Privacy Report: FTC Revisits COPPA

Headlines that matter for privacy and data security.

Federal US News

Equifax to Pay up to $700 Million as Part of Settlement for 2017 Data Breach

Equifax has agreed to pay at least $575 million, and potentially up to $700 million, as part of a global settlement with the FTC, the CFPB, and 50 US states and territories, which alleged that the company’s failure to take reasonable steps to secure its network led to a data breach in 2017 that affected approximately 147 million people. As part of the proposed settlement, Equifax will pay $300 million to a fund that will provide affected consumers with credit monitoring services and will also compensate consumers who bought credit or identity monitoring services from Equifax and paid other out-of-pocket expenses as a result of the breach. Equifax will add up to $125 million to the fund if the initial payment is not enough to compensate consumers for their losses. In addition, beginning in January 2020, Equifax will provide all US consumers with six free credit reports each year for seven years—in addition to the one free annual credit report that Equifax and the two other nationwide credit reporting agencies currently provide. In addition to the monetary relief to consumers, Equifax is required to implement a comprehensive information security program requiring the company to take several measures including designating an employee to oversee the information security program, and conducting annual assessments of internal and external security risks.

FTC Revisits COPPA

In light of continued rapid changes in technology, the FTC is seeking comment on the effectiveness of the amendments the agency made to the Children’s Online Privacy Protection Rule (COPPA Rule) in 2013 and whether additional changes are needed. In addition, the FTC will hold a public workshop on October 7, 2019 to examine the COPPA Rule. The FTC typically reviews its rules every 10 years, but rapid changes in technology, including the expanded use of education technology, reinforce the need to re-examine the COPPA Rule at this time. “[W]e must ensure COPPA remains effective,” said FTC Chairman Joe Simons. “We’re committed to strong COPPA enforcement, as well as industry outreach and a COPPA business hotline to foster a high level of COPPA compliance. But we also need to regularly revisit and, if warranted, update the Rule.”

FTC Finalizes Settlement With Online Rewards Website

ClixSense, the operator of an online rewards website, will be required to implement a comprehensive information security program as part of a final settlement with the FTC related to allegations that it failed to take reasonable steps to protect personal information. The website falsely claimed that it “utilizes the latest security and encryption techniques to ensure the security of your account information.” In fact, ClixSense engaged in unreasonable security practices and failed to implement minimal data security measures to secure the personal information it collected. Under the settlement terms, the individual who operates ClixSense is prohibited from misrepresenting the extent to which any company he controls protects personal information. If any company he controls collects or maintains personal information, he must implement a comprehensive information security program and obtain independent biennial assessments. Finally, he is prohibited from making misrepresentations to the third party performing the biennial assessments of any information security program, and must provide an annual certification of compliance to the FTC.

D-Link Agrees to Make Security Enhancements Per FTC Settlement

Smart home products manufacturer D-Link Systems, Inc. has agreed to implement a comprehensive software security program in order to settle FTC allegations stemming from a 2017 complaint alleging that despite touting device security, vulnerabilities in the company’s routers and cameras left sensitive consumer information, including live video and audio feeds, exposed to third parties and vulnerable to hackers. Though D-Link promoted the security of its products by claiming it offered “advanced network security,” it failed to perform basic secure software development, including testing and remediation to address well-known and preventable security flaws. These flaws included using hard-coded login credentials on its D-Link camera software with the easily guessed username and password, “guest,” and storing mobile app login credentials in clear, readable text on a user’s mobile device. As part of the proposed settlement, D-Link is required to implement a comprehensive software security program and, for 10 years, to obtain biennial, independent third-party assessments of its program.

Industry Groups Push for Federal Privacy Bill

A coalition of 27 trade groups from various industries — retail, food and beverage, and telecom—came together to urge Republicans and Democratic members of the House and Senate commerce committees to pass federal consumer privacy legislation that establishes a single technology and industry-neutral framework. “Although we use data in different ways and may have different views about the details of the final bill, we all agree that the time has come for Congress to pass a consumer privacy law that will provide consumers and businesses alike with the certainty and trust to power our digital economy and ensure our competitiveness in the global marketplace,” the groups said in a letter. Consumer should not have to figure out what rules are applicable to them based on what state they live in, the platform or technology they use, or the various other factors that are currently at play. A uniform national policy that applies to all industries would remove this uncertainty, both for businesses and consumers. A bipartisan privacy working group made up of Senate Committee on Commerce, Science, and Transportation members has been discussing national legislation, but has yet to release a draft proposal.

State US News

Senate committee pares back CCPA amendments

The Senate Standing Committee on Judiciary recently took up a slew of CCPA amendment bills the Assembly had passed more than a month ago. State Sen. Hannah-Beth Jackson supported two CCPA “clean-up” bills—AB 25 and AB 874—without requesting amendments. Both are highly likely to become law. AB 25 provides a one-year moratorium for most CCPA requirements for an employee, contractor, job applicant, beneficiary and emergency contact information, provided that the information is collected and used solely in the employment context (e.g., if an employee or contractor is also a consumer of the business that they work for, then all data collected in the consumer context will remain covered by CCPA). However, two CCPA requirements will apply to this range of “employee data.” First, employers must provide employees with privacy notices and the data breach class action will apply to employee data. AB 874 streamlines the public records exception to “personal information.” Although the exception uses the term “publicly available data,” it defines this term only as public record data. This means that publicly available information (e.g., posted online) is unlikely to be exempt unless it is public record data accessible through a government database. Other bills passed with amendments. AB 846 was amended to clarify that businesses can offer consumers a different price, rate, level or quality of goods to a consumer who has exercised the consumer’s CCPA rights, so long as (1) the offering is in connection with a consumer’s voluntary participation in a loyalty, rewards, premium features, discounts or club card program; and (2) the terms of that program are not “unjust, unreasonable, coercive, or usurious in nature.” AB 1564 exempts businesses that operate exclusively online from the CCPA requirement to maintain a toll-free number for purposes of requests. Instead, these online businesses can provide an email address in lieu of a toll-free number, only if they are businesses that have direct relationships with the California residents from whom they collect personal information. Finally,AB 1146 was amended to limit the auto warranty, repair and product recall exemption to any selling or sharing of the information for any other purpose.

NY Strengthens Cyber-Security and Consumer Privacy Protections

Companies will have to be more forthcoming with New Yorkers about cyber-attacks that jeopardize private data under a pair of new laws signed by Governor Cuomo. First, the Stop Hacks and Improve Electronic Data Security (SHIELD) Act, updates NY’s laws concerning notification requirements and consumer data protection obligations and broadens the state Attorney General’s oversight regarding data breaches impacting New Yorkers. The law expands the definition of data to include biometric data, as well as email addresses, passwords and security questions, and widens the parameters of what counts as a breach, making it so that companies must notify consumers when any of their information is accessed, as opposed to being acquired. The second law calls on consumer credit reporting agencies to offer identity theft prevention and mitigation services to consumers who’ve been affected by a security breach, and provides consumers with the right to freeze their credit at no cost.

EU News

UK DPA Announces Intention to Fine British Airways for Data Breach

The UK data protection authority, the ICO, has issued a notice of its intention to fine British Airways £183.39 million for infringements of the GDPR. The proposed fine relates to a cyber-incident in September 2018 that involved user traffic to the British Airways website being diverted to a fraudulent site. Through this false site, customer details were harvested by the attackers, compromising the personal data of approximately 500,000 customers. The ICO’s investigation found that a variety of information was compromised by poor security arrangements. British Airways has cooperated with the ICO investigation and has made improvements to its security arrangements since these events came to light. The company will now have the opportunity to make representations to the ICO as to the proposed findings and sanction.

French DPA Announces Online Targeted Advertisement Action Plan

After receiving various solicitations from the industry and the public, the CNIL has elaborated an action plan for 2019-2020 in order to outline applicable rules and to help stakeholders in their compliance process. Questions from stakeholders have focused on two central topics: issues related to direct marketing (third party opt-in) and issues related to cookies and other tracking devices. The CNIL’s action plan has two steps. First, it published new guidelines on cookies on July 18, 2019 (available now in French). Second, it will consult with stakeholders to develop by December 2019/early 2020 new recommendations relating to the operational aspects of the collection of consent. Key takeaways from the new guidelines include:

  • The Guidelines apply to any technology that stores or accesses information on any user device connected to a telecommunications network open to the public. This includes the use of HTTP cookies and similar technologies (e.g., HTML5 local storage, Local Shared Objects, fingerprinting techniques, identifiers generated by operating systems and device identifiers).
  • Consent must result from a clear affirmative action of the user.
  • Businesses must be able to demonstrate, at any time, that valid consent was obtained.
  • Analytics cookies may be exempt from the consent requirement, subject to strict conditions.

UK Launches Digital Markets Strategy

The UK Competition and Markets Authority (CMA) has launched its digital markets strategy, setting out how it will continue to protect consumers in rapidly developing digital markets, while fostering innovation. The strategy builds on the recent package of reforms unveiled earlier this year which aims to make the UK competition regime fit for the digital age. An important element of the strategy is the opening of a market study into online platforms, which will examine the major online platforms which are funded by digital advertising. It will consider the sources of any market power, the way they collect and use personal data, and whether competition in digital advertising is producing good outcomes for consumers.

Antitrust Basis for Parental Liability May Have Implications Under the GDPR

Parent entities are typically shielded from liability for the actions of their subsidiaries, however, competition law and the GDPR leverage the concept of an “undertaking” to significantly lower the threshold for holding parents liable. The European Commission has taken advantage of this in the past to levy fines against parent companies for antitrust violations committed by their subsidiaries, and this could be amplified if data protection authorities pursue the same tack with GDPR violations by subsidiaries. The concept of an undertaking means that liability for antitrust violations and potential GDPR infringements may not be limited to the single offending entity — the European Court of Justice has determined an “undertaking” to be an “economically linked unit” whereby one entity has a “decisive influence” over another entity and is exercising that influence.

New Law Decreases Number of Companies Required to Designate DPO in Germany

The German parliament passed new legislation imposing several changes to the current German Federal Data Protection Act. Although many of the changes addressed privacy aspects of criminal proceedings, the new legislation makes an important change for small companies by increasing the threshold to designate a Data Protection Officer (DPO). Whereas currently companies have to formally designate a DPO if they constantly employ at least 10 employees who deal with the automated processing of personal data, the new legislation increases the minimum number of employees from 10 to 20, significantly decreasing the financial and administrative burden for small companies doing business in Germany. That said, even with this new legislation, Germany will still have some of the strictest requirements in the EU relating to the designation of DPOs. In addition, companies will continue to be subject to other applicable data protection requirements.

Danish DPA Fines for Failure to Delete Data

The Danish DPA announced its intention to fine a Danish furniture company for failing to delete 385,000 customers’ records. The regulator carried out a supervisory visit, focusing on whether the company had set deadlines for the deletion of customers’ data and whether the deadlines were complied with. Prior to the inspection, the company provided an overview of the systems it uses for the processing of personal data, which revealed that some of their stores used an older system, which had been replaced by a newer system in the other shops. Under the old system, personal information of about some 385,000 customers had never been deleted. The GDPR establishes that personal data must not be stored for longer than is necessary for the purposes for which the personal data are processed. The Dutch DPA found that the company was in violation of the GDPR principles of storage limitation and accountability.

UK DPA Fines Telecoms Company for Unlawful Text Messages

The ICO has fined telecoms company EE Limited £100,000 for sending over 2.5 million direct marketing messages to its customers, without consent. The messages encouraged customers to access and use their app to manage their account and also to upgrade their phone; a second batch of messages was sent to customers who had not engaged with the first. During the ICO investigation EE stated the texts were sent as service messages and were therefore not covered by electronic marketing rules. However, the ICO found the messages contained direct marketing and that the company sent them deliberately, although it acknowledges that EE did not deliberately set out to breach electronic marketing laws. ICO’s guidance on electronic marketing is clear that marketing messages can only be sent to existing customers if they have given their consent and if they are given a simple way to opt out of marketing when their details are first collected and in every message sent. People have a right to opt out of receiving marketing at any time, at which point it’s the organization’s responsibility to stop sending them.

French DPA Issues Warning to FaceApp Users

The CNIL published a set of guidelines and tutorials signaling potential privacy issues when using apps such as FaceApp. First, it reminds users that apps should be downloaded only from official stores. It then draws attention to several key rights afforded to users under GDPR: the right to know whether their data is stored in or outside the EU, whether their data is shared with third parties or used for secondary purposes, and how to exercise the right to object, erase or access. These points are missing, either entirely or partially, from FaceApp's Terms of Use. Moreover, when personal data is transferred from the EU to a country that does not ensure an adequate level of protection according to the European Commission, users have the right to know what appropriate safeguards have been taken. In sum, it is in users’ interest to ensure that they exercise caution when granting apps access to data, especially when it involves photos of relatives who did not consent to the use of their data and the apps’ Terms of Use.

Polish DPA Releases List of Operations Requiring DPIAs

The Polish data protection authority (UODO), announced a modified list of the types of personal data processing operations that require a data protection impact assessment. The list now:

  • Includes an explicit reservation that its nature is non-exhaustive.
  • Contains the processing of biometric data, either for the purpose of uniquely identifying a natural person or for access control purposes.
  • Enumerates the processing of genetic data.
  • Has expanded by adding the processing of location data.

EDPB Releases Annual Report

The European Data Protection Board (EDPB) published its Annual Report for 2018 on July 16, 2019. The report highlights that the EDPB (i) endorsed 16 guidelines previously adopted by the Article 29 Working Party; (ii) adopted 4 additional guidelines to clarify provisions of the GDPR; (iii) adopted 26 consistency opinions to guarantee the consistent application of the GDPR by the EU data protection authorities; and (iv) issued two opinions in the context of the legislative consultation process, as well as a statement on its own initiative and on the draft ePrivacy Regulation. It also discloses some of the topics that the EDPB aims to further consider in its 2-year work program for 2019-2020, such as data subjects’ rights, the concept of controller and processor, and legitimate interest. The EDPB also plans to focus on new technologies, such as connected vehicles, blockchain, artificial intelligence and digital assistants, video surveillance, search engine delisting, and data protection by design and by default.

Other Global News

New Law Passed Amending Brazilian Oersonal Data Protection Law

Law No. 13,853 was published on July 8, 2019, bringing significant changes to Brazil’s General Personal Data Protection Law (LGPD). Notable among the main vetoes and changes to the LGPD are:

  • The Data Protection Officer (DPO) will no longer be required to have legal and regulatory knowledge and be able to provide specialized data protection services.
  • Three categories of sanctions for breach of the obligations set out in the LGPD were removed: (a) partial suspension of the operation of the database to which the infraction refers; (b) suspension of the exercise of the activity of processing of personal data to which the infraction refers; and (c) partial or total prohibition of the exercise of activities related to data processing.
  • There will no longer be a mandatory human review of automated decisions.
  • The possibility for the national data protection authority (ANPD) to charge fees / emoluments for services rendered was also vetoed, which shall impact its financial autonomy.

The presidential vetoes are still subject to analysis by the National Congress. However, given the quorum required for change, there is a high chance that they will be maintained.

Canadian Commissioner Recommends Updating Privacy Laws for Smart Cities

Ontario’s information and privacy commissioner is calling on the provincial government to review and modernize its privacy laws to prepare for the “risks inherent” with smart cities using technologies such as sensors, big data analytics, and artificial intelligence. The relevant laws came into effect in the ‘80s and ‘90s, at a time when smart city projects were not on the horizon. The principles are solid, but there has never been a complete overhaul to make them more relevant to the digital age. Needed updates include stronger oversight and enforcement mechanisms. A spokesman for the Ministry of Government and Consumer Services said it will review the commissioner’s recommendations as part of its ongoing data strategy. The government recently released framework principles for smart cities, which include guaranteeing the protection and privacy of personal data.

Capital One Announces Data Breach Affecting Millions

Capital One announced that 106 million people—100 million in the US and 6 million in Canada—had their personal information stolen by a hacker whom prosecutors hit with a criminal computer fraud and abuse count in Washington federal court. While most of the breached data includes names, addresses, postal codes, phone numbers, email addresses, dates of birth and self-reported income, the breach also exposed credit scores, credit limits, balances, payment history, contact information and fragments of transaction data from a total of 23 days over the past three years. 140,000 Social Security numbers and about 80,000 linked bank account numbers were also exposed. Based on its investigation to date, the company does not believe the information was used for fraud or disseminated. Capital One expects the incident to cost $100 -150 million this year.

Targeted Ransomware Attacks Soar

According to a recent report from Symantec Corp.,the number of targeted ransomware attacks has skyrocketed in the past year as new attackers have increasingly emerged. While as recently as January 2017, just two organizations a month were being targeted with ransomware attacks, that figure has surged to more than 50 organizations a month. Symantec said the US has had the most targeted ransomware attacks with nearly 900 affected organizations from January 2017 to May 2019, followed by Turkey, the UK, Australia and Canada. The report also stated that “although targeted ransomware attacks account for a small percentage of overall ransomware attacks, they present a far greater risk” because “a successful targeted ransomware attack could cripple an ill-prepared organization.”

The Fun App Trap

The popular FaceApp mobile application has come under scrutiny forprivacy and other concerns. A close review of the Terms of Use indicate that a user grants to the company “a perpetual, irrevocable, nonexclusive, royalty-free, worldwide, fully-paid, transferable sub-licensable license to use, reproduce, modify, adapt, publish, translate, create derivative works from, distribute, publicly perform and display your User Content.” This means that the company can use the images and names forever and that FaceApp can sell or share the content with anyone. While the app’s privacy policy indicates that information will not be rented or sold to third parties without a user’s consent, agreement to the Terms may be read as granting such consent. A repository of facial photos, such as those uploaded to FaceApp, could potentially be used to fraudulently access Americans’ smartphones, and in turn a wide range of financial, medical, and other personal data. Additionally, facial photos taken on a modern-day mobile phone typically have geolocation data embedded within them, which could raise both national security and privacy concerns.

GC of Digital Advertising Trade Group Says Top Issue is Privacy

The new general counsel, Michael Hahn, of the Interactive Advertising Bureau (IAB) said that when he first arrived, the GDPR was the biggest legal issue facing the industry. Now, the CCPA has taken center stage. Earlier in the year, IAB released its CCPA Roadmap to help industry lawyers and to facilitate a common dialogue around the ambiguous issues plaguing privacy lawyers who are grappling with the CCPA. Looking ahead, Hahn says the biggest legal issues will continue to be around privacy, considering the bills pending in a number of states that could lead to additional privacy laws and the efforts underway for a federal privacy law.

The Biggest Cybersecurity Episodes So Far In 2019

The first half of 2019 has seen a steady stream of high-profile cybersecurity incidents.Six of the year’s biggest data security episodes to date include:

  • Quest Diagnostics and LabCorp each announced that one of their customer billing collectors, the American Medical Collection Agency, had been breached, together exposing the personal data of nearly 20 million clients.
  • US Customs and Border Protection revealed that a contractor exposed a database of border traveler photos, after transferring copies of the images to its own network without permission. The incident, which exposed photos of both travelers and their license plates, affected fewer than 100,000 people entering and exiting the US through a few lanes at a single land border port of entry.
  • A security slip-up by First American Title Insurance Co., one of the biggest title insurance companies in the US, exposed more than 885 million mortgage records to anyone with Internet access.
  • Ransomware attacks targeted the cities of Riviera Beach and Lake City, Florida and Baltimore, Maryland. The Florida cities were locked out of their computer networks. In Baltimore, residents lost access for weeks to basic city services housed online.

Report Reveals $45 Billion in Losses Due to Cybersecurity Incidents

According to a report released by the Internet Society’s Online Trust Alliance, cyber incidents in the US led to an estimated loss of $45 billion in 2018. The report found that the financial impact of ransomware cyberattacks rose by 60 percent, while financial losses from the compromise of business emails doubled and cryptojacking incidents more than tripled from the year before. The report looked at the financial fallout from about 2 million cyber incidents including record exposures, ransomware attacks, data breaches and others. Overall data breaches leading to the exposure of personal records, however, went down in 2018 (a decrease of 35.9 percent). The report also found that 95 percent of data breaches were preventable through following “simple and common-sense approaches to improving security.”

The Growing Role of the Chief Data Officer

Part three in a series from the Cybersecurity Law Report covers the Chief Data Officer’s (CDO) role in complying with laws such as the CCPA and in connection with working with third parties. Though every company is different in how it structures its CDO role, there are some reporting structures, teams and collaborative efforts that work better than others. Many believe there needs to be direct communication to the very top, with the CDO reporting to the CEO or COO. The CDO should sit in a department or role that looks at the whole organization, rather than in a silo. The CDO team should include all the people who can leverage the different ways to make sure a company understands the risk of data and how to use the data in a way that drives value (e.g., engineers, data scientists, analysts, etc.). The size of the team doesn’t matter, but the scope of the role is important. Finally, it is important to obtain the necessary budget and support.

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