Maine-Florida Grocer Security Breach Could be 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. Co. 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 the company’s Sweetbay stores in Florida. Most financial institutions are reissuing cards to the 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. His firm expects to issue about 14,000 new cards at a cost of at lease $140,000.

Most financial institutions have insurance to cover such costs, Daudelin said, but the deductibles are so high that it rarely kicks in.

Joseph Murphy, president of Bar Harbor Bank & Trust, said his firm’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. “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.”