Maine Grocer Security Breach Proving Costly for Banks

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The multi-million dollar tab for replacing credit and debit cards compromised by the security breach at the Hannaford Bros. grocery chain will likely be borne by banks and credit unions that issued the cards.

“The banks and the credit card companies are the ones that manage the card usage,” Hannaford spokeswoman Carol Eleazer said. “We work with them cooperatively but we don’t make any calls or participate in any other way” in deciding how to deal with compromised cards.

The data breach affected up to 4.2 million cards used at Hannaford stores in the Northeast and its Sweetbay stores in Florida.

Most financial institutions are reissuing cards with new numbers to the affected customers.

“The cost of reissuing cards, both debit and credit, are at the expense of the financial institution,” said Chris Daudelin, president of South Portland’s Town & Country Federal Credit Union, which expects to issue about 14,000 new cards at a cost of at least $140,000, or roughly $10 to $12 per card.

Most financial institutions have insurance to cover such costs, Daudelin said, but the deductibles are so high that it rarely kicks in except for a major incident. He said he’s not sure whether insurance will cover any of Town & Country’s costs.

Consumers recognize that they will not be held responsible for fraudulent charges and are generally calm about the situation, said Joseph Murphy, president of Bar Harbor Bank & Trust and chairman of the Maine Bankers Association.

Bar Harbor Bank estimates that 5,000 to 6,000 card numbers held by its customers might have been stolen, Murphy said. The bank’s upfront costs should total about $25,000.

“We don’t expect to recoup any of that. We resent it,” said Murphy.

But Murphy saw little to gain from a lawsuit or a lot of finger-pointing. “If financial institutions start suing over these things, it’s going to be a mess,” he said. “There’s nothing to be gained from cross-litigating each other.”