Hancock Fabric Inc., a fabric and sewing store chain based in Baldwyn, Miss., has upgraded all of its VeriFone Holdings Inc. payment terminals after a recent security breach.

The chain, which operates 266 stores in 37 states, has installed VeriFone's MX850 terminals, said Robert W. Driskell, its executive vice president and chief financial officer.

Hancock also installed systems that resist tampering.

Thieves stole PIN pads from 25 Hancock stores in 11 states and replaced them with fake ones that illegally collected cardholder data, Driskell said by e-mail. He would not say where the thefts occurred, because federal, state and local law enforcement agencies were still conducting an investigation.

Executives said they believe the thefts occurred in August and September of last year.

"While we were going through a previously planned replacement of our PIN-pad units, we were alerted by law enforcement that they believed Hancock was the source of customer data that had been used by perpetrators to access ATM accounts," Driskell wrote.

Law enforcement officials have identified suspects; they are not former or current store employees, Driskell wrote. Hancock Fabrics customers have not reported unauthorized charges, he added.