FTC Settles GLBA Enforcement Action Against TaxSlayer Stemming From 2015 Data Breach

We haven’t seen many data security enforcement actions under the Gramm-Leach-Bliley Act (GLBA) Safeguards Rule, but a recent case is a good opportunity to remind entities that they may be covered by it even if they didn’t know it.

Edward McAndrew, Kim Phan, and Zaven Sargsian of Ballard Spahr write:

The Federal Trade Commission (FTC) this week announced a consent order with TaxSlayer, LLC, an online tax preparation services provider, to settle claims that the company violated the Gramm-Leach-Bliley Act (GLBA) Safeguards Rule and Privacy Rule.

As part of the online tax preparation process, TaxSlayer customers are asked to provide a significant amount of sensitive personal information, including Social Security number, telephone number, address, income, marital status, family size, bank names, and bank accounts.

Between October and December 2015, hackers were able to access account information for approximately 8,800 TaxSlayer customers, resulting in an unknown number of false tax returns being filed.

Read more on JDSupra.

As the authors note, the FTC also blogged about this case on the FTC’s site. Lesley Fair of the FTC writes, in part:

For a two-month period in 2015, TaxSlayer was subject to a list validation attack, which allowed remote attackers to access the accounts for about 8,800 TaxSlayer users. (A list validation attack, also known as credential stuffing, is where hackers steal login credentials from one site and then – banking on the fact that some consumers use the same password on multiple sites – use them to access accounts on other popular sites.) In an unknown number of cases, criminals used the data to commit tax identity theft. They filed fake returns with altered routing numbers and pocketed refunds they weren’t owed. And what a mess that left for victimized consumers. Long delays in getting their rightful refunds, freezes or holds on their credit, and endless hours trying to unscramble the ID theft egg.

In the proposed complaint, the FTC alleges that TaxSlayer violated the Privacy Rule and Reg P by failing to give customers the privacy notices they were due. What’s more, TaxSlayer violated the Safeguards Rule by failing to have a written information security program, failing to conduct the necessary risk assessment, and failing to put safeguards in place to control those risks – specifically, the risk that remote attackers would use stolen credentials to take over consumers’ TaxSlayer accounts and commit tax identity theft.

Tracking the settlements in several other GLB cases, TaxSlayer must comply with the rules and will be subject to every-other-year independent assessments for the next decade. You can file a comment about the proposed settlement by September 29, 2017.

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