Strong data security is not optional

Heidi Maher

cyber security lock secure security

According to the Ponemon Institute’s 10th annual Cost of Data Breach Study, the average consolidated total cost of a data breach is now $6.53 million for a U.S. organization, an 11% increase since last year. The study also found that the average cost per lost or stolen record containing sensitive and confidential information rose from $201 in 2014 to $217. These facts alone should encourage every company to tighten its data security policies and capabilities, but there’s more. Key legal and regulatory changes have increased the financial risk to companies with lax data security.

Tasked with protecting consumers from unfair and deceptive business practices, the Federal Trade Commission’s Bureau of Consumer Protection will now launch investigations if it detects risky behavior regarding the security of customer data. No actual injury or breach is required. Companies found to have substandard data security practices may face a variety of penalties. Recently, despite the lack of documented harm to clients, R.T. Jones Capital Equities Management agreed to settle charges that it failed to establish required cybersecurity policies and procedures before a data breach that compromised the personally identifiable information of approximately 100,000 people. The FTC also has the power to investigate discrepancies between a company’s published “terms of use” and how its data is actually stored and shared.

Since no court has yet ruled that the FTC lacks such jurisdiction, the bureau has stepped up its consumer privacy activity, and enforcement actions have skyrocketed. Any organization that deals with consumer information is subject to an investigation.

At the same time, the law is catching up with the real impact of data breaches. A truly game-changing ruling in Remijas v. Neiman Marcus has made it easier for consumers to sue companies after breaches involving their personal data. Historically, even when sensitive information such as credit card numbers, birth dates, government ID numbers and medical records have been accessed, it’s been hard for consumers to sue companies over the breach. Companies have typically been able to avoid these lawsuits by invoking a Supreme Court case, Clapper v. Amnesty International. The case, which was about phone records and national security, required a showing of a risk of “imminent” and “concrete” injury in order to have standing to bring suit.

As a consequence of the Remijas case, however, consumers no longer have to show a risk of imminent and concrete injury in order to file suit, which means that a company’s failure to properly oversee data and how it responds to a breach may be sufficient grounds to sustain class actions by affected customers, whether or not they suffered a financial loss.

1  2  Next Page