Skip to main content
Menu Icon Menu Icon
Close

InfoBytes Blog

Financial Services Law Insights and Observations

FTC takes action against ed tech provider for lax data security

Federal Issues Privacy, Cyber Risk & Data Security FTC Enforcement FTC Act UDAP COPPA Data Breach Consumer Protection

Federal Issues

On October 31, the FTC announced an administrative action against an education technology (ed tech) provider claiming that the company’s allegedly poor data security practices exposed millions of users and employees’ sensitive information, including Social Security numbers, email addresses, and passwords. According to the FTC’s complaint, due to the company’s alleged failure to adequately protect the personal information collected from its users and employees, the company experienced four data breaches beginning in September 2017, when a phishing attack granted a hacker access to employees’ direct deposit information. Less than a year later, another data breach involved a former employee using login information the company shared with employees and outside contractors to gain access to a third-party cloud database containing personal data for roughly 40 million users. In the following two years, the company experienced two more data breaches through phishing attacks that exposed sensitive employee data, including medical and financial information. Claiming violations of Section 5(a) of the FTC Act, the Commission alleged the company failed to implement basic security measures, stored personal data insecurely, and failed to implement a written security policy until January 2021, despite experiencing three phishing attacks.

Under the terms of the proposed decision and order, the company would be required to take several measures to address the alleged conduct, including (i) documenting and limiting data collection; (ii) providing users access to collected data and allowing them to submit requests for deletion; (iii) implementing multifactor authentication or another authentication method to protect user and employee accounts; and (iv) implementing a comprehensive information security program that would encrypt consumer data and provide security training to employees, among other things.

This action is part of the FTC’s ongoing efforts to make sure ed tech providers protect and secure personal data they collect and do not collect more information than necessary. As previously covered by InfoBytes, the FTC issued a policy statement in May warning ed tech providers that they must fully comply with all provisions of the Children’s Online Privacy Protection Act when gathering data about children. The FTC emphasized that ed tech providers may not harvest or monetize children’s data, cannot force children to disclose more information than is reasonably necessary for participating in their educational services, and must have procedures in place to keep the data secure, among other things.

Share page with AddThis