Manatt Financial Services Leader Scott Pearson was quoted in a Law360 article about a recent data breach at the Consumer Financial Protection Bureau that involved dozens of financial institutions and potentially hundreds of thousands of customers’ information.
The breach stemmed from an unnamed examiner forwarding confidential supervisory information that included customer information to a personal inbox. The CFPB did not acknowledge the breach until two months after it occurred and after it was reported by the Wall Street Journal. Pearson said the lack of transparency is major a blow to the CFPB’s credibility.
"No private company would be allowed to behave like this," Pearson said. "That's what's so disturbing about this. You are seeing a double standard."
Though the CFPB has defended its handling of the breach, Pearson and other financial services attorneys have voiced concerns about the number of unanswered questions, including why the Bureau’s networks weren’t more secure to prevent an unauthorized transfer, and concerns over double standards. In the wake of warnings about lax data security possibly qualifying as unlawful and unfair practices and rising tensions between the Bureau and players in the financial industry, Pearson said the CFPB appears to be giving itself more leniency than it does to the organizations it oversees.
"The reality is that data security is challenging for everyone," Pearson said. "But the fact that this happened at the bureau illustrates that perhaps we shouldn't be acting like everyone is strictly liable for everything and perhaps ought to be a little more understanding of what the real world is like."
Pearson also said the Bureau has become increasingly politicized recently, and the CFPB may face increased criticism about the apparent double standard by Congress, as lawmakers have already pointed to the data breach as a manifestation of the Bureau’s lack of accountability.
"The fact that there wasn't any public word of this [breach] until pretty recently is shocking enough," Pearson said. "If a big bank did this, I guarantee you there would be horrific press releases out there talking about how terrible the bank is, how awful its executives are, and how they are hurting all of their customers."
Read the full Law360 article here.