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Financial Services Law Insights and Observations

NYDFS, mortgage lender reach $1.5 million cyber breach settlement

State Issues State Regulators NYDFS Enforcement Privacy/Cyber Risk & Data Security Settlement Mortgages Data Breach 23 NYCRR Part 500 Bank Regulatory

State Issues

On March 3, NYDFS announced a settlement with a mortgage lender to resolve allegations that the lender violated the state’s cybersecurity regulation (23 NYCRR Part 500) by failing to report it was the subject of a cyber breach in 2019. Under Part 500.17, regulated entities are required to provide timely notice to NYDFS when a cybersecurity event involves harm to customers (see FAQs here). A July 2020 examination revealed that the cyber breach involved unauthorized access to an employee’s email account, which could have provided access to personal data, including social security and bank account numbers. NYDFS also claimed that the lender allegedly failed to implement a comprehensive cybersecurity risk assessment as required by 23 NYCRR Part 500. Under the terms of the consent order, the lender will pay a $1.5 million civil monetary penalty, and will make further improvements to strengthen its existing cybersecurity program to ensure compliance with 23 NYCRR Part 500. NYDFS acknowledged that the mortgage lender had controls in place at the time of the cyber incident and implemented additional controls since the incident. NYDFS also acknowledged the mortgage lender’s “commendable” cooperation throughout the examination and investigation and stated that the lender had demonstrated its commitment to remediation.

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