit-card security measures. Given the company's heavy security, the theft may have been an inside job, said Avivah Litan, a security analyst with Gartner Research.

“The fact this breach can happen with all of their security in place is really alarming,” Litan said.

Jason Oxman, CEO of the Electronics Transaction Association, which represents the payments technology industry, said past data breaches have been “heavily organized and sophisticated.”

Last year, global credit and debit card fraud losses reached US$11.27 billion, up 11.4 percent over the previous year, according to The Nilson Report, which tracks global payments. And while credit and debit card fraud has been on the rise, it's because the overall payment industry has expanded. In fact, Nilson's publisher David Robertson said credit and debit card fraud still accounts for less than 6 cents of every US$100 spent.

Target, which has almost 1,800 stores in the U.S. and 124 in Canada, said it immediately told authorities and financial institutions once it became aware of the breach on Dec. 15. The company is teaming with a third-party forensics firm to investigate and prevent future problems.

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Shoppers arrive at a Target store in Los Angeles on Thursday, Dec. 19. Target says that about 40 million credit and debit card accounts may have been affected by a data breach that occurred just as the holiday shopping season shifted into high gear. (AP)

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