Fact Sheet 17b:
How to Deal with a Security Breach


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Copyright © 2006 - 2015
Privacy Rights Clearinghouse
Posted February 2006
Revised September 2014

  1. Introduction
  2. Security breach laws
  3. What should you do if your personal information has been compromised?
  4. Retailer Point-of-Sale (POS) payment card breaches
  5. Breaches involving an existing financial account
  6. Breaches involving your driver's license number or another government-issued ID document
  7. Breaches involving your Social Security number (SSN)
  8. Notify the credit bureaus and establish a fraud alert
  9. Order your credit reports
  10. Examine your credit reports carefully
  11. Continue to monitor your credit reports
  12. Consider a security freeze
  13. Information for businesses
  14. Resources for consumers

1. Introduction

Have you received a letter or an e-mail informing you that your personal information may have gotten into the wrong hands?   Perhaps a media report alerted you to a security breach at a company you do business with. Here are just a few ways that security breaches occur:

  • Computer files containing university student information, including Social Security numbers (SSNs), are hacked.
  • A retailer's payment point-of-sale system has been hacked exposing customers' credit and debit card information.
  • A bank's computer back-up tape with customer account data has been lost while being shipped to a storage facility.
  • A dishonest healthcare employee has obtained computer files containing patients' records, including SSNs and dates of birth, and may have sold the records to criminals.
  • Imposters have established accounts with a large data broker enabling members of an international crime ring to obtain thousands of comprehensive consumer profiles, including SSNs and dates of birth.
  • A company laptop has been stolen from the back seat of a bank employee's car. It contains account data and SSNs on hundreds of thousands of customers.
  • For more examples see PRC's Chronology of Data Breaches which includes breaches involving personal data that could be used to commit identity theft.

2. Security Breach Laws

California was the first state to enact a security breach notice law in 2003. It resulted from a widely publicized breach at the State’s Teale Data Center in April 2002 that leaked the personal information of 265,000 state employees. Because the data elements that had been compromised could lead to financial identity theft if obtained by criminals, the Legislature passed a law in which individuals would be notified so they can take steps to reduce their risk of fraud. The following description of this landmark law is provided by the California Office of Privacy Protection:

A business or a State agency that maintains unencrypted computerized data that includes personal information, as defined, [shall] notify any California resident whose unencrypted personal information was, or is reasonably believed to have been, acquired by an unauthorized person. The type of information that triggers the notice requirement is an individual's name plus one or more of the following:

Social Security number, driver's license or California Identification Card number, financial account numbers, medical information or health insurance information.

The law has since been amended to require that the notice include specific information, and that entities required to issue a breach notice to more than 500 California residents must electronically submit a single sample copy to the Attorney General The California Attorney General provides information on recommended practices for responding to a security breach under California law. 

Following California's lead, a majority of the states have enacted laws requiring that individuals be notified when a security breach compromises personal information.

In addition to the state laws described above, federal law may require notice for certain types of data breaches.

Financial institutions subject to the federal Gramm-Leach-Bliley Act (15 U.S.C. §§6801-6810) must adopt procedures to safeguard customer data and notify customers when there has been unauthorized access to customer data if the financial institution determines that customer data has been or is likely to be misused. Guidelines on when customers of a financial institution should be notified about a data breach are published by the FDIC.

Data breaches involving medical information may also prompt notice under federal law and regulations. The Health Information Technology for Clinical Health Act (HITECH), Section 13402, required the Department of Health and Human Services (HHS) to issue rules defining how and when consumers are to be notified of a breach of protected health information. For information on this rule and a list of companies that have reported a data breach, see www.hhs.gov/ocr/privacy/hipaa/administrative/breachnotificationrule/

The HITECH Act also requires the Federal Trade Commission (FTC) to adopt data breach rules that apply to web-based vendors of electronic personal health information as well as the vendors’ service providers. To read the FTC’s breach notification rule, go to:
http://www.ftc.gov/opa/2009/08/hbn.shtm

It has become a “best practice” for companies, educational institutions, and government agencies to notify their customers and employees whether or not the breach they’ve experienced requires that they provide notice to their customers and/or employees. For example, there have been several high-profile breaches in which customers’ names and email addresses were compromised.  While the data elements exposed in these breaches would not likely lead to financial identity theft if obtained by criminals, the affected companies nonetheless notified their customers anyway. 

3. What should you do if your personal information has been compromised?

Above all, don't panic. A security breach does not necessarily mean that you will become a victim of identity theft. This guide provides instructions on ways to reduce your risk of identity theft. And if the worst happens and you do become a victim of fraud, this guide points you to other sources of information about identity theft.

Your first step is to figure out what type of breach has occurred.  That will help you determine the action that you need to take.  The four major types of breaches are:

  • A breach involving your credit or debit card information at a retailer's point-of-sale terminal (cash register)
  • A breach involving another existing financial account
  • A breach involving your driver's license number or another government-issued ID document
  • A breach involving your Social Security number

The sections below describe the action that you should take to protect yourself in each of these situations.

4. Retailer Point-of-Sale (POS) Payment Card Breaches

In the U.S., most retailers use point-of-sale (POS) terminals in which either the customer or a store employee “swipes” a debit or credit card’s magnetic stripe to pay for purchases.  In Europe, payment cards do not rely on a magnetic stripe.  Instead, they rely on newer technology and use cards that contain computer chips.  The chip stores the same information as the magnetic stripe on your card. However, chip cards generate a unique code for each transaction that cannot be reused.

Because most U.S. retailers continue to use older POS technology, their payment systems are more attractive targets for hackers and are vulnerable to security breaches.  These breaches can be massive in size, sometimes affecting millions of cardholders.  POS systems have been breached at major retailers including Target, Home Depot, Michaels Stores and Neiman Marcus.  PRC’s Chronology of Data Breaches lists these and many other data breaches involving retail POS systems.

Given the pervasiveness of these breaches, many consumers will have their credit or debit card information compromised at some point in time.  Sometimes, you may become aware of this because your financial institution has reissued your payment card with a new account number.  However, because of the high cost of large scale payment card reissuances, many financial institutions do not automatically reissue cards that may have been compromised. 

If you become aware (through news media coverage or otherwise) that there has been a payment card breach at a retailer at which you have shopped, what should you do?

First of all, determine whether you have used a debit or credit card at the merchant.  There is far greater risk to you from a compromised debit card.  If your debit card is compromised, funds can quickly be withdrawn from your bank account without your knowledge.  Your bank account can be emptied, resulting in overdrafts, fees, and an inability to obtain cash or pay your bills.  On the other hand, if you used a credit card, you will have an opportunity to dispute any fraudulent transactions before you have to pay the bill, so you will still retain access to the funds in your bank account.  You can learn more about the risks of debit cards by reading PRC’s Fact Sheet 32: Paper or Plastic: What Have You Got to Lose?

After you determine the type of payment card that you may have used at the breached retailer, here are some steps that you can take to reduce the risk of fraudulent activity:

  • Ask your card issuer to cancel your current card and reissue the card with a new account number.  They are not required to do so, and there may be a charge for the replacement card.  However, this is especially important if you have used a debit card at the breached entity.
  • Carefully monitor all your account transactions online.
  • If your card issuer offers it, set up text or email alerts of any activity. 
  • Make sure that your account statements arrive in your mailbox at their normal time.  Consider setting up access to online statements, with email notification from the card issuer when your statement is ready for viewing.
  • If you become aware of any fraudulent transactions, immediately call your financial institution and follow up by formally disputing the transaction in writing.
  • Be suspicious of any email or phone call that you might receive about the breach that requests personal information.

5.  Breaches involving an existing financial account 

If the breach involves an existing financial account, such as a checking, savings, money market, or brokerage account, here are some steps that you can take to reduce the risk of fraudulent activity:

  • Ask your financial institution to cancel your account and issue it with a new account number. 
  • Carefully monitor all your account transactions online.
  • If your financial institution offers it, set up text or email alerts of any activity. 
  • Make sure that your account statements arrive in your mailbox at their normal time.  Consider setting up access to online statements, with email notification from the card issuer when your statement is ready for viewing.
  • If you become aware of any fraudulent transactions, immediately call your financial institution and follow up by formally disputing the transaction in writing.
  • Be suspicious of any email or phone call that you might receive about the breach that requests personal information.

6. Breaches involving your driver's license number or another government-issued ID document

If you are notified of a breach involving your driver's license or another government document, contact the agency that issued the document and find out what it recommends in such situations. You might be instructed to cancel the document and obtain a replacement. Or the agency might instead "flag" your file to prevent an imposter from getting a license in your name.

7. Breaches involving your Social Security number (SSN)

 If the breach involved disclosure of your Social Security number (SSN), a fraudster could use that information to open new accounts in your name. This is called "new account fraud". You will not immediately know of the new accounts because criminals usually use an address other than your own for the account. Since you will not be receiving the monthly account statements, you are likely to be unaware that the accounts have been opened in your name. 

That is why it is so important to immediately place a fraud alert on your  credit reports when you learn that your SSN has been compromised, and then to monitor your credit reports on an ongoing basis. A security freeze provides even more protection than a fraud alert.  In fact, a security freeze can provide the greatest protection from identity theft.

The next 5 sections (Sections 8-12) of this guide provide instructions on how to establish fraud alerts, order and monitor your credit reports, and place a freeze on your credit reports.

 8. Notify the credit bureaus and establish a fraud alert

Immediately contact the fraud department of any one of the three credit reporting agencies -- Experian, Equifax, or TransUnion to request a fraud alert. When you request a fraud alert from one bureau, it will notify the other two for you. Your credit file will be flagged with a statement that says you may be a victim of fraud and that creditors should take additional steps to verify your identity before extending credit.  The federal Fair Credit Reporting Act (FCRA) enables you to place an initial fraud alert for 90 days.  The fraud alert may be renewed on the 91st day for another 90 days. You can continue to renew a fraud alert indefinitely. You may cancel the fraud alerts at any time. 

If you do become a victim of identity theft, you can obtain an “extended fraud alert” that will be in effect for seven (7) years.

Members of the military can place an active duty fraud alert on their credit reports for one year if they are away from their usual duty station. The Federal Trade Commission explains this type of fraud alert at http://www.consumer.ftc.gov/articles/0273-active-duty-alerts.

9. Order your credit reports

When you establish the fraud alert, you will receive a follow-up letter from each credit bureau. Each letter explains how you can order a free copy of your credit report from that credit bureau. We suggest that you take advantage of this offer and order your credit reports soon. If you are a victim of identity theft, you will see evidence of it on your credit report. Surveys have found that the sooner individuals learn of identity theft, the more quickly they can clean up their credit reports and regain their financial health.

When you order your free credit report after establishing a fraud alert, your additional right to order free annual credit reports through www.annualcreditreport.com  will not be affected.

                       10. Examine your credit reports carefully

When you receive your credit reports, look for signs of fraud such as credit accounts that are not yours. Check if there are numerous inquiries on your credit report. If a thief is attempting to open up several accounts, an inquiry will be listed on your credit report for each of those attempts. Usually identity thieves do not succeed in opening all of the accounts that they apply for, only some. So multiple inquiries that you yourself have not generated are a sign of potential fraud. Also, check that your SSN, address(es), phone number(s), and employment information are correct.

If your credit report indicates you are a victim of identity theft, you will want to immediately take steps to remove the fraudulent accounts. Read our Fact Sheet 17a: Identity Theft: What to Do if It Happens to You for instructions.  Also see the Federal Trade Commission's identity theft web site at http://www.consumer.ftc.gov/features/feature-0014-identity-theft .

Report fraudulent accounts and erroneous information by writing to the credit bureaus and the credit issuers following the instructions provided with the credit reports. The FTC's identity theft guide provides a sample letter to send to the credit bureaus requesting that fraudulent accounts be removed (scroll down to page C-1 to find the letter).

In all communications with the credit bureaus, you will want to refer to the unique identification number assigned to your credit report and mail items certified, with return receipt requested. Be sure to save all credit reports as part of your fraud documentation.

11. Continue to monitor your credit reports

Be aware that these measures may not entirely stop new fraudulent accounts from being opened by an imposter. Credit issuers do not always pay attention to fraud alerts, even though federal law now requires it. Once you have received the first free copy of your credit report, follow up in a few months and order another.

Every consumer (whether or not a victim of identity theft) can receive one free credit report every 12 months from each of the three national credit bureaus. This is over and above the free credit report that you can request upon establishing a fraud alert. See the Resources at the end of this guide for information on how to order your free report.

In addition, laws in several states give individuals other opportunities to obtain free credit reports. For victims who live in California, you can get one free report each month for the first 12 months upon request. (California Civil Code 1785.15.3) And in seven states, whether a victim or not, you can receive a free credit report each year under state law, over and above the free report you can receive yearly under federal law. These states are: Colorado, Georgia (2 per year), Maine, Maryland, Massachusetts, New Jersey, and Vermont.   To read more:  http://money.msn.com/credit-rating/get-extra-credit-reports-for-free.aspx

12. Consider a security freeze

A security freeze provides the greatest protection from identity theft.  It is stronger than a fraud alert because it prevents anyone from accessing your credit file until and unless you authorize the credit bureaus to release your report. (Note that it does not affect existing accounts). Be aware that this might be inconvenient if you will be applying for new credit, renting an apartment, or seeking employment involving a background check, since you will have to lift the freeze on your credit file for these situations. Generally, you can request that it be lifted for a certain period of time, or for a specific creditor.

There may be a small fee to place and/or lift the security freeze. In California and in many other states, the security freeze is free to victims of identity theft. Non-victims who wish to place a security freeze may need to pay a fee, depending upon your state of residence.  If there is a fee, it is typically $5-10 to activate the freeze for each credit bureau, and $5-10 lift the freeze per credit bureau.

The three credit bureaus -- Equifax, Experian, and TransUnion -- offer security freezes nationwide.

The California Department of Justice’s Privacy Enforcement and Protection Unit web site provides information on how to establish a security freeze in California: http://www.oag.ca.gov/idtheft/facts/freeze-your-credit

13. Information for Businesses

If you are a business that has experienced a security breach, you can find a list of state security breach notification laws on the website of the National Conference of State Legislatures: www.ncsl.org/issues-research/telecom/security-breach-notification-laws.aspx.  The law firm of Baker Hostetler offers a more comprehensive analysis of state security breach notification laws at http://www.bakerlaw.com/files/Uploads/Documents/Data%20Breach%20documents/State_Data_Breach_Statute_Form.pdf.  It also has an analysis of key issues in these laws at http://www.bakerlaw.com/files/Uploads/Documents/Data%20Breach%20documents/Data_Breach_Charts.pdf.

The California Department of Justice’s Privacy Enforcement and Protection Unit has developed a series of recommended practices. If you are a California company (or state government agency, nonprofit, or educational institution), review its guide, “Recommended Practices on Notice of Security Breach Involving Personal Information” available at http://www.oag.ca.gov/sites/all/files/pdfs/privacy/recom_breach_prac.pdf? . See also:

The International Association of Privacy Professionals' Newsletter, The Privacy Advisor has published an article entitled "How To Prepare for, Respond to and Manage Breaches" (February 24, 2013) available at https://www.privacyassociation.org/publications/2013_03_01_how_to_prepare_for_respond_to_and_manage_breaches.

Additional resources are provided by the following agencies, companies and organizations:

Privacy Rights Clearinghouse

Intersections
Data Breach Consumer Notification Guide (May 2014): http://www.intersections.com/library/Consumer_Notification_Guide_May%202014_Final.pdf
 

 Federal Trade Commission (FTC)
FTC Bureau of Consumer Protection Business Center’s webpage on “Data Security”: http://business.ftc.gov/privacy-and-security/data-security

Open Security Foundation
This all-volunteer organization provides a free list-serve of data breaches. Its website offers a wealth of information and statistics on data breaches worldwide:
www.datalossdb.org/

14.  Resources for Consumers

Order your free credit report.  Whether or not you are a victim of identity theft, take advantage of your free annual credit reports. The official website and toll-free number are listed here. We recommend ordering by telephone, rather than online to avoid look-alike sites that are meant to trick you into ultimately paying for your reports.

Check your ID Score

  • Track the possible misuse of your identity at the free service My ID Score, www.myidscore.com.

Federal Trade Commission (FTC)

Identity Theft Resource Center

California Department of Justice’s Privacy Enforcement and Protection Unit

Privacy Rights Clearinghouse
           
Consumer guides, including ID theft:  www.privacyrights.org/privacy-rights-fact-sheets           
Online Complaint Center: www.privacyrights.org/new-complaint

Copyright © Privacy Rights Clearinghouse. This copyrighted document may be copied and distributed for nonprofit, educational purposes only. For distribution, see our copyright and reprint guidelines. The text of this document may not be altered without express authorization of the Privacy Rights Clearinghouse.


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