Are TerraCom and YourTel the poster children for how NOT to respond to a breach?

Isaac Wolf reports:

A month ago, two phone carriers participating in a federal benefit program were alerted that sensitive customer records, including Social Security numbers and bank-account records, were freely posted online.

Now, Oklahoma-based TerraCom Inc. and affiliate YourTel America Inc. — the companies that collected the records — say they don’t plan to notify all affected consumers of the privacy breach, which affects residents of 26 states.

Read more on Evansville Courier & Press.

So if you were not one of the 343 individuals who did get notification letters because of heightened risk and you do not reside in Texas, Minnesota, Nevada, or Illinois – the four states where TerraCom will be sending notifications because of state notification laws – you probably will not get a notification letter. Only four states’ residents will get notification letters out of 26 states? There’s a lesson for state legislators and Congress to learn from this.

Frankly, TerraCom and YourTel seem to positioning themselves as the poster children of how not to respond to data breaches. First they accused TScripps Howard News Service of hacking and violations of CFAA. As Ms. Smith recaps:

Lee wrote a letter informing Scripps that the “intrusions and downloading” of sensitive records were associated with Scripps IP addresses. Lee warned that “the ‘Scripps Hackers’ have engaged in numerous violations of the Computer Fraud and Abuse Act by gaining unauthorized access into confidential computer files maintained for the Companies by Vcare, and by digitally transferring the information in these folders to Scripps.”

Lee added that the Scripps Hackers eventually used Wget to find and download “the Companies’ confidential files.” (Wget was the same tool used by Facebook’s Mark Zuckerberg in the film The Social Network to collect student photos from various Harvard University directories.) The rest of the letter pretty much blamed the “Scripps Hackers” for the cost of breach notifications, demanded Scripps hand over all evidence as well as the identity and intentions of the hackers, before warning that Scripps will be sued.

Perhaps not fully appreciating the backlash they would incur from a breach at an outsource contractor (VCare) and how absurd they look blaming reporters who did what reporters do – and were able to document their methods – they’ve now compounded their problems and the likelihood of lawsuits by consumers and investigation by the FTC  by taking the position that there is no need to notify everyone because of their risk assessment.

That simply will not fly in this day and age.

The breach is already under investigation by at least three states (Indiana, Illinois, and Texas).

TerraCom and YourTel would be well-advised to get a breach response firm with experience involved as soon as possible, if they haven’t already, take full responsibility, apologize to Scripps Howard, and offer consumers some free services.  If they don’t do those things, I expect some states will sue them, and the FTC may investigate them for their data security failures and for allegations that despite regulations and policies, they may have retained information that they were not supposed to retain.  Although the FTC could not fine them for a first offense, any investigation and possible corrective action plan and monitoring requirements could be costly for the firms.

Previous coverage of this breach on this blog can be found here and here.

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