The U.S. Federal Trade Commission (FTC) announced on
Data Privacy Day (January 28) that it had reached a settlement with
a cord blood bank in respect of the loss of nearly 300,000
customers' personal information. The lost data included contact
information, social security numbers, credit and debit card account
numbers, drivers' licences, banking information, and medical
information. The information had been stored on unencrypted backup
tapes, an external hard drive and a laptop that were stolen from a
backpack left in an employee's car for several days.
In the statement of allegations, the FTC alleged that the blood
bank misrepresented that it maintained reasonable and appropriate
practices to protect consumers' personal information from
unauthorized access. The proposed settlement involves an order
prohibiting future misrepresentations and requiring the cord blood
bank "to establish and maintain a comprehensive information
security program that is reasonable designed to protect the
security, confidentiality, and integrity of personal information
collected from or about customers." The proposed settlement
also requires the organization to submit to independent privacy
assessments for a period of 20 years.
Although the FTC settlement concerns an incident in December
2010, the use of unencrypted portable storage devices to transport
personal information appears to continue to be an all too common
phenomenon. In Canada, there has been a string of cases in which
government custodians in Canada have lost control of unencrypted
storage devices containing personal information.
The FTC settlement is a cautionary tale. Many organizations
assert that they take appropriate administrative, technological and
physical security precautions regarding the protection of personal
information. If the risk of loss of data is not a sufficient reason
to stop the practice of using unencrypted portable storage devices,
the FTC settlement is a reminder that there is the potential for
prosecution or liability for misrepresentation in using a
manifestly unsafe data transfer method.
The FTC settlement is equally instructive for Canadian
organizations. Even though, to date, the approach of the FTC in
relying on consumer protection provisions regarding unfair trade
practices and misrepresentations has not taken root in Canada,
Canadian organizations may wish to consider that Canadian common
law and consumer protection legislation also prohibits
misrepresentations and unfair and deceptive practices – quite
apart from compliance with privacy legislation.
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