Three companies whose business is reselling consumers’ credit reports have agreed to settle federal charges that they did not take reasonable steps to protect consumers’ personal information, failures that allowed computer hackers to access that data.
The settlements with the Federal Trade Commission (FTC) require the companies to strengthen their data security procedures and submit to audits for 20 years. These are the FTC’s first cases against credit report resellers for their clients’ data security failures.
“These cases should send a strong message that companies giving their clients online access to sensitive consumer information must have reasonable procedures to secure it,” said David Vladeck, Director of the FTC’s Bureau of Consumer Protection. “Had these three companies taken adequate steps to ensure the use of basic computer security measures, they might have foiled the hackers who wound up gaining access to extensive personal information in the consumer reporting system.”
According to administrative complaints issued by the FTC, the three resellers buy credit reports from the three nationwide consumer reporting agencies, Equifax, Experian, and TransUnion, and combine them into special reports they sell to mortgage brokers and others to determine consumers’ eligibility for credit.
Due to their lack of information security policies and procedures, the companies allegedly allowed clients without basic security measures, such as firewalls and updated antivirus software, to access their reports.
As a result, hackers accessed more than 1,800 credit reports without authorization via the clients’ computer networks. In addition, even after becoming aware of the data breaches, the companies did not make reasonable efforts to protect against future breaches.
The resellers are SettlementOne Credit Corporation and its parent company, Sackett National Holdings Inc.; ACRAnet Inc.; Fajilan and Associates Inc., doing business as Statewide Credit Services; and Robert Fajilan.
They are charged with violating the Fair Credit Reporting Act by failing to protect their internet portals and thereby furnishing credit reports to hackers who lacked a permissible purpose to have them, failing to maintain reasonable procedures to limit the furnishing of credit reports for such purposes, and furnishing credit reports when they had reasonable grounds for believing the reports would not be used for a permissible purpose. Their failure to protect consumers’ personal information also allegedly violated the FTC Act.
In addition, the resellers allegedly violated the Gramm-Leach-Bliley Safeguards Rule by failing to design and implement information safeguards to control the risks to consumer information; to regularly test or monitor the effectiveness of their controls and procedures; to evaluate and adjust their information security programs in light of known or identified risks; and to have comprehensive information security programs.
The proposed consent orders bar the respondents from violating the Safeguards Rule and require them to:
have comprehensive information security programs designed to protect the security, confidentiality, and integrity of consumers’ personal information, including information accessible to clients;
obtain independent audits of their security programs, every other year for 20 years;
furnish credit reports only to those with a permissible purpose; and
maintain reasonable procedures to limit the furnishing of credit reports to those with a permissible purpose.