United States: States Respond To Equifax Cyber Breach With Enforcement Actions And Calls For Enhanced Regulatory Powers

Last Updated: October 20 2017
Article by Peter Carey, Joseph Facciponti and Joseph V. Moreno

Most Read Contributor in United States, November 2018

In the wake of last month's historic cyber breach of Equifax, which resulted in the theft of sensitive personal information belonging to over 140 million Americans,1 states have wasted no time in seeking a greater role in regulating cybersecurity risk. Historically, while state consumer agencies and attorneys general have enforced notification requirements for victims of cyberattacks where consumer data was compromised, significant enforcement actions have been the purview of federal agencies such as the Federal Trade Commission, the U.S. Department of Justice, the Securities and Exchange Commission, and the Commodity Futures Trading Commission. However, given the scope of recent breaches and the sensitivity of the information that was stolen, states have recently stepped up and launched their own investigations and enforcement actions, and have imposed new data protection standards on various types of businesses. Assuming this trend continues, organizations responsible for defending against cyberattacks, or who find themselves the victim of a successful hack, may find themselves with both federal and state cyber regulators to deal with.

I. Massachusetts Brings the First Enforcement Action

Since the announcement of its data breach, on September 7, 2017, Equifax has faced a barrage of criticism from regulators, litigants, and Congress on its failure to adequately secure its information systems against attack, as well as its multi-week delay in disclosing the breach to consumers and the investing public. On September 19, 2017, the Commonwealth of Massachusetts took this criticism a step further and filed a civil action against Equifax for failing to adequately protect consumer data and for other related violations.2

In the complaint filed by Massachusetts Attorney General Maura Healey, Equifax is alleged to have (i) failed to adopt appropriate safeguards of customer data, as required by Massachusetts regulations regarding data security; (ii) failed to provide timely notice of the data breach to the state and to affected consumers, as required by the state's data breach notification law; and (iii) engaged in unfair and deceptive trade practices based on, among other things, the company's failure to abide by its own promises to consumers regarding its data security policies and procedures, in violation of the state's consumer protection law.3

The Massachusetts action focuses on Equifax's alleged failure to implement the widely-available security patch to the Adobe Struts application, which is believed to have contributed to the vulnerability. Specifically, the complaint alleges that, in early March 2017, the developers of the Adobe Struts application as well as cybersecurity watchdog groups notified the public of a severe vulnerability in the application that would leave systems using it vulnerable to hacking. Notwithstanding this notice, Equifax allegedly failed to implement an available security patch to the application, which was released in early March 2017. Equifax's system was reportedly first breached two months later, in May 2017, by hackers who took advantage of the Adobe Struts vulnerability. Equifax did not detect the breach until late July 2017. The lawsuit further alleges that Equifax faltered in its response to the breach by failing to ensure that adequate call center staffing and online resources were available to answer questions from affected consumers, and by improperly seeking to make a profit from consumers by charging for certain credit protection services beyond a one-year period.

According to AG Healey, customers have experienced and will continue to experience significant financial losses, lost time, and aggravation as a result of Equifax's alleged misconduct. The State of Massachusetts is seeking injunctive relief, civil penalties, restitution and legal costs.

II. Multiple States Launch Investigations and Demand Information

In addition to the Massachusetts lawsuit, attorneys general in New York, Illinois, California, and in other states announced investigations of Equifax, with AG Schneiderman of New York declaring the purpose was getting to "the bottom of how and why this massive hack occurred."4

States have a variety of tools at their disposal to investigate and penalize companies for data breaches. For example, most states in addition to the District of Columbia and certain U.S. territories have data breach notification laws that generally require prompt notification to consumers and/or state regulators of data breaches that affect the personal information of those states' residents. These notification laws typically allow state attorneys general to bring enforcement actions for non-compliance.

In New York, for example, the attorney general may seek to recover any consequential damages suffered by consumers who were entitled to notice but were not notified, as well as a fine of up to $150,000 if the failure to provide notice was knowing or reckless.5 A smaller number of states have laws that expressly require companies to adopt certain cybersecurity measures to protect the personal data of their residents. In New Mexico, for example, companies that fail to adopt "reasonable security procedures and practices" may be sued by the attorney general for actual damages caused by a company's failure to maintain such safeguards as well as receive a fine of up to $150,000 for knowing or reckless violations.6 Finally, some states rely on pre-existing consumer protection laws, which usually prohibit deceptive or unfair trade practices, to pursue companies for damages, penalties, and injunctive relief for either (i) failing to adopt appropriate safeguards for consumer data or (ii) misleading customers about the existence or strength of the company's cybersecurity safeguards.

Further, on September 19, 2017, the attorneys general and consumer protection regulators from over forty states signed a letter to Equifax that expressed "profound concerns" regarding the breach, primarily concerning the rollout of Equifax's consumer notice of the data breach and offer of free credit monitoring to consumers.7 These concerns include (i) language that initially appeared in the terms of service that required customers to agree to an arbitration clause and class action waiver as a condition of accepting the free credit monitoring;8 (ii) Equifax's marketing of fee-based identity protection services alongside its offer of free identity protection services, which could potentially deceive consumers into selecting the fee-based service; and (iii) Equifax's failure to provide sufficient call center support and internet resources, such that consumers reported being unable to obtain additional information regarding the breach.

These same state attorneys general have also turned their attention to Experian and TransUnion, the other two major credit reporting agencies.9 Although there is no evidence that these other credit reporting agencies were affected by the Equifax breach, on October 10, 2017, the state attorneys general demanded that the other credit agencies voluntarily waive the fees they charge consumers – often $10 – to impose or lift credit freezes, noting (i) that consumers must seek credit freezes from all three credit reporting agencies in order to fully protect themselves from the Equifax breach and (ii) that it is inappropriate for these credit agencies to impose fees for credit freezes, given that consumers do not voluntarily choose to do business with credit reporting agencies.

III. New York Calls for Expanded Regulatory Powers

New York's Attorney General and Governor have also used the Equifax breach as an opportunity to impose new and tougher cybersecurity standards on credit agencies such as Equifax as well as any business that handles the private information of New York residents.

A. Renewed Call for Passage of New York Data Security Act

On September 15, 2017, AG Schneiderman wrote in an op-ed article that he was renewing his call for the passage of the New York Data Security Act, which would require New York businesses to implement and maintain data security programs.10 AG Schneiderman had previously proposed the legislation in January 2015,11 but it failed to gain traction. If enacted, the law would implement the following cyber-related provisions.12

  • Data Security Standards and Programs. Any entity that does business in New York and maintains certain private information regarding New York residents would be required to develop, implement and maintain "reasonable safeguards" to protect the confidentiality of that information. Entities would also be required to implement an information security program that includes: (i) administrative safeguards, such as conducting risk assessments and training employees; (ii) technical safeguards, such as assessing risks in network and software design; and (iii) physical safeguards, such as protecting against unauthorized access to private information during collection, transportation, destruction, and disposal.
  • Broad Definition of Private Information. The definition of private information would be expanded beyond standard forms of personal information, such as social security numbers, to also cover biometric information, unsecured protected health information, and a username or email address in combination with a password or security question and answer that would permit access to an online account.
  • Safe Harbor and Law Enforcement Sharing. To encourage compliance with the new standards, a rebuttable presumption of compliance would be provided if an entity's cybersecurity program is certified annually by an independent third party auditor. The legislation would also offer immunity from liability in a civil action, including an action brought by the attorney general, for entities that comply with certain information security guidelines published by the National Institute of Standards and Technology. In addition, the bill would incentivize companies to share information about data breaches with law enforcement by establishing that the production of forensic reports to local and state law enforcement agencies for the purpose of investigating a breach is not a waiver of any privilege or protection, such as the work product doctrine or trade secret protection.
  • Penalties and Enforcement. The New York Attorney General would be empowered enjoin violations and seek civil penalties of $250 for each person whose private information was compromised, up to a maximum of $10 million per breach. For violations found to be knowing or reckless, these amounts increase to $1,000 for each affected person, up to the greater of $50 million or three times the aggregate amount of any actual costs and losses.

B. Proposed Oversight of Credit Reporting Agencies

On September 18, 2017, Governor Cuomo directed the New York Department of Financial Services ("DFS") to implement new regulations that would expand the jurisdiction of the DFS, which regulates financial services firms and insurance companies, to include credit reporting agencies, such as Equifax, that collect data on consumers in New York.13 The proposal would mandate that credit reporting agencies not only register with the DFS but also comply with the DFS's "first-in-the-nation" cybersecurity rules.14

Under the proposal, credit reporting agencies that collect information on consumers in New York would be required to register with the DFS and would be subject to DFS's cybersecurity rules. The credit reporting agencies would also be subject to ongoing DFS examinations and investigations to evaluate compliance. Should a credit reporting agency or its officers fall out of compliance, or otherwise appear to be "not trustworthy and competent to act as or in connection with a consumer credit reporting agency," the DFS could suspend or revoke the credit reporting agency's registration and thereby prohibit the firm from doing business with consumers and certain financial institutions in New York.

Under the proposal, consumer credit reporting agencies would be required to register with the DFS by February 1, 2018, and would have a phased period to comply fully with the cybersecurity regulations by October 4, 2019.

IV. Conclusion

Even before the Equifax breach, states had begun taking an increasingly active role in penalizing companies that failed to safeguard consumer information.15 However, the scope of the Equifax breach is likely the tipping point that will call states to more muscular action, including more aggressive statutes, compliance examinations, and enforcement actions. As a result, businesses must be increasingly mindful of not just federal data protection standards and rules, but of increasingly strict state rules as well. Businesses that possess sensitive data that cybercriminals might seek to exploit would do well to regularly revisit their cybersecurity controls, policies, and procedures to ensure that they comply with all applicable laws.


1 See Cadwalader Clients & Friends Memo, Equifax Data Breach Highlights SEC Disclosure Obligations for Public Companies in the Wake of Cybersecurity Attacks (Sep. 18, 2017), http://www.cadwalader.com/resources/clients-friends-memos/equifax-data-breach-highlights-sec-disclosure-obligations-for-public-companies-in-the-wake-of-cybersecurity-attacks.

2 See Press Release, AG Healey Sues Equifax (Sep. 19, 2017), http://www.mass.gov/ago/news-and-updates/press-releases/2017/2017-09-19-equifax-lawsuit.html.

3 See Complaint, Massachusetts v. Equifax, Inc. (Suffolk Cty. Super. Ct., Sept. 19, 2017), http://www.mass.gov/ago/docs/press/2017/equifax-complaint.pdf.

4 See Press Release, A.G. Schneiderman Launches Formal Investigation Into Equifax Breach, Issues Consumer Alert (Sep. 8, 2017), https://ag.ny.gov/press-release/ag-schneiderman-launches-formal-investigation-equifax-breach-issues-consumer-alert; see also Press Release, Attorney General Madigan Investigating Massive Equifax Data Breach & Urges Illinois Residents to Be Vigilant (Sep. 8, 2017), http://www.illinoisattorneygeneral.gov/pressroom/2017_09/20170908.html; Press Release, Attorney General Becerra Issues Consumer Alert Following Equifax Data Breach (Sep. 10, 2017), https://www.oag.ca.gov/news/press-releases/attorney-general-becerra-issues-consumer-alert-following-equifax-data-breach.

5 See N.Y. GBS § 899-aa.6(a), https://www.nysenate.gov/legislation/laws/GBS/899-AA.

6 See N.M. Stat. Ann. §§ 57-12C-4, 57-12C-11.

7 See Letter from State Attorneys General to Equifax (Sep. 19, 2017), http://www.michigan.gov/documents/ag/Equifax.Letter+to+Counsel.9-15-17_600904_7.pdf.

8 Equifax ultimately removed the arbitration language and declared that it would not seek to compel any consumers into arbitration. See https://www.equifaxsecurity2017.com/2017/09/13/progress-update-consumers-4/.

9 See Press Release, Attorney General Madigan Calls on Credit Bureaus to Halt Fees for Consumers Impacted by Massive Equifax Breach (Oct. 10, 2017), http://www.illinoisattorneygeneral.gov/pressroom/2017_10/20171010b.html.

10 See Eric Schneiderman, "Raising our guard vs. mega-breaches," N.Y. Daily News (Sep. 15, 2017), http://www.nydailynews.com/opinion/raising-guard-mega-breaches-article-1.3496434.

11 See Press Release, N.Y. State Office of the Attorney Gen., A.G. Schneiderman Proposes Bill To Strengthen Data Security Laws, Protect Consumers From Growing Threat Of Data Breaches (Jan. 15, 2015), https://ag.ny.gov/press-release/ag-schneiderman-proposes-bill-strengthen-data-security-laws-protect-consumers-growing.

12 See Data Security Act, Assembly Bill 6866 (2015-2016 Regular Session), http://nyassembly.gov/leg/?default_fld=&leg_video=&bn=A06866&term=2015&Summary=Y&Actions=Y&Committee%26nbspVotes=Y&Floor%26nbspVotes=Y&Memo=Y&Text=Y.

13 See Press Release, Governor Cuomo Announces New Actions to Protect New Yorkers' Personal Information in Wake of Equifax Security Breach (Sep. 18, 2017), https://www.governor.ny.gov/news/governor-cuomo-announces-new-actions-protect-new-yorkers-personal-information-wake-equifax.

14 Cadwalader attorneys have written several memoranda on DFS's new cybersecurity rules, most recently on September 12, 2017. See Cadwalader Clients & Friends Memo, Compliance with Initial New York DFS Cybersecurity Rules Now Mandatory (Sep. 12, 2017), http://www.cadwalader.com/resources/clients-friends-memos/compliance-with-initial-new-york-dfs-cybersecurity-rules-now-mandatory.

15 For example, in May 2017, Target agreed to pay $18.5 million to resolve claims by 47 states and the District of Columbia arising from a 2013 data breach involving the theft of 40 million payment card records from Target's computer network. See S. Ramakrishnan and N. Bose, Target in $18.5 million multi-state settlement over data breach, Reuters (May 23, 2017), https://www.reuters.com/article/us-target-cyber-settlement/target-in-18-5-million-multi-state-settlement-over-data-breach-idUSKBN18J2GH. In August 2017, Nationwide Mutual Insurance entered into a $5.5 million settlement with 32 states concerning a 2012 data breach that compromised personal information for over one million customers. See Press Release, A.G. Schneiderman Announces $5.5 Million Multi-State Settlement With Nationwide Mutual Insurance Company Over 2012 Data Breach (Aug. 9, 2017), https://ag.ny.gov/press-release/ag-schneiderman-announces-55-million-multi-state-settlement-nationwide-mutual.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Pillsbury Winthrop Shaw Pittman LLP
Cadwalader, Wickersham & Taft LLP
Troutman Sanders LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Pillsbury Winthrop Shaw Pittman LLP
Cadwalader, Wickersham & Taft LLP
Troutman Sanders LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions