Data Resellers Liable for Downstream Security Failures
Leslie Fair of the FTC comments on recent settlements that were reported earlier this month:
Of course, no legitimate business would put out a welcome mat for crooks. But as the FTC’s data security cases make clear, that’s the effect when companies fail to take reasonable steps to secure sensitive information in their possession — or data they allow others to access. Three recent settlements with companies that resell credit reports illustrate that point.
The companies contract with the nationwide credit reporting agencies to assemble data about a person in a single “trimerge report,” which they resell to mortgage brokers and others to determine credit eligibility. The reports are a veritable all-you-can-eat buffet of sensitive data: name, current and former addresses, Social Security number, date of birth, employment history, trade lines, account numbers — the works. Businesses that buy the trimerge reports get them through an online portal, accessible with a user name and password.
The FTC’s complaint recaps a number of lapses in the resellers’ security practices. What’s notable for data security watchers is that the allegations relate primarily to the resellers’ mistakes with regard to their clients’ access to the data. For example, the FTC complaint cited their failure to take reasonable steps to assess the risks of allowing clients with unverified or inadequate security to access credit reports through the portal and their failure to maintain an effective system for monitoring clients’ access to detect suspicious activity.
Read more on FTC.