Privacy & Information Security Law Blog

On July 26, 2022, the attorneys general of New Jersey, Pennsylvania, Delaware, Maryland, Virginia, Florida and Washington D.C. announced an $8 million multistate settlement with Wawa Inc. that resolves the states’ investigation into a 2019 data breach that compromised approximately 34 million payment cards used by consumers at Wawa stores and fueling locations. 

As of early April, hundreds of millions of workers around the world have been affected by “stay-at-home” or “station-in-place” orders issued by governments in response to the COVID-19 pandemic. To cope, transaction processors are shifting work out of their high-security delivery centers and into the spare bedrooms and home offices of their personnel. That shift creates security challenges that have chief information security officers’ (“CISOs’”) heads spinning. Specifically, special challenges are created when work-from-home (“WFH”) orders affect payment cardholder data that is subject to the Payment Card Industry’s Data Security Standard (“PCI DSS”).

On October 31, 2017, the New York and Vermont Attorneys General (“Attorneys General”) announced a settlement with Hilton Domestic Operating Company, Inc., formerly known as Hilton Worldwide, Inc. (“Hilton”), to settle allegations that the company lacked reasonable data security and waited too long to report a pair of 2015 data breaches, which exposed over 350,000 credit card numbers. The Attorneys General alleged that Hilton failed to maintain reasonable data security and waited more than nine months after the first incident to notify consumers of the breaches, in violation of the states' consumer protection and breach notification laws.

On December 9, 2015, the Federal Trade Commission announced that Wyndham Worldwide Corporation (“Wyndham”) settled charges brought by the FTC stemming from allegations that the company unfairly failed to maintain reasonable data security practices. The case is FTC v. Wyndham Worldwide Corporation, et al. (2:13-CV-01887-ES-JAD) in the U.S. District Court for the District of New Jersey.

Earlier this month, the Payment Card Industry Security Standards Council (“PCI SSC”) published a set of enhanced validation procedures designed to provide greater assurance that certain entities are maintaining compliance with the PCI Data Security Standard (“PCI DSS”) effectively and on a continuing basis. The payment card brands and acquirers will determine which organizations are required to undergo a compliance assessment with respect to these supplemental validation requirements, which are entitled the PCI DSS Designated Entities Supplemental Validation (“DESV”).

On September 13, 2012, the PCI Security Standards Council (“PCI SSC”) issued new guidelines entitled “PCI Mobile Payment Acceptance Security Guidelines” (the “Guidelines”), which outline best practices for mobile payment acceptance security. As we reported in May, the PCI SSC Mobile Working Group published its “At a Glance: Mobile Payment Acceptance Security” fact sheet, detailing how merchants can more securely accept payments on mobile devices.

On May 16, 2012, the PCI Security Standards Council’s (“PCI SSC’s”) Mobile Working Group published its “At a Glance: Mobile Payment Acceptance Security” fact sheet (the “Guidance”), which outlines best practices for securely accepting payments via mobile devices. The Guidance offers merchants practical advice for partnering with a Point-to-Point Encryption (“P2PE”) solution provider and satisfying their PCI Data Security Standard compliance requirements in the context of mobile payment acceptance. The Guidance includes recommendations for maintaining data security throughout the payment lifecycle, including securing account data at the point of capture and using an approved hardware accessory in combination with a validated P2PE solution.

Lush Cosmetics Ltd. (“Lush”) has avoided a monetary penalty for its breach of the UK Data Protection Act 1998.  Instead, the UK Information Commissioner’s Office (the “ICO”) has required Lush to sign an undertaking that obliges the company to “ensure that future customer credit card data will be processed in accordance with the Payment Card Industry Data Security Standard.”

On June 14, 2011, the PCI Security Standards Council’s Virtualization Special Interest Group published its “Information Supplement: PCI DSS Virtualization Guidelines”(the “Guidelines”) to Version 2.0 of the PCI Data Security Standard (“PCI DSS”).  The Guidelines provide context for the application of the PCI DSS to cloud and other virtual environments, and offer at least three critical reminders:

• the PCI DSS applies to cloud environments without exception; 
• critical analysis of the application of the PCI DSS to rapidly evolving cloud offerings is essential to compliance; and
• cloud providers must be prepared to document and contract for necessary controls.

On March 28, 2011, the Briar Group, LLC, owner and operator of several Boston-area bars and restaurants, reached a settlement with Massachusetts Attorney General Martha Coakley regarding the breach of “tens of thousands” of consumers’ payment card information.  The settlement resolves a lawsuit filed in Massachusetts Superior Court alleging that in April 2009 hackers gained access to the Briar Group’s computer systems and misappropriated customer data by installing malcode which was not removed by the company until December of that year.  The complaint further alleged that the Briar Group’s lax data protection practices, such as allowing employees to share computer passwords and failing to secure network wireless connections, put customers’ personal information at risk.

Under a Washington law effective July 1, 2010, certain entities involved in payment card transactions may be liable to financial institutions for costs associated with reissuing payment cards after security breaches.  Designed to encourage the reissuance of payment cards as a means of mitigating harm caused by security breaches, Washington H.B. 1149 applies to three types of entities:  businesses, processors and vendors.  Under the law, a business is an entity that “processes more than six million credit card and debit card transactions annually, and who provides, offers, or sells goods or services to . . . residents of Washington.” A processor is any entity, other than a business, that “directly processes or transmits [payment card] account information for or on behalf of another person as part of a payment processing service.” A vendor is any “entity that manufactures and sells software or equipment that is designed to process, transmit, or store [payment card] account information or that maintains account information that it does not own.”

On January 1, 2010, two important state data security and privacy laws took effect in Nevada and New Hampshire.  The laws create new obligations for most companies that do business in Nevada and for health care providers and business associates in New Hampshire.

A lawsuit that will soon commence in Arizona has the potential to alter the data breach liability landscape by making data security auditors liable for data breaches experienced by the companies they audit.  The case, Merrick Bank Corp. v. Savvis Inc., has its origins in events that began in 2003, when Merrick Bank (“Merrick”) offered to hire CardSystems Solutions (“CardSystems”) to process credit card transactions for its merchant customers.  The offer was contingent upon CardSystems achieving certification under VISA’s Cardholder Information Security Program (“CISP”), which is the predecessor to the Payment Card Industry Data Security Standard (“PCI DSS”).  Savvis audited CardSystems in 2004 and found that it had “implemented sufficient security solutions” and followed “industry best practices.”  VISA certified CardSystems shortly after receiving Savvis’ audit report.  In 2005, CardSystems revealed that it had experienced an information security breach that compromised forty million payment cards.