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New York Attorney General reaches largest ever COPPA settlement to resolve violations of children’s privacy
On December 4, the New York Attorney General announced the largest Children’s Online Privacy Protection Act (COPPA) settlement in U.S. history—totaling approximately $6 million —to resolve allegations with a subsidiary of a telecommunications company that allegedly conducted billions of auctions for ad space on hundreds of websites it knew were directed to children under the age of 13. According to the Attorney General’s office, the subsidiary collected and disclosed personal data on children through auctions for ad space, allowing advertisers to track and serve targeted ads to children without parental consent. Under COPPA, operators of websites and other online services are prohibited from collecting or sharing the information of children under the age of 13 unless they give notice and have express parental consent. Among other things, the subsidiary also allegedly placed ads on other exchanges that possessed the capability to auction ad space on child-directed websites, but that when it won ad space on COPPA-covered websites, the subsidiary treated the space as it would any other and collected user information to serve targeted ads.
Under the terms of the settlement, the subsidiary must (i) create a comprehensive COPPA compliance program, which requires annual COPPA training for staff, regular compliance monitoring, and the retention of service providers that can comply with COPPA, as well as a third party who will assess the privacy controls; (ii) enable website operators that sell ad inventory to indicate what portion of a website is subject to COPPA; and (iii) destroy the personal data it collected on children.
FTC seeks comments on identity theft detection rules
On December 4, the FTC released a request for public comment on whether the agency should make changes to its identity theft detection rules—the Red Flags Rule and the Card Issuers Rule—which require financial institutions and creditors to take certain actions to detect signs of identity theft affecting their customers. The FTC is seeking comment as part of its systematic review of all of its regulations and guides. According to the FTC, consumer complaints relating to identity theft represented the third largest category of consumer complaints made to the FTC through the first three quarters of 2018 and the second largest category in 2017. The FTC is seeking comment on all aspects of the two rules, but also poses specific questions for commenters to address, such as (i) whether there is a continuing need for the specific provisions of the rules; (ii) what significant costs have the rules imposed on consumers and businesses; and (iii) whether there are any types of creditors that are not currently covered by the Red Flags Rule but should be covered. The request for comment is due to be published in the Federal Register shortly, and comments must be received by February 11, 2019.
FTC commissioners discuss need for expanded authority over consumer data privacy and security
On November 27, the Senate Committee on Commerce, Science and Transportation’s Subcommittee on Consumer Protection, Product Safety, Insurance, and Data Security conducted a hearing to discuss, among other topics, whether the FTC should be granted expanded authority over consumer data privacy and security. The hearing entitled “Oversight of the Federal Trade Commission” heard from the Chairman of the FTC as well as the agency’s four commissioners. Ranking Member Senator Bill Nelson’s opening statement discussed the need for providing additional resources to the FTC in order to ensure the agency is able to perform its mandated duties and effectively protect U.S. consumers from unfair or deceptive acts or practices. The five witnesses agreed that enforcement remains a priority for the FTC and called for comprehensive consumer privacy legislation that would clarify the agency’s authority and the rules relating to data security and breach notification, while fostering competition and innovation to the benefit of consumers. Specifically, FTC Chairman Joseph Simons stated he would support federal data security legislation if it provided the following three items: (i) the ability to seek civil money penalties to effectively deter unlawful conduct; (ii) jurisdiction over nonprofits and common carriers; and (iii) broad rulemaking authority to issue implementing rules under the Administrative Procedures Act for consumer protection issues such as privacy and data security. Commissioner Rohit Chopra also emphasized the need for Congress to support the FTC’s authority under Section 13B of the FTC Act, which authorizes the FTC to seek preliminary and permanent injunctions against companies and individuals.
However, Senator Blumenthal argued that too often the FTC has “fallen short” on protecting consumer privacy, particularly in terms of enforcement and pressing challenges. According to Senator Blumenthal, big tech companies misuse their power and consent orders are not “vigorously and adequately enforced.” He argued that the FTC must have the tools and resources to establish meaningful penalties for first offenses that pose a credible deterrent and recognize state attorneys general to ensure violations are investigated and punished.
Among other things, the hearing also discussed topics addressing: (i) the FTC’s ongoing series of public hearings reexamining the agency’s approach to consumer privacy in light of changing technologies (see previous InfoBytes coverage here); (ii) federal preemption versus state-by-state laws and the risk of inconsistencies and compliance challenges; (iii) the potential use of the FTC’s Section 6B authority, which would allow requests to be sent to the tech industry to understand what data is collected from consumers and how that information is used, shared, and sold; (iv) privacy protections for children, including the strengths and weaknesses of the Children’s Online Privacy Protection Act, particularly with respect to children ages 13 and older; (v) data minimization controls; and (vi) notice and comment rulemaking authority.
FTC emphasizes need for privacy and data security legislation
On November 13, the FTC submitted comments in response to the Department of Commerce’s National Telecommunications and Information Administration (NTIA) request for input on developing the Administration’s approach to consumer data privacy protections. In its comment letter, the FTC noted that it supported a balanced approach to privacy, weighing the risks of data misuse with the benefits of data to innovation and competition, and reiterated its support for data privacy legislation. Specifically, the FTC renewed its call for Congressional action that clarifies the FTC’s authority and the rules relating to data security and breach notification. According to the FTC, any such legislation should balance “consumers’ legitimate concerns about the protections afforded to the collection, use, and sharing of their data with business’ need for clear rules of the road, consumers’ demand for data-driven products and services, and the importance of flexible frameworks that foster innovation.”
The FTC emphasized it is “uniquely situated” to balance consumers’ interest in privacy, innovation, and competition and argued it should continue to be the primary enforcer of the laws related to “information flows in the marketplace,” whether it’s under the existing or new privacy framework. The FTC noted, however, that the existing framework places a number of limitations on its powers, including (i) its lack of authority over non-profits and common carriers; (ii) its inability to levy civil money penalties; and (iii) its lack of broad rulemaking authority under the APA for consumer protection issues such as privacy and data security.
FCC urges voice providers to participate in spoofed robocalls “traceback” program
On November 6, the FCC announced that it sent letters to voice providers urging them to participate in “traceback” efforts to help the FCC identify the source of illegal spoofed robocalls. The FCC released copies of the letters that it sent to eight voice providers that are not currently assisting with the USTelecom Industry Traceback Group’s program, which seeks to trace the robocalls that pass through the voice providers’ networks to the originating provider.
In the announcement, the FCC notes that: (i) traceback efforts assist the FCC in identifying the source of illegal calls; and (ii) the FCC receives more complaints from consumers regarding unwanted calls—including scam calls that use spoofing to trick consumers—than any other subject. The FCC emphasizes that “consistent participation of all network operators is critical for helping consumers and enforcing the law.”
FFIEC issues joint statement on OFAC Cyber-Related Sanctions Program
On November 5, the Federal Financial Institutions Examination Council (FFIEC) members issued a joint statement alerting financial institutions to the potential impact that the U.S. Treasury Department’s Office of Foreign Assets Control’s (OFAC) recent actions under its Cyber-Related Sanctions Program may have on financial institutions’ risk management programs. OFAC implemented the Cyber-Related Sanctions Program in response to Executive Order 13694 to address individuals and entities that threaten national security, foreign policy, and the economy of the U.S. by malicious cyber-enabled activities. FFIEC’s press release announcing the joint statement references OFAC’s June action against five Russian entities and three Russian individuals who, through “malign and destabilizing cyber activities,” provided material and technological support to Russia’s Federal Security Service (previously covered by InfoBytes here), noting that these entities may offer services to financial institutions operating in the U.S.
The joint statement reminds financial institutions to ensure that their compliance and risk management processes address possible interactions with an OFAC sanctioned entity. The statement notes that continued use of products or services from a sanctioned entity may cause the financial institution to violate the OFAC sanctions. Additionally, use of software or technical services from a sanctioned entity may increase a financial institution’s cybersecurity risk. The statement encourages financial institutions to take appropriate corrective action, as well as to ensure their third-party service providers comply with OFAC’s requirements.
The OCC also released Bulletin 2018-40, which corresponds with the FFIEC’s joint statement.
FTC to hold public hearings on consumer privacy and data security; focus will address data security enforcement program
On October 26, the FTC announced it will hold four days of public hearings in December 2018 and February 2019 to examine the Commission’s authority to deter unfair and deceptive conduct in data security and privacy matters as part of its broader series of hearings on “Competition and Consumer Protection in the 21st Century.” According to the FTC, these hearings (i) “will provide the first comprehensive re-examination of the FTC’s approach to consumer privacy since 2012,” and (ii) “will provide an opportunity to reexamine the Commission’s work in light of changing technologies, legal regimes, and business models.”
The FTC will continue to accept public comments through March 13, 2019, regarding items to be discussed at the February 2019 hearing. As previously covered by InfoBytes, a coalition of bipartisan state Attorneys General submitted a comment letter to the FTC last August requesting that they be included in the discussions regarding consumer protection during the Commission’s hearing process. Specifically, the letter emphasized the states’ “long history of protecting consumers from unfair and deceptive practices” under each state’s consumer protection authority, and noted consumers’ concerns over personal information and data security.
NYDFS updates cybersecurity FAQs to address use of utilization review agents
On October 25, NYDFS provided a new update to its answers to FAQs relating to 23 NYCRR Part 500, which took effect March 1, 2017, and establishes cybersecurity requirements for banks, insurance companies, and other financial services institutions. The original promulgation of the FAQs was covered in Infobytes, as were the last updates in February, March, and August.
The new update states that when a covered entity uses an independent “Utilization Review” agent (UR agent) who receives nonpublic information, the covered entity should treat the UR agent as a third-party service provider in order to properly assess and address any potential risks to their data and systems. NYDFS emphasizes that covered entities bear the responsibility for these protections.
FTC approves final expanded settlement with global ride-sharing company over data breaches
On October 26, the FTC announced its final approval of an expanded settlement with a global ride-sharing company over allegations that the company violated the FTC Act by deceiving consumers regarding the company’s privacy and data practices. Specifically, the company allegedly failed to closely monitor and audit its employees’ internal access to consumer and driver data. Furthermore, the company represented to consumers and drivers that personal information stored in its databases were secure, but, according to the FTC, the company failed to implement reasonable measures to prevent unauthorized access to consumers and driver data maintained by the ride-sharing company’s third-party cloud service provider. In April, the FTC announced it would be expanding the original settlement from August 2017 (previously covered by InfoBytes here), which covered a 2014 data breach, because it was discovered the company failed to disclose a subsequent data breach that occurred in 2016 for more than a year, despite the on-going FTC investigation of the 2014 data breach.
The expanded final settlement subjects the company to civil penalties if it fails to notify the FTC of future incidents involving unauthorized access to data. The settlement also, among other things, requires the company to implement a comprehensive privacy program, including biennial third-party privacy assessments for 20 years.
FTC to review potential updates to federal privacy rules
On October 17, as part of its fall 2018 rulemaking agenda, the FTC announced that it plans to review potential updates to federal privacy rules on how banks protect consumer data. The planned recommendation—scheduled to be presented to FTC commissioners at the end of November—will incorporate recommendations by staff and the public on changing the Gramm-Leach-Bliley Act Safeguard Rules (the Rule) given the potential conflict between the Rule and state, local, or other federal laws or regulations. As previously covered by InfoBytes, the FTC requested comments on the Rule in 2016, seeking feedback on several specific questions relating to the Rule’s economic impact and benefits, potential conflicts, and how technological, economic, or other industry changes will affect the Rule.
Among other things, the FTC’s regulatory agenda will also address (i) 2016 amendments to the Telemarking Sales Rule; (ii) the periodic review of identity theft rules; (iii) issues related to the privacy of consumer financial information concerning vehicle disclosures; and (iv) credit monitoring for active duty military as required by the Economic Growth, Regulatory Relief, and Consumer Protection Act.