Tag Archive | "Data security"

U.S. Federal Trade Commission Investigating the Equifax Data Breach

Last month, reports surfaced that Equifax, Inc., one of the nation’s leading credit reporting services, was the subject of a historic cyberattack that compromised the security of financial and other personal information of more than 143 million U.S. consumers.  The data breach involved names, social security numbers, birth dates, addresses, driver’s license numbers and credit card numbers.

Not surprisingly, given the breadth of the breach and criticism that Equifax dragged its feet on alerting consumers, the Federal Trade Commission has now opened an investigation into the unprecedented data hack.

“The FTC typically does not comment on ongoing investigations.  However, in light of the intense public interest and the potential impact of this matter, I can confirm that FTC staff is investigating the Equifax data breach,” said Peter Kaplan, the FTC’s acting director of public affairs, in a statement.

Reports indicate that the breach was due to an open-source software vulnerability that the company used to create Java web applications.  The FTC will no doubt be investigating when cybersecurity professionals discovered the vulnerability, when Equifax was put on alert, whether it took proper measures to install security updates and what representations were made to consumers.

For years, the FTC has investigated and taken action against numerous companies for violation of the FTC Act due to inadequate privacy and data security protocols.  For example, in the recent case of FTC v. Wyndham Worldwide Corp., 799 F. 3d 236 (3rd Cir. 2015) hackers accessed the personal and financial information of hundreds of thousands of consumers, resulting in millions of dollars in fraudulent credit card charges.

Consequently, the FTC filed suit against Wyndham, alleging that it made deceptive claims regarding its cybersecurity practices and that its failure to protect the privacy of customer information amounted to an unfair practice.  In support

The FTC cited several facts to supports its allegations against Wyndham, including that it: stored payment card information in clear readable text; allowed the use of easily guessed passwords for remote access; did not use firewalls; did not properly restrict third-party vendor access; failed to conduct security investigations when vulnerabilities were raised; failed to follow industry standard incident response procedures; and failed to monitor its network for malware and harmful software.

Most likely, the FTC will be assessing the foregoing factors during the Equifax investigation, as well as those unique to the company.

The agency’s top Democrat, Terrell McSweeny, stated that she is “very concerned” about the size of the breach, as well as Equifax’s response.

Given the FTC’s public acknowledgement of the investigation, it is probably safe to assume that Equifax will be subject to a permanent injunction and restitutionary remedies designed to compensate consumers that are harmed by the massive data breach.

The Consumer Financial Protection Bureau has also revealed that it has commenced an investigation into the Equifax incident.

Some believe that the scope of the data breach could prompt Congress to act on data privacy legislation, including a data breach notification law and minimum data security standards for credit reporting agencies.

Please contact the author if you are interested in discussing the design and implementation of preventative data security and privacy protocols, or if you are the subject of a local, state or federal regulatory investigation or enforcement action.

 

This article should be of interest to social media influencers and marketers.  Consult with an experienced FTC compliance lawyer for assisting designing and implementing preventative compliance controls, or if you are being threatened with civil litigation or a regulatory investigation.

Follow the author on Twitter.

Richard B. Newman is an Internet marketing compliance and regulatory defense attorney at Hinch Newman LLP focusing on advertising and digital media matters. His practice includes conducting legal compliance reviews of advertising campaigns, representing clients in investigations and enforcement actions brought by the Federal Trade Commission and state Attorneys General, commercial litigation, advising clients on promotional marketing programs, and negotiating and drafting legal agreements.

 

ADVERTISING MATERIAL. These materials are provided for informational purposes only and are not to be considered legal advice, nor do they create a lawyer-client relationship. No person should act or rely on any information in this article without seeking the advice of an attorney. Information on previous case results does not guarantee a similar future result. Hinch Newman LLP | 40 Wall St., 35thFloor, New York, NY 10005 | (212) 756-8777.

 

Posted in LegalComments (0)


Facebook

Subscribe via RSS