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Financial Services Law Insights and Observations


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  • Final CCPA regulations approved: Overview of changes

    State Issues

    On August 14, the California attorney general announced that the Office of Administrative Law (OAL) approved the final regulations under the California Consumer Privacy Act (CCPA). As previously covered by InfoBytes, the CCPA—enacted in June 2018 (covered by a Buckley Special Alert) and amended several times—became effective January 1. While the regulation package was under review by the OAL, the California attorney general made certain “nonsubstantial changes” and “changes without regulatory effect” to the CCPA regulations, which are outlined here (Buckley created redline available here). Under the OAL’s regulations, changes are considered “nonsubstantial” if they clarify without materially altering the requirements, rights, responsibilities, conditions, or prescriptions contained in the original text. Changes are considered to be “without regulatory effect” if they involve renumbering or relocating a provision, revising structure, syntax, grammar or punctuation, and, subject to certain conditions, making a provision consistent with statute.

     Among others, the following nonsubstantial changes were made to the final regulations:

    • The shorthand phrase “Do Not Sell My Info” was removed from several sections in order for the language to track the statute (i.e. “Do Not Sell My Personal Information”).
    • The requirement in Section 999.308(c)(1)(e) that the identification of sources from which personal information is collected “be described in a manner that provides consumers a meaningful understanding of the information being collected” in the privacy policy has been removed but the categories of sources still must be identified.
    • The severability provision, formerly in Section 999.341 was deleted as unnecessary. This provision previously stated: “If any article, section, subsection, sentence, clause or phrase of these regulations contained in this Chapter is for any reason held to be unconstitutional, contrary to statute, exceeding the authority of the Attorney General, or otherwise inoperative, such decision shall not affect the validity of the remaining portion of these regulations.” (formerly § 999.341).

    Additionally, the following requirements were deleted from the regulations at this time, although the California attorney general has indicated that these provisions may be resubmitted “after further review and possible revisions”:

    • The requirement, formerly in Section 999.305(a)(4), that the business notify and obtain explicit consent from a consumer to use the consumer’s personal information for a purpose materially different than those disclosed in the notice at collection.
    • The requirement, formerly in Section 999.306(b)(2), that a business that substantially interacts with consumers offline must provide a notice to the consumer offline to facilitate their awareness of the right to opt-out.
    • The requirement in Section 999.315(c) that the business’s methods for submitting the request to opt-out must “be easy for consumers to execute” and “require minimal steps to allow the consumer to opt-out.”
    • The provision, formerly in Section 999.326(c), permitting a business to deny a request from an authorized agent if the agent fails to submit proof of authorization from the consumer.

    The final regulations became effective on August 14, 2020.

    State Issues State Attorney General CCPA Regulation Consumer Protection Privacy/Cyber Risk & Data Security

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  • Arkansas Securities Department extends work-from-home guidance

    State Issues

    On August 18, the Arkansas Securities Department further extended interim regulatory guidance previously issued to licensed mortgage companies, mortgage loan officers, and branch managers. The original interim regulatory guidance, previously covered here, and extended in May, permits mortgage loan officers to conduct activities requiring a license from home, provided certain data security provisions are met. This guidance is extended through the duration of the emergency declared by the governor of Arkansas.

    State Issues Covid-19 Arkansas Securities Licensing Mortgages Mortgage Licensing Privacy/Cyber Risk & Data Security

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  • Final CCPA regulations approved

    State Issues

    On August 14, the California attorney general announced that the Office of Administrative Law (OAL) approved the final regulations under the California Consumer Privacy Act (CCPA). As previously covered by InfoBytes, the CCPA—enacted in June 2018 (covered by a Buckley Special Alert) and amended several times—became effective January 1. The proposed final regulations were submitted to OAL on June 1 and were “nonsubstantially changed” during OAL’s review process for “accuracy, consistency, and clarity.” The final regulations are effective as of August 14.

    The final regulations set forth guidance regarding compliance with the CPPA, including requirements related to the various required notices under the CCPA (e.g., Notice at Collection, privacy policy, etc.), business practices for handling consumer requests (e.g., methods for submitting and responding to requests to know and requests to delete), service providers, training and recordkeeping, verification of requests, special rules for minors, and nondiscrimination requirements.

    For a detailed overview of the regulations, see here (the InfoByte details an earlier version of the regulations, which remain substantially unchanged).  Details discussing the nonsubstantial changes available by InfoBytes here.

    State Issues State Attorney General CCPA Regulation Consumer Protection Privacy/Cyber Risk & Data Security

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  • FTC continues to enforce Privacy Shield

    Privacy, Cyber Risk & Data Security

    On August 5, the FTC Commissioners testified before the Senate Committee on Commerce, Science, and Transportation and discussed, among other things, the agency’s continued enforcement of the EU-U.S. Privacy Shield, despite the recent Court of Justice of the European Union (CJEU) invalidation of the framework, and their interest in federal data privacy legislation. As previously covered by InfoBytes, in July, the CJEU determined that because the requirements of U.S. national security, public interest and law enforcement have “primacy” over the data protection principles of the EU-U.S. Privacy Shield, the data transferred under the EU-U.S. Privacy Shield would not be subject to the same level of protections prescribed by the EU General Data Protection Regulation, and thus, declared the EU-U.S. Privacy Shield invalid.

    In his opening remarks, Commissioner Simons emphasized that the FTC will “continue to hold companies accountable for their privacy commitments, including privacy promises made under the Privacy Shield,” which the FTC has also noted on its website. Additionally, Simons urged Congress to enact federal privacy and data security legislation, that would be enforced by the FTC and give the agency, among other things, the “ability to seek civil penalties” and “targeted [Administrative Procedures Act] rulemaking authority to ensure that the law keeps pace with changes and technology in the market.” Moreover, Commissioner Wilson agreed with a senator’s proposition that the enactment of a preemptive federal privacy framework would make “achieving a future adequacy determination by the E.U. easier.”

    Privacy/Cyber Risk & Data Security FTC Courts GDPR European Union EU-US Privacy Shield

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  • District court approves MDL data breach settlement


    On July 21, the U.S. District Court for the Northern District of California issued an order approving a $117.5 million class action settlement, including $23 million in attorneys’ fees, with a global internet company to resolve multidistrict litigation concerning the exposure of class members’ sensitive information stemming from multiple data breaches. The settlement approval follows a fairness hearing, as the court originally denied preliminary approval due to several identified deficiencies (covered by InfoBytes here), including that the settlement inadequately disclosed the sizes of the settlement fund and class, as well as the scope of non-monetary relief, and “appear[ed] likely to result in an improper reverter of attorneys’ fees.” Last July, the court preliminarily signed off on a revised settlement, conditionally certifying a class of U.S. and Israeli residents and small businesses with accounts between 2012 and 2016 that were affected by the breaches. These class members have been certified in the final approved settlement, which requires the company to provide class members with either two years of credit monitoring services or alternative compensation for members who already have credit monitoring. Among other things, the company will allocate at least $66 million each year to its information security budget until 2022, will increase the number of full-time security employees from current levels, and will “align its information security program with the National Institute of Standards and Technology Cybersecurity Framework” and “undertake annual third-party assessments to ensure compliance” with the framework.

    Courts MDL Settlement Attorney Fees Class Action Data Breach Privacy/Cyber Risk & Data Security

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  • NYDFS enforces its cybersecurity regulation for the first time

    State Issues

    On July 22, NYDFS filed a statement of charges against a title insurer for allegedly failing to safeguard mortgage documents, including bank account numbers, mortgage and tax records, and other sensitive personal information. This is the first enforcement action alleging violations of NYDFS’ cybersecurity regulation (23 NYCRR Part 500), which took effect in March 2017 and established cybersecurity requirements for banks, insurance companies, and other financial services institutions. (See InfoBytes coverage on NYDFS’ cybersecurity regulation here.) Charges filed against the company allege that a “known vulnerability” in the company’s online-based data storage platform was not fixed, which allowed unauthorized users to access restricted documents from roughly 2014 through 2019 by changing the ImageDocumentID number in the URL. Although an internal penetration test (i.e., an authorized simulated cyberattack) discovered the vulnerability in December 2018, NYDFS claims that the company did not take corrective action until six months later, when a well-known journalist publicized the problems.

    The company allegedly violated six provisions of 23 NYCRR Part 500, including failing to (i) conduct risk assessments for sensitive data stored or transmitted within its information systems; (ii) maintain appropriate, risk-based policies governing access controls to sensitive data; (iii) limit user-access privileges to information systems providing access to sensitive data, or periodically reviewing these access privileges; (iv) implement a risk assessment system to sufficiently identify the availability and effectiveness of controls for protecting sensitive data and the company’s information system; (v) provide adequate data security training for employees and affiliated title agents responsible for handling sensitive data; and (vi) encrypt sensitive documents or implement suitable controls to protect sensitive data. Additionally, NYDFS maintains that, among other things, the company misclassified the vulnerability as “low” severity despite the magnitude of the document exposure, failed to investigate the vulnerability within the timeframe dictated by the company’s internal cybersecurity policies, and did not conduct a reasonable investigation into the exposure or follow recommendations made by its internal cybersecurity team.

    A hearing is scheduled for October 26 to determine whether violations occurred for the company’s alleged failure to safeguard consumer information.

    State Issues Privacy/Cyber Risk & Data Security Title Insurance Mortgages 23 NYCRR Part 500 NYDFS Enforcement

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  • FCC provides safe harbors for blocking illegal robocalls

    Privacy, Cyber Risk & Data Security

    On July 16, the FCC issued an order adopting rules to further encourage phone companies to block illegal and unwanted robocalls and to continue the Commission’s implementation of the TRACED Act (covered by InfoBytes here). The rule establishes two safe harbors from liability for the unintended or inadvertent blocking of wanted calls: (i) voice service providers will not be held liable under the Communications Act and FCC rules on terminating voice service providers that block calls, provided “reasonable analytics,” such as caller ID authentication information, are used to identify and block illegal or unwanted calls; and (ii) voice service providers will not be held liable for blocking calls from “bad-actor upstream voice service providers that continue to allow unwanted calls to traverse their networks.” The FCC’s order also includes a Further Notice of Proposed Rulemaking seeking comments on, among other things, “whether to obligate originating and intermediate providers to better police their networks against illegal calls,” whether the “reasonable analytics” safe harbor should be expanded “to include network-based blocking without consumer opt-out,” and whether the Commission should adopt more extensive redress requirements, and require terminating providers to provide consumers information about blocked calls.

    Privacy/Cyber Risk & Data Security FCC Robocalls TRACED Act

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  • Court of Justice of the European Union invalidates EU-U.S. Privacy Shield; standard contractual clauses survive (for now)

    Privacy, Cyber Risk & Data Security

    On July 16, 2020, the Court of Justice of the European Union (CJEU) issued its opinion in the Schrems II case (Case C-311/18). In its opinion, the CJEU concluded that the Standard Contractual Clauses issued by the European Commission for the transfer of personal data to data processors established outside of the EU are valid. However, the Court invalidated the EU-U.S. Privacy Shield. The ruling cannot be appealed.


    In 2015, a privacy campaigner named Max Schrems filed a complaint with Ireland’s Data Protection Commissioner challenging a global social media company’s use of data transfers from servers in Ireland to servicers in the U.S. Schrems argued that U.S. laws did not offer sufficient protection of EU customer data, that EU customer data might be at risk of being accessed and processed by the U.S. government once transferred, and that there was no remedy available to EU individuals to ensure protection of their personal data after transfer to the U.S. Schrems sought the suspension or prohibition of future data transfers, which were executed by the company through standard data protection contractual clauses (a method approved by the Court in 2010 by Decision 2010/87). The social media company had utilized these standard contractual clauses after the CJEU invalidated the U.S. – EU Safe Harbor Framework in 2015.

    Following the complaint, Ireland’s Data Protection Commissioner brought proceedings against the social media company in the Irish High Court, which referred numerous questions to the CJEU for a preliminary ruling, including questions addressing the validity of the standard contractual clauses and the EU-U.S. Privacy Shield.

    CJEU Opinion – Standard Contractual Clauses (Decision 2010/87)

    Upon review of the recommendations from the CJEU’s Advocate General published on December 19, 2019, the CJEU found the Decision approving the use of contractual clauses to transfer personal data valid.

    The CJEU noted that the GDPR applies to the transfer of personal data for commercial purposes by a company operating in an EU member state to another company outside of the EU, notwithstanding the third-party country’s processing of the data under its own security laws. Moreover, the CJEU explained that data protection contractual clauses between an EU company and a company operating in a third-party country must afford a level of protection “essentially equivalent to that which is guaranteed within the European Union” under the GDPR. According to the CJEU, the level of protection must take into consideration not only the contractual clauses executed by the companies, but the “relevant aspects of the legal system of that third country.”

    As for the Decision 2010/87, the CJEU determined that it provides effective mechanisms to, in practice, ensure contractual clauses governing data transfers are in compliance with the level of protection requirement by the GDPR, and appropriately requires the suspension or prohibition of transfers in the event the clauses are breached or unable to be honored. The CJEU specifically highlighted the certification required by the EU data exporter and the third-party country recipient to verify, prior to any transfer, (i) the level of data protection in the third-party country prior to any transfer; and (ii) abilities to comply with the data protection clauses.

    CJEU Opinion - EU-U.S. Privacy Shield, (Decision 2016/1250)

    The CJEU decided to examine and rule on the validity of the EU – U.S. Privacy Shield. The CJEU determined that because the requirements of U.S. national security, public interest and law enforcement have “primacy” over the data protection principles of the EU-U.S. Privacy Shield, the data transferred under the EU-U.S. Privacy Shield would not be subject to the same level of protections prescribed by the GDPR. Specifically, the CJEU held that the surveillance programs used by U.S. authorities are not proportionally equivalent to those allowed under the EU law because they are not “limited to what is strictly necessary,” nor, under certain surveillance programs, does the U.S. “grant data subjects actionable rights before the courts against the U.S. authorities.” Moreover, the CJEU rejected the argument that the Ombudsperson mechanism satisfies the GDPR’s right to judicial protection, stating that it “does not provide any cause of action before a body which offers the persons whose data is transferred to the United States guarantees essentially equivalent to those required by [the GDPR],” and the Ombudsperson “cannot be regarded as a tribunal.” Thus, on those grounds, the CJEU declared the EU-U.S. Privacy Shield invalid.

    Privacy/Cyber Risk & Data Security GDPR European Union Of Interest to Non-US Persons EU-US Privacy Shield

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  • District court allows data breach claim to proceed against national credit reporting agency


    On July 8, the U.S. District Court for the Eastern District of New York allowed a consumer’s claim under New York’s consumer protection law (N.Y. G.B.L. § 349) to proceed against a national credit reporting agency (CRA) for grievances stemming from a 2017 data breach that compromised the consumer’s personal information. According to the opinion, the consumer alleged that the CRA, among other things, failed to “implement security and privacy measures to safeguard plaintiff’s sensitive information and misrepresented to him that his personal data would be protected from outside threats.” The CRA had previously entered into a class action settlement concerning the data breach and resolved hundreds of data breach cases brought against the company; however, the consumer opted out of that nationwide class action. The CRA moved to dismiss the consumer’s action, arguing, among other things, that data breach claims are not actionable under N.Y. G.B.L. § 349. While the court granted the CRA’s motion as to the consumer’s FCRA claim, the court denied the CRA’s request to dismiss the consumer’s claim under N.Y. G.B.L. § 349. Specifically, the court concluded that the consumer plausibly alleged the CRA misrepresented its ability to protect the consumer’s personal information, which “resulted in actual and pecuniary harm after [the consumer]’s identity was stolen and numerous unauthorized accounts were opened under his name.” The court distinguished this claim from the consumer’s FCRA claim, which asserted the CRA failed to “shield” the consumer’s information from the hackers, whereas the N.Y. G.B.L. § 349 claim rests on the CRA’s representations of protection.

    Courts Privacy/Cyber Risk & Data Security Credit Report Credit Reporting Agency Data Breach

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  • California AG publishes CCPA FAQs

    Privacy, Cyber Risk & Data Security

    The California attorney general recently published a set of frequently asked questions providing general consumer information on the California Consumer Privacy Act (CCPA). The CCPA—enacted in June 2018 (covered by a Buckley Special Alert) and amended several times—became effective January 1. Final proposed regulations were submitted by the AG last month as required under the CCPA’s July 1 statutory deadline (covered by InfoBytes here), and are currently with the California Office of Administrative Law for review. The FAQs—which will be updated periodically and do not serve as legal advice, regulatory guidance, or as an opinion of the AG—are intended to provide consumers guidance on exercising their rights under the CCPA.

    • General CCPA information. The FAQs address consumer rights under the CCPA and reiterate that these rights apply only to California residents. This section also clarifies the definition of “personal information,” outlines businesses’ compliance thresholds, and states that the CCPA does not apply to nonprofit organizations and government agencies. The FAQs also remind consumers of their limited ability to sue businesses for CCPA violations and details the conditions that must be met before a consumer may sue a business for a data breach. The FAQs remind consumers that if they believe a business has violated the CCPA, they may file a complaint with the AG’s office.
    • Right to opt-out of sale. The FAQs answer common questions related to consumers’ requests for businesses not to sell their personal information. The FAQs provide information on the steps for submitting opt-out requests, as well as explanations for why a business may deny an opt-out request. It also address circumstances where a consumer receives a response from a service provider that says it is not required to act on an opt-out request.
    • Right to know. The FAQs discuss a consumer’s right to know what personal information is collected, used, shared, or sold, and clarifies what consumers should do to submit requests to know, how long a business may take to respond, and what steps should be taken if a business requests more information, denies a request to know, or claims to be a service provider that is not required to respond.
    • Required notices. The FAQs outline the disclosures that businesses must provide - i.e., the “notice at collection” and privacy policy. It also discusses the common places where notices at collection and privacy policies are located.
    • Request to delete. The FAQs address several questions related to consumers’ right to delete personal information, including how to submit a request to delete, businesses’ responses to and denials of requests to delete, and why a debt collector may make an attempt to collect a debt or a credit reporting agency may provide credit information even after a request to delete has been made.
    • Right to non-discrimination. Consumers are reminded that a business “cannot deny goods or services, charge. . .a different price, or provide a different level or quality of goods or services just because [a consumer] exercised [his or her] rights under the CCPA.”
    • Data brokers. The FAQs set forth the definition of a data broker under California law and outline steps for consumers interested in finding data brokers that collect and sell personal information, as well as measures consumers can take to opt-out of the sale of certain personal information.

    Privacy/Cyber Risk & Data Security State Issues CCPA California State Attorney General Opt-Out Disclosures

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