In light of growing concerns over identity theft, data breaches, and the hacking of online brokerage accounts, the Securities and Exchange Commission (“SEC”) has recently proposed new amendments to Regulation S-P – the SEC’s existing privacy rules mandated under the Gramm-Leach-Bliley Act. The SEC’s unanimous approval of these proposed rules signals the Commission’s desire to more closely align its privacy guidelines with those of the Federal Trade Commission (“FTC”) and the Federal Banking Agencies, which adopted data breach notice rules in 2005. For regulated companies, however, the amendments could mean additional costs and liabilities.

• Print
• Comments
• Trackbacks

On March 4 the FTC announced that a consent agreement has been reached in its 17th case challenging data security practices by a company handling sensitive consumer information. Goal Financial, LLC, a San Diego-based student loan company, has agreed to implement a comprehensive information security program, avoid future misrepresentations about its data security practices, and receive independent, third-party audits of its data security program every two years for the next 10 years. The consent order does not provide for a civil fine.

According to the FTC's Complaint, Goal Financial "failed to provide reasonable and appropriate security for consumers' sensitive personal information" starting no later than September 1, 2004. The company's faulty security practices allowed employees to transfer over 7000 consumer files containing personally identifying information and financial histories to third parties. Additionally, in 2006 a Goal Financial employee allegedly sold company hard drives containing sensitive personal information of approximately 34,000 consumers in readable text.

• Print
• Comments
• Trackbacks

The Southern District of Florida has held that the Fair Credit Reporting Act (FACTA), applies to both electronic receipts from online purchases and receipts printed in stores. In Grabein v. 1-800-Flowers.com, Inc., 07-22235-CIV, 2008 WL 343179 (S.D. Fla. Jan. 29, 2008), Plaintiff filed a class action lawsuit after he used a credit card to purchase flowers through Defendant’s website and received a receipt that contained both Plaintiff's truncated credit card number and the card’s expiration date. Plaintiff alleged that printing both pieces of information violated FACTA, which provides:

No person that accepts credit cards or debit cards for the transaction of business shall print more than the last five digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction. 15 U.S.C. § 1681c(g).

• Print
• Comments
• Trackbacks

The Federal Trade Commission has quietly changed its position on the level of parental consent required under the Children’s Online Privacy Protection Act (“COPPA”) for e-cards sent from a website directed to children.

Under COPPA, websites directed to children under 13 are required to obtain parental consent prior to the collection of personal information – including an email address or a first and last name – from children under 13. There are certain exceptions to this requirement, including the so-called “one-time use” exception, which permits websites directed to children to collect an email address to respond once to a child’s specific request, provided that the website deletes that email address after doing so. The FTC had taken the position that an e-card – which typically permits a child to send a message to a friend’s email account – fell under this exception. Thus, no parental consent was required.

At the end of last year, however, the FTC amended its “Frequently Asked Questions about the Children’s Online Privacy Protection Rule,” available at http://www.ftc.gov/privacy/coppafaqs.shtm, and specifically noted in response to the FAQ concerning e-cards (FAQ 44) that “where an operator’s e-card or forward-to-a-friend system discloses the sender’s email address or first and last name in the message, the operator must obtain verifiable parental consent before such collection and disclosure.” Accordingly, operators of websites directed to children must now comply with COPPA’s verifiable parental consent provisions before permitting children under 13 to send e-cards that disclose their email addresses or full names.

• Print
• Comments
• Trackbacks

http://www2.csoonline.com/exclusives/column.html?CID=33533

• Print
• Comments
• Trackbacks

The Federal Trade Commission announced on January 17, 2008 that it has agreed in principle to a consent order with Life is good, Inc. and Life is good Retail, Inc. (collectively “Life is good”) resolving allegations that the apparel company collected sensitive information from consumers and failed to secure it in compliance with its own privacy and security policies. The consent order against Life is good, among other things, prohibits future deceptive privacy and security claims and requires the company to implement a comprehensive information security program that includes biennial audits by an independent security professional for the next twenty years.

• Print
• Comments
• Trackbacks

In a unanimous panel opinion issued on January 28, 2008, the Ninth Circuit upheld the National Labor Relations Board’s (NLRB) newly-announced three-factor test for determining whether employer surveillance activity of potential union members is coercive and therefore in violation of the National Labor Relations Act (NLRA). The case, Local Joint Executive Board of Las Vegas et al. v. NLRB, No. 05-75515, -- F.3d --, 2008 WL 216935 (January 8, 2008), involved two incidents of alleged surveillance of union activities at Aladdin Gaming, LLC, in which Aladdin officials conferred with employees in the cafeteria who had been presented with union cards.

• Print
• Comments
• Trackbacks

Yesterday, attorneys general from 49 states (all but California’s) and the District of Columbia announced a sweeping agreement with MySpace under which the company will adopt new measures to protect children online. This announcement culminates many months of negotiations between a task force of the attorneys generals led by Richard Blumenthal, the Connecticut Attorney General and Roy Cooper, the North Carolina Attorney General and is reflective of the intense pressure on web 2.0 sites to protect children online. We previously posted about that pressure, reporting on state attorneys general investigations of MySpace and Facebook here and the subsequent New York attorney general settlement with Facebook here. The new agreement with MySpace is available as an attachment to the press release on the North Carolina Attorney General’s website. 

• Print
• Comments
• Trackbacks

On December 18, the FTC announced a settlement in its 15th case (and its first in 13 months) addressing the data security practices of companies handling sensitive consumer information. American United Mortgage Company agreed to pay a $50,000 penalty for failing to implement reasonable safeguards to protect customer information and failing to provide customers with privacy notices.

American United is the first FTC action taken pursuant to the Disposal Rule, promulgated in 2005, of the Fair and Accurate Credit Transactions Act (FACTA) of 2003. The complaint filed in the Northern District of Illinois in mid-December, asserted that the Northbrook, Illinois-based mortgage company disposed of several dozen consumers’ personally identifying information by leaving intact hundreds of documents in a nearby unsecured dumpster, in some cases in open trash bags. Indeed, even after the FTC provided written notice to American United that disposal of documents containing consumers’ personal information in this manner created a risk of unauthorized access, "on at least two occasions, additional intact American United documents containing consumers’ personal information were found in and around the same dumpster adjacent to American United’s office."

• Print
• Comments
• Trackbacks