Data Breach Lawsuits Revived: Court Turns in Favor of Consumers

July 30, 2015
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A data breach may be in the news one week and out the other, but the real lasting business impact and consumer effects can be felt long after the fact, as the recent reinstatement of a lawsuit tied to the Neiman Marcus breach of January 2014 proves.

A data breach may be in the news one week and out the other, but the real lasting business impact and consumer effects can be felt long after the fact, as the recent reinstatement of a lawsuit tied to the Neiman Marcus breach of January 2014 proves.

Exposing data for 350,000 Neiman Marcus customers, the liability case held the company accountable for potential damage to consumers that spent time and money repairing credit card accounts after the breach, as well as dealing with any future identity theft.

And there were at least 9,200 of them that were actually used for fraud, according to The Wall Street Journal. This proves that simply reimbursing customers for fraud and giving them free credit monitoring isn’t going to cut it anymore, as the impact of stolen identities can continue if their information is sold and reused to open up new credit cards.

Class-Action Lawsuits Tied to Company Data Breaches

Of course, this isn’t the first retailer or organization that has had to settle class-action lawsuits as a result of a data breach.

In March, Target agreed to pay $10 million as a result of their 2013 breach in which attackers stole an estimated 42 million customers’ credit or debit card information, according to NPR.org. Sixty-two million total had their personal information stolen in the breach.

The lawsuit also stipulated certain security changes that would have to happen in the company, including appointing an actual chief information security officer (CISO); documenting an information security program and security risks; and offering security training to key employees.

The turning of the courts in favor of consumers is significant, as most U.S. lawsuits filed in response to data breaches typically fail, since proving harm and future injury can be difficult, as BankInfoSecurity.com noted.

But now that the courts are recognizing the real impact on consumers, businesses that experience breaches of consumer data need to be aware of the costly consequences of skimping on information security.

Protecting Against Common Threats

Two retailers, two major class-action consumer lawsuits. A few key points about their cases:

  • Similar payment card scraping malware was found in NM’s stores and Target’s systems
  • NM hackers had access for more than eight months to payment card data
  • NM attackers compromised the company’s point-of-sale system by leveraging an Internet-facing server – their card data network was not segmented
  • Target’s breach was traced back to network credentials stolen from a third-party HVAC vendor that allowed them to log into their networks remotely
  • NM hackers extracted data with custom hacking software and sent data out through a virtual private network (VPN)
  • Target hackers used file transfer protocol (FTP) to extract card data, according to Bloomberg Business

One of the main commonalities in both cases is the use of remote access to gain initial entry into systems, install malware, take over servers, and send data back to their own command and control servers.

Most recently, Hacking Team’s Remote Access Control spyware has been making news, as the surveillance tool can turn on microphones, cameras, and track all data on different devices, including passwords and browser history. It can also hide itself and install malicious apps as root on devices.

How can your company protect against remote access threats, often deployed over remote access applications with weak authentication? Implementing two-factor authentication can stop an attacker from accessing your network, either by cracking or stealing passwords. Only a user with personal device tied to your account, such as a smartphone or smartwatch, can verify and authenticate your real identity.

Learn more about two-factor authentication mobile apps, and download our latest guide, The Essential Guide to Securing Remote Access.

As The Wall Street Journal stated, information security insurance isn’t as easy to get as it was a year or two ago, nor is it a catchall for security failures. Insurers are taking a closer look at potential clients’ security practices before issuing policies that can protect chief information officers (CIOs) and other senior executives from a data breach fallout.

Instead, try investing in the security basics upfront and protect your company and executives from future data breach legal battles.