law

Handling debtor information securely isn’t just good business—it’s legally essential. For collection agencies, failing to protect sensitive debtor data can be disastrous. Here’s what agencies must know about cybersecurity and why it matters:

Compliance Isn’t Optional

Collection agencies are regulated by laws such as the Fair Debt Collection Practices Act (FDCPA) and the Gramm-Leach-Bliley Act (GLBA). These regulations demand stringent data security practices. If an agency doesn’t comply, it could face serious penalties. For example, a violation under the GLBA can lead to fines of up to $100,000 per violation for the agency, and agency officers could be personally fined up to $10,000.

Real Cyber Threats, Real Costs

Debtor data is particularly appealing to cybercriminals. It often contains Social Security numbers, bank account details, and personal contact information. A single breach can expose thousands of individuals’ sensitive data. In one notable incident, a medium-sized collection agency suffered a ransomware attack that compromised over 25,000 debtor accounts. The cost of addressing this breach—including legal fees, notification costs, and settlements—exceeded $1 million.

Protect Your Reputation

A breach doesn’t just mean financial loss; it can severely damage an agency’s reputation. Clients depend on agencies to handle debtor information responsibly. For instance, after experiencing a data leak involving debtor information, a California-based collection firm lost key contracts, amounting to nearly $500,000 in annual revenue. Effective cybersecurity shows clients and debtors alike that your agency is trustworthy and reliable.

Minimizing Risks Through Security Practices

Agencies must take proactive cybersecurity steps. Secure portals, encryption, firewalls, and two-factor authentication (2FA) are foundational security measures. Consider a situation where an employee accidentally emails debtor information without encryption. Such an incident could result in fines ranging from $5,000 to $50,000 per violation under certain state privacy laws, like the California Consumer Privacy Act (CCPA).

Be Prepared to Respond

No cybersecurity strategy is foolproof. Thus, having an incident response plan is crucial. Rapidly addressing breaches can limit damages significantly. Agencies should conduct regular cybersecurity training and periodic audits to identify potential vulnerabilities before they become expensive problems.

Bottom Line

Cybersecurity for collection agencies isn’t just a technical necessity—it’s a vital part of managing risk, maintaining compliance, and safeguarding both finances and reputation.

The California Privacy Rights Act (CPRA) is a privacy law that was approved by California voters in November 2020, and it is set to take effect on January 1, 2023, with enforcement beginning on July 1, 2023. The CPRA builds on the California Consumer Privacy Act (CCPA), which was enacted in 2018, and further enhances privacy protections for California residents. Here are some key provisions and enhancements introduced by the CPRA:

1. Creation of the California Privacy Protection Agency (CPPA): The CPRA establishes a new state agency, the California Privacy Protection Agency, to enforce the law, and issue regulations and guidance.
2. Expanded Rights of Consumers: CPRA expands the existing rights under CCPA and introduces new rights for consumers, such as the right to correct inaccurate personal information, and a broader right to opt-out of not only the sale but also the sharing of personal information for advertising and marketing purposes.
3. Sensitive Personal Information: The CPRA introduces a new category called “sensitive personal information” which includes precise geolocation, race, religion, biometric data, health information, and more. Consumers have the right to limit the use and disclosure of sensitive personal information.
4. Data Minimization and Purpose Limitation: Businesses are required to limit the collection of personal information to what is necessary for the purposes for which it was collected and must specify the purpose for collecting or using personal information.
5. Risk Assessments and Audits: Certain businesses must conduct regular risk assessments and submit cybersecurity audits regarding their processing of consumers’ personal information.
6. Increased Penalties for Violations Involving Children’s Data: The CPRA increases penalties for violations of the law that involve the personal information of minors.
7. Expanded Breach Liability: CPRA expands the private right of action for data breaches to include unauthorized access or disclosure of an individual’s email address combined with a password or security question and answer that would permit access to an account.
8. Service Providers and Contractors: CPRA imposes new obligations on service providers and contractors and requires specific contractual provisions when businesses share personal information with these parties.
9. Exemptions: The CPRA extends certain exemptions, such as those for business-to-business (B2B) and employee data, but they are subject to conditions.
10. International Data Transfers: The CPRA hints at future regulation regarding restrictions on cross-border data transfers, but the specifics have not yet been developed.

Businesses that fall within the scope of the CPRA need to ensure compliance by reviewing and updating their data protection policies, practices, and contracts. Consumers should be aware of their enhanced rights under this law and know how to exercise them.