Companies should proactively prepare for changes in consumer behavior and corporate responsibility.
By now, most people have heard about the massive data breach at Equifax, one of the four US credit bureaus along with Experian, TransUnion and Innovis, affecting 143 million people. Credit bureaus (also known as consumer reporting agencies) compile and keep a file containing a person’s credit history, including things like the types of credit, how long credit accounts have been open, how much available credit is utilized/available, whether bills are paid on time, late payments/collection notices/foreclosure notices, and public records such as liens and bankruptcies, as well as personal information such as Social Security Number (SSN), date of birth (DOB), and current and previous addresses. Credit bureaus make a report of a person’s credit history (their “credit report”) available to that person, and to employers and other businesses.
Employers and businesses often want to base decisions on whether to offer a person their products or services such as a loan/mortgage/credit offer, the interest rate to charge on that offer, a cell phone plan, an insurance policy, etc., or extend that person an offer of employment or a lease, on as much available relevant information as possible. This often includes a review of that person’s credit history. Credit reporting agencies monetize accumulated credit history and associated personal information by making credit reports available to employers, insurers, service providers and other businesses for a fee, as permitted by applicable law. If an employer or business wants to obtain your credit report, they obtain your permission to access your report as required by law and ask you to provide certain sensitive personal information about you which they will use to request your report, and they pay a fee to one or more of the credit bureaus to receive a copy of your credit report.
Many employers and businesses rely on easy access to credit reports. However, this may be one of the more likely casualties of the Equifax breach. As noted earlier, 143 million Americans may now be at risk for identity theft using their sensitive personal information from this one breach event alone. Unlike a credit card number, which can be changed in the event the data is compromised, SSNs and DOBs (which were compromised in the Equifax breach) can’t be changed. This is why the Equifax breach is so significant – unlike most previous breaches, the scale of this breach and the nature of information compromised mean that consumers will be at risk for, and must remain vigilant for, identity theft for the rest of their lives, which will likely drive changes in the way people monitor and manage their credit reports and sensitive personal information.
Most of the advice and guidance regarding the Equifax breach to date has been consumer-focused – what consumers can and should do to protect themselves in the post-Equifax world. This includes recommendations for more robust use of credit freezes currently offered by the credit bureaus and use of third party monitoring services which alert consumers to (or require the consumer’s approval for) changes in their credit report, representing a shift in the spectrum towards consumer identity protection and away from access to easy credit such as point-of-sale, “save 20% if you open an account today”-type offers requiring an instant check of your credit. It is also likely the earthquake caused by the Equifax breach will result in additional security and legal requirements not just for credit bureaus, but for all companies possessing sensitive personal information such as SSNs and DOBs, as well as industry-driven or legislatively-mandated enhanced best practices and/or new ways for consumers to help them control access to their credit reports in an effort to minimize identity theft, such as a tool to manage security freezes at all three credit bureaus simultaneously and make it easier to impose, and temporarily lift, such freezes. The Equifax breach is also likely to increase consumer acceptance of more complex login processes, such as multi-factor authentication.
Employers and businesses should start thinking about how they can and should adapt to the coming post-Equifax changes in consumer and credit bureau behavior, and increases in corporate responsibility with respect to security and collection/use of sensitive personal information. By taking proactive steps, companies can demonstrate to their employees and customers that they are sensitive to the importance of identity protection and security. Here are 5 proactive steps companies may want to consider:
1. Address consumer credit freeze/release approval in the new employee hiring process and other processes requiring a consumer credit check (such as point-of-sale credit offers).
While implementing a credit freeze will help protect a person from identity theft, it’s not without its drawbacks. As of today, these drawbacks include the need to separately implement or lift freezes on a per-credit bureau basis, and the fact that the freeze must be lifted (temporarily or permanently) before an employer or business can perform a credit check. Despite this drawback, more people will likely implement credit freezes in the post-Equifax world, which will impact companies’ ability to easily complete background checks or receive point-of-sale credit offers.
- Employers and other businesses performing a consumer credit check should anticipate this and consider proactively modifying their credit check process by adding a question to their credit report authorization form asking whether a person has a credit freeze, or whether that person’s approval is required for the release of their credit report. If that person answers “yes,” the employer or business should have a standard exception process to work with that person to ensure the freeze is temporarily lifted, or approval for the credit check is given, so the employer or business can perform the credit check.
- Retailers offering point-of-sale credit offers should consider ensuring their offer disclosures include a statement that people with credit freezes may not be eligible for the offer due to the inability to verify their credit history. For those businesses which use sales associates to offer point-of-sale promotions, consider requiring them to ask whether the consumer has a credit freeze in place, and if so notify them if the freeze renders them ineligible for the offer.
Employers and businesses should also know which credit bureau(s) they use for background checks, and be prepared to provide this information to make it as easy as possible for a prospective employee or customer to implement a temporary lift of the credit freeze. It may be worth having a short URL handy which can be provided to a prospective employee or customer who wants to temporarily lift their credit freeze to enable them to take advantage of the offer on the spot or at a later time.
2. Enable multi-factor authentication for access to online services and consumer portals.
Most businesses use a username and password as access credentials. Some, but not all, have moved to a more secure authentication mechanism known as multi-factor authentication. Multi-factor authentication requires a user to provide not only a username, but two or more of the following “authentication elements” to validate the user’s identity: (1) something you know (e.g., a password, the answer to a challenge question), (2) something you have (e.g., a one-time PIN or password or a code delivered specifically through the user’s mobile device), and/or (3) something you are (e.g., facial recognition or fingerprint). Each factor must be independent of the other so that knowing one factor does not reveal another. Other data, such as geolocation information or time-based access requirements, can be used as well. The most commonly-known type of multi-factor authentication is two-factor authentication, where two authentication elements (of which one is typically a password) are required. Multi-factor authentication helps reduce the chance a bad actor could successfully exploit a username and password obtained through a security breach, through phishing, or through other social engineering attack vectors. Companies can use multi-factor authentication to demonstrate to its users (and potential users) that it places a high value on security.
Some companies argue that the burden of providing additional verification does not outweigh the simplicity of a username/password, especially where the company is not collecting any sensitive personal information. However, multi-factor authentication is an industry standard in certain areas, such as under the current Payment Control Industry Data Security Standard (PCI-DSS) for companies that are required to be PCI compliant, and will likely continue to gain traction as an industry standard, or customer expectation, in other areas. The National Institute of Standards and Technology (NIST) recommends using multi-factor authentication wherever possible. For companies where multi-factor authentication is not an industry standard or legal requirement, consider offering multi-factor authentication anyway, or offering it as an enhanced security option to customers concerned about protecting access to their accounts.
3. Evaluate whether there is a true need to collect SSNs and DOBs from consumers, and/or other creative ways to validate SSN and DOB information.
Companies which collect Social Security Numbers or dates of birth from their users should consider whether the collection of this information is truly required. One of the core tenets of data privacy is the Collection Limitation principle, which advocates for limits on companies’ collection of personal data. HIPAA takes this a step further and applies a “minimum necessary standard” – companies should limit the use and disclosure of collected personal information to the minimum necessary to accomplish the intended purpose. Companies should consider following HIPAA’s “minimum necessary standard” even if they are not subject to HIPAA. With respect to sensitive personal information such as SSN and DOB, companies should look carefully at whether they truly need to collect this information, and for what purpose. If there is another way to accomplish the same goal without collecting the information, consider implementing that alternative approach. Here are two examples:
- With respect to SSNs, instead of asking for a user’s SSN for validation purposes considering asking for the sum of the digits in their SSN,or the sum of the digits in their SSN plus the digits in their home street address.This provides a strong identity validation mechanism without the need to capture and store SSNs.
- With respect to DOBs, if validating a user’s age (e.g., for COPPA purposes), consider whether the month and year is sufficient, and keep a flag indicating that the age information was verified instead of the month/year information itself.
4. Review and freshen (or implement) their incident response and incident communications plan(s).
To many, Equifax’s response has been a lesson in how not to manage communications regarding a security breach. Companies should take the opportunity to learn from Equifax’s missteps and review and freshen up their incident response and incident communication plan(s). For companies still without an incident response/incident communications plan, now is the time to ensure one is in place. A few things to consider:
- According to press reports, the Equifax breach allegedly stemmed from the failure to timely implement a security update to the Apache Struts Web Framework. As part of incident response preparedness, work with IT to ensure that your company is actively monitoring for hardware/software security patches, and is applying them as quickly as possible following release.
- There have been numerous reports regarding sales of Equifax stock valued at $1.8 million by three senior Equifax executives within days of Equifax’s discovery of the breach. While Equifax has stated that the executives were not aware of the breach, whether or not the executives (including the CFO and President of US Information Systems) had knowledge doesn’t really matter – the perception and optics of it are awful in the eyes of the public, the SEC, and state attorneys general. Consider ensuring that the entire senior team is notified immediately in the event of a security breach, and have your General Counsel or external breach counsel discuss with them the risks of continuing with any automated stock sale programs in light of the breach.
5. Consider offering credit monitoring as an employee benefit.
Finally, employers may want to consider adding credit monitoring as an employee benefit, by offering subsidized or free credit monitoring services to their employees through a partnership with a credit bureau or a third-party provider such as AllClear ID. While there are some questions as to the value of credit monitoring in protecting against identity theft, services that notify you and/or require your approval before a new account is opened can be very valuable in fighting identity theft. As the possibility of identity theft is becoming a fact of life in the 21st century, companies may find it beneficial to help their employees guard their identity. Among other benefits to companies, minimizing identity theft reduces the time employees need to take away from work, whether as PTO or lost productivity, to deal with the repercussions of having their identity stolen, and provides employees with increased peace of mind with respect to identity protection.
Eric Lambert has spent most of his legal career working in-house as a proactive problem-solver and business partner. He specializes in transactional agreements, technology/software/e-commerce, privacy, marketing and practical risk management. Any opinions in this post are his own. This post does not constitute, nor should it be construed as, legal advice. He is a technophile and Internet evangelist/enthusiast. In his spare time Eric dabbles in voice-over work and implementing and integrating connected home technologies.