How Main Street Will Pay for Home Depot's Data Breach

[InfoSec News <alerts () infosecnews org>]

http://www.businessweek.com/articles/2014-09-16/home-depot-breach-why-small-merchants-will-pay

By Patrick Clark
Businessweek.com
September 16, 2014

Federal law protects consumers from the cost of fraudulent charges 
incurred when thieves steal credit-card and debit-card numbers. That’s 
good for the millions of Americans who had their payments data exposed by 
the hackers who breached Home Depot’s (HD) computer system earlier this 
year. And it’s bad for merchants, who often take losses on sales made to 
crooks with stolen cards.

When a credit-card company identifies fraud, it wipes the payment off the 
cardholder’s account and notifies the merchant. Unless the store can prove 
the payment was authorized, the credit-card company debits money from a 
merchant’s checking account, leaving the vendor on the hook for the cost 
of items that were fraudulently purchased. Merchants also pay penalties, 
called chargeback fees, for accepting unauthorized charges. Accrue too 
many chargebacks and you’ll pay higher processing fees or lose the ability 
to accept certain credit cards.

Those costs add up. The average merchant lost .68 percent of annual 
revenue to fraud in 2013, but the total cost is a multiple of that, 
according to a survey published (PDF) last month by LexisNexis. For every 
dollar lost to fraud, merchants spend a further $3.08, to replace lost 
inventory and cover chargeback fees and other penalties, according to the 
survey.

The Home Depot hack left as many as 60 million credit cards and debit 
cards exposed, according to a report in the New York Times. Add those to 
the 40 million accounts affected by a hacker assault on Target (TGT) last 
year, plus the cards pilfered from Chinese restaurant chain P.F. Chang, 
luxury retailer Neiman Marcus, and others. A lot of stolen identities are 
floating around.

[...]

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