Computer virus infection skull of death flat illustration for websitesYou recently engaged a contract HR recruiter to work onsite helping with increased hiring. The contractor is reviewing hundreds of job applications for several new job postings. Not surprisingly, many of the job applications have a PDF resume attached. The contract recruiter clicks on one of the attached resumes and enables the associated macro to run. Suddenly, the recruiter gets a screen notifying him that unless a ransom is paid, the victim will not be able to access their files. Not the best way to start off the week for HR, IT, or security employees. Continue Reading HR Bewar(y): Job applications and resumes could have ransomware attached

checking-iniStock_000015745218_LargeYesterday the FTC announced it has settled its claims against Wyndham for inadequate data security, with Wyndham signing on to essentially the same consent order used by the FTC in most of its more than 50 concluded data security enforcement matters. The settlement marks the end of a three-year legal battle in which Wyndham attempted, unsuccessfully, to restrict the FTC’s authority to pursue companies for inadequate data security as an ”unfair” business practice under Section 5 of the FTC Act. Continue Reading Wyndham checks out of FTC dispute

fedoraiStock_000000981698_MediumThe FTC has pursued enforcement actions against more than 50 companies for inadequate data security, and to date only two, Wyndham Hotels and LabMD, have pushed back. On the heels of a Third Circuit victory in its Wyndham litigation, the FTC recently suffered a blow when its administrative complaint against LabMD was dismissed – by an FTC administrative judge, no less.

As the FTC pursues an appeal to its commissioners, are there lessons to be learned? First, reports of the death of the FTC’s Section 5 data security enforcement authority have, once again, been greatly exaggerated – the FTC will remain in the data security enforcer role post-LabMD, as strong as ever. And second, the real lesson of LabMD is what it teaches us about grey hat security firm tactics, and how businesses need to trust their gut and do their homework. Continue Reading FTC v. LabMD – 50 shades of white hat

White gift box wrapped with vibrant red bow and ribbon isolatedTalk about a “bank holiday” – under a settlement deal filed in court yesterday, Target will pay $39.4 million  to a litigation class of banks and credit unions to settle financial institution claims related to the retailers’ massive 2013 data breach, which compromised at least 40 million credit cards. The preliminary settlement is the first time a retailer has agreed to directly absorb financial institutions’ costs from a data breach, such as fraud losses and the expense of issuing new debit and credit cards.

Under the terms of this settlement, Target will pay up to $20.25 million directly to the settlement class and $19.1 million to fund MasterCard’s Account Data Compromise Program relating to the breach. The settlement will apply to all U.S. financial institutions that issued payment cards identified as having been at risk from the breach and that did not previously release their claims against Target by signing on to separate deals. A final approval hearing on the settlement is set for next year. Continue Reading Target update: Happy holidays for banks

Traffic lights over blue skyMonths. Actually, years. That’s how long the notion has been brewing that the Federal Trade Commission has no authority to enforce reasonable data security under the unfairness prong of FTC Act Section 5. The stakes are high – the FTC can pursue essentially any commercial company under the FTC Act for unfair or deceptive trade practices in interstate commerce. And if the FTC indeed has the authority to take any such company to court for “unfair” data security practices under Section 5, without any FTC regulations under Section 5 setting standards for exactly what constitutes adequate data security… well, one can appreciate why many in the general business community are uneasy.

When the FTC sued Wyndham in federal court for inadequate data security, Wyndham raised every argument its lawyers could think of to dismiss the FTC’s unfairness claims.  After failing to convince the trial court, Wyndham next took an interlocutory appeal to the Third Circuit Court of Appeals, the first appellate court to ever consider this issue, and asked that the FTC be stopped. But instead of a red light (a ruling of no FTC authority) or a yellow light (a ruling on other grounds), the Third Circuit Court of Appeal’s decision, handed down this week, gives the FTC a clear green light to pursue its claims against Wyndham for alleged unreasonable data security as an unfair business practice. Continue Reading Third Circuit gives FTC green light for data security enforcement

shopping-cartsiStock_000000255866_MediumCosts continue to mount for Target as the company works to put its massive 2013 data breach behind it. Target and Visa recently announced an agreement for Target to reimburse Visa card issuers as much as $67 million for costs associated with the historic breach. The settlement is considerably larger, and more likely to succeed, than the proposed $19 million deal between Target and MasterCard that issuers previously rejected as too low. Continue Reading Target update: still shopping, but no end in sight

Washington DCAs high-profile data breaches continue to make news, it appears Congress could finally pass legislation establishing a national standard for data breach notification. Currently, PII breach notification is governed by a patchwork of state laws, making compliance burdensome and time consuming for affected businesses. To further complicate matters, many states have recently passed or are considering legislation to amend current rules in the wake of recent breaches. However, despite Congress ramping up its efforts to pass federal breach notification legislation and President Obama calling for federal action on data breaches in his State of the Union address, a number of factors still need to be ironed out. They include:

  • The extent to which state laws should be preempted. Federal breach notification legislation would obviously set minimum standards, but the question remains whether it should set the ceiling as well. Some members of Congress would likely oppose a law that prevents states from setting a higher standard than the federal minimum. Additionally, whether a federal cause of action would provide the sole remedy for breach notification violations will likely be another subject of debate, along with the enforcement role, if any, of the FTC.
  • The types of breaches that trigger a notification requirement. Congress will need to specify which types of information must be put at risk to bring an incident under the federal standard. States have taken a myriad of approaches in this respect, so Congress must determine how broadly or narrowly to construe the definition of “personal information.” There also will be a debate over how much, if any, potential harm a breach must pose before it would trigger a requirement to notify affected parties.

Both chambers of Congress are currently considering legislation that would create a federal standard for breach notification. Some of the more notable bills currently pending include: Continue Reading Federal Cyber Legislation Update #2

Electronic Door Lock with Card KeyIn 2012, the Federal Trade Commission filed suit in federal court against hotelier Wyndham and its various subsidiaries (“Wyndham”), claiming that Wyndham’s allegedly unreasonable data security practices allowed hackers to steal personal information and payment data of Wyndham’s customers. The FTC’s claims were not unusual – by 2012 the FTC had spent a decade pursuing companies for unreasonable data security in administrative actions under Section 5 of the FTC Act, which forbids unfair or deceptive acts or practices in or affecting commerce.  In each of these prior enforcement actions the company settled with the FTC, agreeing to comprehensive data security controls, program monitoring, and reporting, usually extending for 20 years.

But Wyndham’s response was highly unusual – it pushed back, and continues to do so, challenging the FTC’s authority to enforce “reasonable” data security under the FTC Act.

In its motion to dismiss, Wyndham argued that the unfairness prong of FTC Act Section 5 does not empower the FTC to regulate cybersecurity, and also that the FTC has not provided constitutionally adequate notice of what cybersecurity practices are required to satisfy a “reasonableness” standard.

The federal district court denied Wyndham’s motion to dismiss, but later allowed an interlocutory appeal on Wyndham’s arguments. The stage is now set for the Third Circuit Court of Appeals, in a case of first impression, to decide whether the FTC has authority under the unfairness prong of FTC Act Section 5 to enforce reasonable data security. Will the Third Circuit resolve this issue, or will it dodge the question? Continue Reading FTC v. Wyndham: the battleground for reasonable data security

arrow-bullseyeiStock_000043470790_FullThe Target data breach disrupted the 2013 holiday shopping season, shook the retail industry, and shocked many who assumed that a nationwide retailer would have the security controls in place to prevent such an attack. The breach exposed credit card data of 40 million individuals and personal data of approximately 70 million consumers. A quarter billion dollars and a slew of lawsuits later, lessons have emerged and questions remain. Continue Reading Taking stock of the Target data breach