Privacy Lawyer & Attorney : Proskauer Rose Law Firm : CAN-SPAM, FCRA, FACTA

According to a proposed settlement announced by the Federal Trade Commission (“FTC”) on March 27, 2008, discount retailer TJX will be required to implement a comprehensive information security program to remedy deficiencies in protecting sensitive consumer information. If approved, the settlement will resolve allegations that the company engaged in practices that failed to provide reasonable and appropriate security for consumer information. In addition to implementing a comprehensive security program, TJX will be required to obtain periodic security audits to provide reasonable assurances that personal information is being adequately protected.

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On March 4 the FTC announced that a consent agreement has been reached in its 17th case challenging data security practices by a company handling sensitive consumer information. Goal Financial, LLC, a San Diego-based student loan company, has agreed to implement a comprehensive information security program, avoid future misrepresentations about its data security practices, and receive independent, third-party audits of its data security program every two years for the next 10 years. The consent order does not provide for a civil fine.

According to the FTC's Complaint, Goal Financial "failed to provide reasonable and appropriate security for consumers' sensitive personal information" starting no later than September 1, 2004. The company's faulty security practices allowed employees to transfer over 7000 consumer files containing personally identifying information and financial histories to third parties. Additionally, in 2006 a Goal Financial employee allegedly sold company hard drives containing sensitive personal information of approximately 34,000 consumers in readable text.

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The Federal Trade Commission announced on January 17, 2008 that it has agreed in principle to a consent order with Life is good, Inc. and Life is good Retail, Inc. (collectively “Life is good”) resolving allegations that the apparel company collected sensitive information from consumers and failed to secure it in compliance with its own privacy and security policies. The consent order against Life is good, among other things, prohibits future deceptive privacy and security claims and requires the company to implement a comprehensive information security program that includes biennial audits by an independent security professional for the next twenty years.

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On December 18, the FTC announced a settlement in its 15th case (and its first in 13 months) addressing the data security practices of companies handling sensitive consumer information. American United Mortgage Company agreed to pay a $50,000 penalty for failing to implement reasonable safeguards to protect customer information and failing to provide customers with privacy notices.

American United is the first FTC action taken pursuant to the Disposal Rule, promulgated in 2005, of the Fair and Accurate Credit Transactions Act (FACTA) of 2003. The complaint filed in the Northern District of Illinois in mid-December, asserted that the Northbrook, Illinois-based mortgage company disposed of several dozen consumers’ personally identifying information by leaving intact hundreds of documents in a nearby unsecured dumpster, in some cases in open trash bags. Indeed, even after the FTC provided written notice to American United that disposal of documents containing consumers’ personal information in this manner created a risk of unauthorized access, "on at least two occasions, additional intact American United documents containing consumers’ personal information were found in and around the same dumpster adjacent to American United’s office."

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