Magazine article American Banker

Extent of Heartland Breach Unknown; Probes Multiply

Magazine article American Banker

Extent of Heartland Breach Unknown; Probes Multiply

Article excerpt

Byline: Nadia Oehlsen

Fallout from the data breach it announced last month will probably pose the biggest challenge of the year for Heartland Payment Systems Inc.

The Princeton, N.J., processor said Tuesday that its costs related to the incident will be significant, though it still cannot estimate how many consumer accounts were compromised. It said that it expects to lose some customers.

Robert Carr, Heartland's chairman and chief executive, said the company has been named in numerous lawsuits and investigations by regulators.

"We are the subject of several governmental investigations and inquiries, including a new formal inquiry by the [Securities and Exchange Commission] and the related investigation by the Department of Justice, an inquiry by the [Office of the Comptroller of the Currency], and an inquiry by the" Federal Trade Commission, he said during a conference call with analysts. "We believe we have meritorious defenses to the claims asserted against us."

Heartland has said its systems were in compliance with Payment Card Industry data security standards and therefore should not be held responsible for the breach. The company said last month that it had discovered a malicious program installed in its systems.

Robert Baldwin, Heartland's president and chief financial officer, said the company still cannot estimate how long the program ran, how many card accounts may have been affected, or how much the company will have to spend handling the incident.

Though Heartland expects breach-related costs to be "material," the processor has the ability to absorb significant costs, Mr. Baldwin said.

Mr. Carr said he expects competitors to use the incident to poach his customers "and some will succeed."

Still, he said, Heartland's sales performance since the breach has been encouraging. Since disclosing the breach Jan. 20, "our merchant attrition has actually been a hair better than in the same period of 2008," he said. …

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