Privacy & Information Security Law Blog

On September 14, 2021, the U.S. House Committee on Energy and Commerce (“E&C Committee”) voted in favor of a legislative recommendation that would create a new Federal Trade Commission privacy bureau as part of the proposed $3.5 trillion federal budget reconciliation package.

As reported on the Hunton Retail Law Blog, on April 26, 2021, the U.S. Court of Appeals for the Second Circuit affirmed the dismissal on Article III standing grounds of a data breach class action predicated on an alleged increased risk of identity theft. McMorris v. Carlos Lopez & Assocs., LLC, No. 19-4310, 2021 WL 1603808 (2d Cir. Apr. 26, 2021). Notably, the district court that dismissed the action raised the issue of standing sua sponte in advance of a scheduled class settlement fairness hearing.

On November 24, 2020, a multistate coalition of Attorneys General announced that The Home Depot, Inc. (“Home Depot”) agreed to pay $17.5 million and implement a series of data security practices in response to a data breach the company experienced in 2014. The $17.5 million payment will be divided among the 46 participating states and the District of Colombia. We previously reported on a settlement Home Depot reached in 2017 to resolve a putative class action brought by financial institutions impacted by the 2014 data breach.

On July 25, 2019, New York Governor Andrew Cuomo signed into law Senate Bill S5575B (the “Bill”), an amendment to New York’s breach notification law (the “Act”). The Bill expands the Act’s definition of “breach of the security of the system” and the types of information (i.e., “private information”) covered by the Act, and makes certain changes to the Act’s requirements for breach notification.

On July 22, 2019, the Federal Trade Commission announced that Equifax Inc. (“Equifax”) agreed to pay at least $575 million, and potentially up to $700 million, as part of a global settlement agreement with the FTC, the Consumer Financial Protection Bureau (“CFPB”), and 48 U.S. states and territories to resolve investigations into the colossal data breach the company suffered in 2017. This is the largest data breach settlement in U.S. history.

On May 24, 2019, Oregon Governor Kate Brown signed Senate Bill 684 (the “Bill”) into law. The Bill, which takes effect January 1, 2020, amends the Oregon Consumer Identity Theft Protection Act (“OCITPA”) by enhancing the breach notification requirements applicable to third-party vendors.

On December 4, 2018, the Federal Trade Commission published a notice in the Federal Register indicating that it is seeking public comment on whether any amendments should be made to the FTC’s Identity Theft Red Flags Rule (“Red Flags Rule”) and the duties of card issuers regarding changes of address (“Card Issuers Rule”) (collectively, the “Identity Theft Rules”). The request for comment forms part of the FTC’s systematic review of all current FTC regulations and guides. These periodic reviews seek input from stakeholders on the benefits and costs of specific FTC rules and guides along with information about their regulatory and economic impacts.

On September 26, 2018, the SEC announced a settlement with Voya Financial Advisers, Inc. (“Voya”), a registered investment advisor and broker-dealer, for violating Regulation S-ID, also known as the “Identity Theft Red Flags Rule,” as well as Regulation S-P, the “Safeguards Rule.” Together, Regulations S-ID and S-P are designed to require covered entities to help protect customers from the risk of identity theft and to safeguard confidential customer information. The settlement represents the first SEC enforcement action brought under Regulation S-ID.

Recently, Louisiana amended its Database Security Breach Notification Law (the “amended law”). Notably, the amended law (1) amends the state’s data breach notification law to expand the definition of personal information and requires notice to affected Louisiana residents within 60 days, and (2) imposes data security and destruction requirements on covered entities. The amended law goes into effect on August 1, 2018.

On April 11, 2018, Arizona amended its data breach notification law (the “amended law”). The amended law will require persons, companies and government agencies doing business in the state to notify affected individuals within 45 days of determining that a breach has resulted in or is reasonably likely to result in substantial economic loss to affected individuals. The old law only required notification “in the most expedient manner possible and without unreasonable delay.” The amended law also broadens the definition of personal information and requires regulatory notice and notice to the consumer reporting agencies (“CRAs”) under certain circumstances.

On December 12, 2017, the Federal Trade Commission hosted a workshop on informational injury in Washington, D.C., where industry experts, policymakers, researchers and legal professionals considered how to best characterize and measure potential injuries and resulting harms to consumers when information about them is misused or inappropriately protected.

On July 27, 2017, Lisa Sotto, chair of Hunton & Williams LLP’s Global Privacy and Cybersecurity practice, appeared live on Washington, DC’s Fox TV to discuss the ID theft issue involving former Dallas Cowboys player Lucky Whitehead, and to warn against the risk of identity theft. Sotto cautions that identity thieves who are determined and looking to do harm “will find [personal data].” According to Sotto, consumers “leave footprints everywhere online.” To mitigate risk of identity theft, Sotto advises against freely providing a Social Security number, shredding ...

On May 2, 2017, the United States Court of Appeals for the Second Circuit issued a summary order affirming dismissal of a putative data breach class action against Michaels Stores, Inc. (“Michaels”). The plaintiff’s injury theories were as follows: (1) the plaintiff’s credit card information was stolen and twice used to attempt fraudulent purchases; (2) the risk of future identity fraud and (3) lost time and money resolving the attempted fraudulent charges and monitoring credit. The plaintiff, however, quickly cancelled her card after learning of the unauthorized charges and did not allege that she was held responsible for any of those charges.

On April 6, 2017, New Mexico became the 48th state to enact a data breach notification law, leaving Alabama and South Dakota as the two remaining states without such requirements. The Data Breach Notification Act (H.B. 15) goes into effect on June 16, 2017.

Recently, Virginia passed an amendment to its data breach notification law that adds state income tax information to the types of data that require notification to the Virginia Office of the Attorney General in the event of unauthorized access and acquisition of such data. Under the amended law, an employer or payroll service provider must notify the Virginia Office of the Attorney General after the discovery or notification of unauthorized access and acquisition of unencrypted and unredacted computerized data containing a Virginia resident’s taxpayer identification number in combination with the income tax withheld for that taxpayer. 

On March 9, 2017,  Home Depot Inc. (“Home Depot”) reached an agreement that includes the payment of $25 million and the implementation of new data security measures to resolve a putative class action brought by financial institutions impacted by the company’s 2014 data breach.

Recently, the People’s Republic of China’s Ministry of Public Security, the National Development and Reform Commission and six other administrative departments jointly published the Announcement on Regulating the Administration of the Use of Resident Identity Cards (the “Announcement”). The Announcement came into effect on July 15, 2016, the date of its issuance.

The Announcement reiterates existing prohibitions against leasing, lending or assigning a resident identity card to another person, and reiterates an existing requirement that resident identity cards must not be seized or held as a security by government agencies, related entities or their staff.

On April 13, 2016, Nebraska Governor Pete Ricketts signed into law LB 835 (the “Bill”), which among other things, adds a regulator notification requirement and broadens the definition of “personal information” in the state’s data breach notification statute, Neb. Rev. Stat. §§ 87-802 to 87-804. The amendments take effect on July 20, 2016.

On March 24, 2016, Tennessee Governor Bill Haslam signed into law S.B. 2005, as amended by Amendment No. 1 to S.B. 2005 (the “Bill”), which makes a number of changes to the state’s data breach notification statute, Tenn. Code § 47-18-2107. The amendments take effect on July 1, 2016.

On February 16, 2016, California Attorney General Kamala D. Harris released the California Data Breach Report 2012-2015 (the “Report”) which, among other things, provides (1) an overview of businesses’ responsibilities regarding protecting personal information and reporting data breaches and (2) a series of recommendations for businesses and state policy makers to follow to help safeguard personal information.

On November 13, 2015, Chief Administrative Law Judge D. Michael Chappell dismissed the FTC’s complaint against LabMD Inc. (“LabMD”) for failing to show that LabMD’s allegedly unreasonable data security practices caused, or were likely to cause, substantial consumer injury. The law judge did not address LabMD’s claim that the FTC does not have jurisdiction to enforce data security standards under the unfairness prong of Section 5 of the FTC Act, and LabMD has reserved its jurisdictional challenge for an anticipated appeal to the federal court. The action is In the Matter of LabMD Inc., Docket No. 9357.

On August 3, 2015, Neiman Marcus requested en banc review of the Seventh Circuit’s recent decision in Remijas v. Neiman Marcus Group, LLC, No. 14-3122. As we previously reported, the Seventh Circuit found that members of a putative class alleged sufficient facts to establish standing to sue Neiman Marcus following a 2013 data breach. During that breach, hackers gained access to customers’ credit and debit card information.

On July 20, 2015, the United States Court of Appeals for the Seventh Circuit reversed a previous decision that dismissed a putative data breach class action against Neiman Marcus for lack of Article III standing. Remijas et al. v. Neiman Marcus Group, LLC, No. 14-3122.

On February 23, 2015, the Wyoming Senate approved a bill (S.F.36) that adds several data elements to the definition of “personal identifying information” in the state’s data breach notification statute. The amended definition will expand Wyoming’s breach notification law to cover certain online account access credentials, unique biometric data, health insurance information, medical information, birth and marriage certificates, certain shared secrets or security tokens used for authentication purposes, and individual taxpayer identification numbers. The Wyoming Senate also agreed with amendments proposed by the Wyoming House of Representatives to another bill (S.F.35) that adds content requirements to the notice that breached entities must send to affected Wyoming residents. Both bills are now headed to the Wyoming Governor Matt Mead for signing.

On October 17, 2014, the White House announced that the President signed a new executive order focused on cybersecurity.  The signed executive order, entitled Improving the Security of Consumer Financial Transactions (the “Order”), is focused on securing consumer transactions and sensitive personal data handled by the U.S. Federal Government.

On July 1, 2014, Delaware Governor Jack Markell signed into law a bill that creates new safe destruction requirements for the disposal of business records containing consumer personal information. The new law requires commercial entities conducting business in Delaware to take reasonable steps to destroy their consumers’ “personal identifying information” prior to the disposal of electronic or paper records. The law will take effect on January 1, 2015.

On April 10, 2014, Kentucky Governor Steve Beshear signed into law a data breach notification statute requiring persons and entities conducting business in Kentucky to notify individuals whose personally identifiable information was compromised in certain circumstances. The law will take effect on July 14, 2014.

On September 5, 2013, Pew Research Center released a report detailing the results of a new survey that questioned 792 Internet and smartphone users in the United States about their desire for anonymity and issues they have faced regarding privacy and security online. The report indicates that although most Internet users may wish to be anonymous online, they don’t believe complete anonymity is possible.

On August 29, 2013, the FTC announced that it had filed a complaint against LabMD, Inc. (“LabMD”) for failing to protect consumers’ personal data. According to the complaint, LabMD, which performs various laboratory tests for consumers, exposed the personal information of more than 9,000 consumers on a peer-to-peer (“P2P”) file-sharing network. Specifically, a LabMD spreadsheet that was found on the P2P network contained names, Social Security numbers, dates of birth, health insurance information and medical treatment codes. In another instance, identity thieves were able to obtain LabMD documents that contained the personal information of more than 500 consumers, including names, Social Security numbers and bank account information.

In May 2013, the Federal Trade Commission released a new guide entitled Fighting Identity Theft with the Red Flags Rule: A How-To Guide for Business (the “Guide”) to help businesses and organizations determine whether they are subject to the FTC’s Red Flags Rule (“Red Flags Rule”) and how to meet the Rule’s requirements. The FTC’s Guide includes information regarding what types of entities must comply with the Red Flags Rule, a set of FAQs, and a four-step process to achieve compliance.

On April 10, 2013, the Securities and Exchange Commission (“SEC”) and the Commodity Futures Trading Commission (“CFTC”) jointly adopted rules that require broker-dealers, mutual funds, investment advisers and certain other regulated entities to adopt programs designed to detect “red flags” and prevent identity theft. These rules implement provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, that amended the Fair Credit Reporting Act (“FCRA”) to direct the SEC and the CFTC to adopt rules requiring regulated entities to address risks of identity theft. The 2003 amendments to the FCRA required other regulatory authorities to issue identity theft red flags rules, but did not authorize or require the SEC or the CFTC to issue their own rules.

On March 11, 2013, in Tyler v. Michaels Stores, Inc., the Massachusetts Supreme Judicial Court effectively reinstated the suit against the retailer by answering favorably for the plaintiff three certified questions from the United States District Court for the District of Massachusetts regarding Massachusetts General Laws Chapter 93, Section 105(a) entitled “Consumer Privacy in Commercial Transactions” (“Section 105(a)”). The court ruled that (1) a ZIP code constitutes personal identification information under the Massachusetts law; (2) a plaintiff may bring an action for a violation of the Massachusetts law absent identity fraud; and (3) the term “credit card transaction form” refers equally to electronic and paper transaction forms. The Massachusetts court’s determination that a ZIP code constitutes personal identification information is similar to the determination in Pineda v. Williams-Sonoma Stores, Inc., in which the California Supreme Court held that ZIP codes are “personal identification information” under California’s Song-Beverly Credit Card Act. More than 15 states, including Massachusetts and California, have statutes limiting the type of information that retailers can collect from customers.

On February 26, 2013, the United States Supreme Court decided in Clapper v. Amnesty International that U.S. persons who engage in communications with individuals who may be potential targets of surveillance under the Foreign Intelligence Surveillance Act (“FISA”) lack standing to challenge the statute’s constitutionality. The Supreme Court determined that the plaintiffs’ alleged injuries were not “certainly impending” and that the measures they claimed to have taken to avoid surveillance were not “fairly traceable” to the challenged statute. Although this 5-4 decision would not be considered a “privacy” or “data breach” case, the Court’s analysis will have a significant impact on such cases going forward, and may thwart the ability of individuals affected by data breaches to assert standing based on possible future harm.

On November 30, 2012, the Federal Trade Commission announced the issuance of an interim final rule (“Interim Final Rule”) that makes the definition of “creditor” in the FTC’s Identity Theft Red Flags Rule (“Red Flags Rule”) consistent with the definition contained in the Red Flag Program Clarification Act of 2010.

On March 21, 2012, Massachusetts Attorney General Martha Coakley announced that Maloney Properties Inc. (“MPI”), a property management firm, executed an Assurance of Discontinuance and agreed to pay $15,000 in civil penalties following an October 2011 theft of an unencrypted company-issued laptop. The laptop contained personal information of more than 600 Massachusetts residents and was left in an employee’s car overnight. MPI has indicated that it has no evidence of unauthorized access to or use of the personal information in connection with this breach.

On January 24, 2011, Connecticut Attorney General George Jepsen and Consumer Protection Commissioner William Rubenstein announced that they had reached an Assurance of Voluntary Compliance (“AVC”) with Metropolitan Life Insurance Co. (“MetLife”) in connection with an incident involving the disclosure of customer personal information on the Internet. In November 2009, a MetLife employee posted the personally identifiable information of current and former MetLife customers, including their Social Security numbers, on the Internet. Following the discovery of the posting, MetLife acted to mitigate possible harm by providing credit monitoring and identity theft insurance to the affected customers.

On December 12, 2011, the United States Court of Appeals for the Third Circuit affirmed a decision that employees of Ceridian Corporation's (“Ceridian's") customers did not have standing to sue Ceridian after the payroll processing firm suffered a data breach.

Members of Parliament on the House of Commons Justice Select Committee have called for courts in the United Kingdom to be given greater powers to imprison and fine individuals who breach the Data Protection Act (“DPA”). The Committee stated in its October 18, 2011 report that the current penalties for unlawfully obtaining personal data (under Section 55 of the DPA) are an inadequate deterrent, and urged the government to exercise its power to introduce prison sentences without delay. Although currently a magistrates’ court can issue fines of up to £5,000 for breaches of Section 55 (and the Crown Court can impose unlimited fines), in practice, penalties often are limited to only a few hundred pounds.

On October 24, 2011, Israel’s Data Protection Authority, the Israeli Law, Information and Technology Authority in the Israeli Ministry of Justice (“ILITA”), announced significant developments in an information theft case affecting more than nine million Israeli citizens. In 2006, a contract worker hired by Israel’s Ministry of Welfare and Social Services downloaded a copy of Israel’s population registry to his home computer. The registry later fell into the hands of a software developer and a hacker before being disseminated on the Internet along with a program that allowed users to run searches and queries on the data. The stolen personal information included full names, identification numbers, addresses, dates of birth, dates of immigration to Israel, family status, names of siblings and other information.

On June 13, 2011, Representative Mary Bono Mack (R-CA) released a discussion draft of the Secure and Fortify Data Act (the “SAFE Data Act”), which is designed to “protect consumers by requiring reasonable security policies and procedures to protect data containing personal information, and to provide for nationwide notice in the event of a security breach.”  Representative Bono Mack is Chairman of the House Subcommittee on Commerce, Manufacturing and Trade.  In a press release, Representative Bono Mack remarked that “E-commerce is a vital and growing part of our economy.  We should take steps to embrace and protect it – and that starts with robust cyber security.”  She added that “consumers have a right to know when their personal information has been compromised, and companies and other organizations have an overriding responsibility to promptly alert them.”

On April 5, 2011, Lisa Sotto, partner and head of the Privacy and Data Security practice at Hunton & Williams LLP, discussed the Epsilon email breach in an interview with Tracy Kitten of Information Security Media Group.  The interview covered issues such as data protection requirements for sensitive consumer data, steps companies should take to protect data and lessons to be learned from the breach.  Download the podcast now.

In our August 2009 blog post on data protection issues in China, we noted that there was no uniform Chinese law that specifically addresses the protection of personal data, and that it seemed likely that Chinese personal information protection law would continue to develop as a patchwork of piecemeal regulations. This remains true today, and developments since our previous article was published have in fact reinforced this assumption. In the past year and a half, new laws affecting personal information protection in China have arisen in various forms, including a consumer ...

In the past two months, lawmakers in three states have introduced legislation that would expand the scope of certain security breach notification requirements.

Virginia SB 1041

On January 11, 2011, Virginia lawmakers introduced SB 1041, which would amend the state’s health breach notification statute to impose notification requirements on businesses, individuals and other private entities, in the event unencrypted or unredacted computerized medical information they own or license is reasonably believed to have been accessed and acquired by an unauthorized person.  The law currently applies only to organizations, corporations and agencies supported by public funds.  In addition to broadening the scope of the law’s applicability, the amendment would permit the Virginia Attorney General to impose a civil penalty of up to $150,000 per breach (or series of similar breaches that are discovered pursuant to a single investigation), without limiting the ability of individuals to recover direct economic damages for violations.

Update: On February 11, 2011, BNA's Privacy Law Watch reported that SB 1041 had failed and would not be carried over to the next legislative session.

On December 18, 2010, President Obama signed into law the “Red Flag Program Clarification Act of 2010” (S.3987), which amends the Fair Credit Reporting Act with respect to the applicability of identity theft guidelines to creditors.  The law limits the scope of the Federal Trade Commission’s Identity Theft Red Flags Rule (“Red Flags Rule”), which requires “creditors” and “financial institutions” that have “covered accounts” to develop and implement written identity theft prevention programs to help identify, detect and respond to patterns, practices or specific activities that indicate possible identity theft.

On December 8, 2010, the U.S. House of Representatives approved the Social Security Number Protection Act of 2010 (S. 3789), which is aimed at reducing identity theft by limiting access to Social Security numbers.  The bill prohibits printing Social Security numbers, or any derivative of a Social Security number, on government-issued checks, and bars federal, state and local government entities from employing prisoners in jobs that would allow them to access Social Security numbers.  Although there are numerous state laws on the books to safeguard Social Security numbers, the ...

The “Red Flag Program Clarification Act of 2010” (S. 3987) has passed the Senate.  The legislation would limit the scope of the Red Flags Rule, which requires certain “creditors” to develop and implement written identity theft prevention programs to help identify, detect and respond to patterns, practices or specific activities that indicate possible identity theft.  The new legislation would exclude from the definition of “creditor” certain entities that “[advance] funds on behalf of a person for expenses incidental to a service provided by the creditor to that ...

On June 21, 2010, the French Data Protection Authority (the “CNIL”) published its Opinion on a new security bill, the Loi d'orientation et de programmation de la performance de la sécurité intérieure (referred to as “LOPPSI”), which was adopted by the French National Assembly on February 16, 2010, and recently amended by the Senate's Commission of Laws on June 2, 2010.

As reported in BNA’s Privacy Law Watch, the Federal Trade Commission intends to agree to temporarily exempt health care providers from the FTC’s Identity Theft Red Flags Rule.  The Red Flags Rule implements Sections 114 and 315 of the Fair and Accurate Credit Transactions Act.  In relevant part, the Rule requires creditors and financial institutions that offer or maintain certain accounts to implement an identity theft prevention program.  The FTC previously has stated that health care providers could be deemed “creditors” under the Rule.  The agreement will grant relief to ...

On May 28, 2010, the FTC announced that it would again delay enforcement of the Identity Theft Red Flags Rule.  This is the fifth time the Commission has announced an extension of the enforcement deadline, after most recently extending the deadline to June 1, 2010.  The Red Flags Rule requires “creditors” and “financial institutions” that have “covered accounts” to develop and implement written identity theft prevention programs to help identify, detect and respond to patterns, practices or specific activities – known as “red flags” – that could indicate ...

Federal Trade Commission Chairman Jon Leibowitz recently sent a letter to Congressman Edward Markey, Co-Chairman of the bipartisan Congressional Privacy Caucus, announcing that the FTC will address the privacy risks associated with the use of digital copiers.  Congressman Markey had urged the FTC to investigate this issue after a CBS News exposé showed that almost every digital copier produced since 2002 stores on its hard drive images of documents that are “scanned, copied or emailed by the machine” – including documents with sensitive personal information.

In 2009, for the first time in three years, more publicly reported data security breaches were caused by hackers than by other sources, such as insider theft.  The nonprofit Identity Theft Resource Center (“ITRC”) tracks breaches involving five categories of data loss: (i) “data on the move,” such as lost laptops; (ii) accidental exposure; (iii) insider theft; (iv) losses involving subcontractors; and (v) hacking.  The ITRC’s 2009 Breach Report analyzed 498 publicly reported breaches affecting over 222 million total records, concluding that hacking may be on the rise.

On March 9, 2010, the Federal Trade Commission announced that LifeLock, Inc., has agreed to pay $12 million to settle charges of deceptive advertising related to its identity theft protection services.  The FTC and the attorneys general of 35 states obtained the coordinated settlement pursuant to charges that LifeLock made false representations regarding the effectiveness of the protection its services offer consumers.  The FTC alleged that, contrary to assertions made in LifeLock’s advertisements, its products provide no protection from the most common form of identity ...

On February 25, 2010, the Federal Trade Commission filed a notice that it is appealing the D.C. District Court’s December 28, 2009 judgment in favor of the American Bar Association in American Bar Association v. FTC.  The District Court’s summary judgment held that the FTC’s Identity Theft Red Flags Rule (“Red Flags Rule” or the “Rule”) does not apply to attorneys or law firms.  The Rule implements Sections 114 and 315 of the Fair and Accurate Credit Transactions Act.  In relevant part, the Rule requires creditors and financial institutions that offer or maintain certain ...

On February 22, 2010, the Federal Trade Commission issued a news release indicating that it had notified almost 100 organizations that personal data about their customers, students or employees had been shared from their computer networks on peer-to-peer (“P2P”) file sharing sites, thereby exposing the data of affected individuals to possible identity theft and fraud.  In its letters, the FTC urged recipient entities to review their internal security procedures and the security procedures of their third party service providers.  The letters also recommended that the ...

The FTC today announced that it would, for the fourth time, delay enforcement of the Identity Theft Red Flags Rule.  The enforcement date is now June 1, 2010 for creditors and financial institutions subject to FTC jurisdiction.  The agency stated that the delay was requested by members of Congress, who are currently considering a bill that would limit the rule's scope.  That bill (which would exclude certain entities with 20 or fewer employees from the rule's definition of "creditor" and also would provide a mechanism for other entities to apply for that exclusion) recently passed the ...

It is being reported that the U.S. District Court for the District of Columbia agreed this morning with the American Bar Association's argument that the FTC's Identity Theft Red Flags Rule ("Red Flags Rule" or the "Rule") does not apply to lawyers.  The Rule implements Section 114 and 315 of the Fair and Accurate Credit Transactions Act (the "FACT Act").  In relevant part, the Rule requires creditors and financial institutions that offer or maintain certain accounts to implement an identity theft prevention program.  The program must be designed to detect, prevent, and mitigate the risk of identity theft. The FTC has interpreted the definition of "creditor" broadly.  The Commission has taken the position in publications and numerous panels that lawyers and law firms meet the definition of creditor because they allow clients to pay for legal services after the services are rendered.  For law firms (as well as for other entities that the FTC deems subject to its enforcement jurisdiction), November 1, 2009 is the deadline for compliance with the provisions of the Rule that require implementation of an identity theft prevention program.

The November 1st deadline for compliance with the FTC’s Red Flags Rule Identity Theft Prevention Program requirements is rapidly approaching.  Of late, there has been a flurry of activity aimed at limiting the scope of the rule.  The Red Flags Rule, which was jointly promulgated by several federal agencies in November 2007, requires all “creditors” that offer or maintain a “covered account” to implement a written identity theft prevention program.  A “creditor” is defined broadly to include “any person who regularly extends, renews, or continues credit.”  In March 2009, the Federal Trade Commission (“FTC”) published a how-to guide for businesses to comply with the Red Flags Rule that confirmed the FTC will broadly construe the rule, stating that the definition of a “creditor” includes all businesses that “provide goods or services and bill customers later.”

On July 29, 2009, the Federal Trade Commission ("FTC") announced another three-month delay in the enforcement of the provision of Identity Theft Red Flags and Address Discrepancies Rule (the "Rule") that requires creditors and financial institutions to implement an Identity Theft Prevention Program.  The FTC noted that small businesses and entities with a low risk of identity theft remain uncertain about their obligations under the Rule and pledged to "redouble" its efforts to educate businesses about compliance with the Rule.  The new enforcement deadline for creditors and ...

On May 13, 2009, the Federal Trade Commission ("FTC") published a compliance template designed to assist financial institutions and creditors "at low risk for identity theft " in developing the Identity Theft Prevention Program required by the FTC’s Identity Theft Red Flags and Address Discrepancies Rule (the "Rule").  The template is entitled "A Do-It-Yourself Prevention Program for Businesses and Organizations at Low Risk for Identity Theft."

The White House today released the report from the 60-day cybersecurity review the President ordered in February. Speaking to a packed audience in the East Room, President Obama outlined the broad range of threats facing the digital infrastructure, focusing not only on national security and organized crime attacks, but also on identity theft and incursions into individual privacy.

He promised a “new comprehensive approach to securing our nation’s infrastructure,” including appointment of a White House cybersecurity coordinator reporting to both the National Security Council and the National Economic Council. The coordinator would have broad responsibilities, but little direct authority, although the President did promise that the coordinator would have access to him.

At the eleventh hour, the Federal Trade Commission announced that it will once again delay enforcement of the Red Flags Rule.  The Red Flags Rule was promulgated pursuant to the Fair and Accurate Credit Transactions Act of 2003 ("FACTA").  The previous compliance date was May 1, 2009, which was an extension from the original deadline of November 1, 2008.  The new extension applies only to the provisions of the Rule requiring financial institutions and creditors to implement an identity theft prevention program.  The continuing enforcement delays respond to ongoing uncertainty about ...

The mere increased risk of identity theft following a data breach is sufficient to give the data subjects standing to bring a lawsuit in federal court but, absent actual identity theft or other actual harm, claims against the data owner and its service provider for negligence and breach of contract cannot survive, a federal judge ruled this month.  Ruiz v. Gap, Inc., et al., No. 07-5739 SC (N.D. Cal. April 6, 2009).

On March 20, 2009, the Federal Trade Commission (“FTC”) published its long-awaited guide to the Red Flags Rule (the “Rule”), entitled “Fighting Fraud with Red Flags Rule:  A How-To Guide for Business.”  The guide applies to creditors and certain financial institutions (such as state-chartered credit unions and mutual funds that offer accounts with check-writing privileges) that are subject to the FTC’s jurisdiction and addresses the provision of the Rule that requires implementation of an Identity Theft Prevention Program.  For entities subject to the FTC’s jurisdiction, the relevant compliance deadline is May 1, 2009.  Financial institutions that are regulated by federal bank regulatory agencies or the National Credit Union Administration (which issues their own versions of the Red Flags Rule) were required to comply with the Rule as of November 1, 2008.

On March 20, 2009, the Federal Trade Commission published a Red Flags Rule compliance guide for businesses, entitled “Fighting Fraud with the Red Flags Rule.”  The guide offers an overview of the Rule and practical steps businesses need to take to comply.  In addition, the guide addresses the issue that has raised the most concern among businesses -- the Rule's scope.  As expected, the FTC is interpreting the Rule broadly, suggesting, for example, that any company that sells goods or services and bills customers later is a "creditor" subject to the Rule.  According to the guide ...

A recent federal court decision offers a detailed analysis of several theories of liability for violations of a privacy policy.  Pinero v. Jackson Hewitt Tax Service Inc., No. 08-3535, 2009 WL 43098 (E.D. La. January 7, 2009). 

Plaintiff Pinero visited Jackson Hewitt Tax Service in Louisiana to have her tax returns prepared.  During her visit, she provided Jackson Hewitt with confidential information such as her Social Security number, date of birth and driver’s license number.  Pinero signed Jackson Hewitt’s privacy policy, which stated that Jackson Hewitt had policies and procedures in place, including physical, electronic, and procedural safeguards, to protect customers' private information.  Pinero alleged that she relied on this statement in her decision to turn over her information.

A California state Court of Appeal has ruled that a California law barring merchants from collecting “personal identification information” in connection with certain credit card transactions does not prohibit the collection of a five-digit ZIP Code alone. Party City Corp. v. Superior Court of San Diego County, No. D053530, 2008 WL 5264023 (Cal. Ct. App. Dec. 19, 2008).

In a continuing effort to combat identity theft, New York recently enacted an amendment to the Penal Law making it a crime to impersonate another person or pretend to be a public servant by means of online communication.

Specifically, New York’s Internet impersonation law amends section 190.25 of the Penal Law by adding Subdivision 4, making it a crime to impersonate another person by electronic means, including through use of a website, with the intent to obtain a benefit or injure or defraud another person. It also prohibits using such electronic means to pretend to be a public ...