Cyber Security

New Sheriff in Town?

The Consumer Financial Protection Bureau recently levied a fine in the cyber security realm. It sent a clear warning.
By: | April 4, 2016 • 4 min read

In early March, the Consumer Financial Protection Bureau (CFPB) took action against Dwolla, an online payment platform provider in Des Moines, Iowa, for deceiving consumers about its data security practices and system safety.


For the first time ever, the CFPB, which is authorized under the Dodd-Frank Wall Street Reform and Consumer Protection Act, levied a fine related to protecting consumer data security.

The fine was not earth-shattering, at $100,000. But the action signaled the CFPB’s arrival as a new sheriff in town for protecting consumer data against companies engaged in “unfair, deceptive or abusive acts or practices, or that otherwise violate federal consumer financial laws,” according to the CFPB.

“This way, if you follow the guidelines you can stay off the CFPB’s radar and out of trouble.” — Colin Hite,  practice leader, data privacy and security practice, Hirschler Fleischer

The agency also ordered Dwolla to fix its security practices.

Legal and data security experts say the CFPB’s action further strengthens the need for both strong data security safeguards and for cyber insurance coverage, especially if you are going to handle consumers’ personal data.

Mark Greisinger, president, NetDiligence

Mark Greisinger, president, NetDiligence

“The thing that stands out is this is one more enforcer stepping up to the plate when it comes to cyber risk,” said Mark Greisinger, president at NetDiligence, a cyber risk assessment service that works with insurers that offer cyber coverage.

“They have teeth to enforce the law, but how they are doing it is under unfair and deceptive trade practices,” he said.

“What’s interesting is not only are they a new enforcer, but the CFPB went after Dwolla proactively, before a breach even occurred.”

Richmond, Va.-based Collin J. Hite, practice leader at Hirschler Fleischer’s data privacy and security practice, said it was interesting that the CFPB’s consent order puts the responsibility squarely on Dwolla’s board of directors.

And, he noted, the $100,000 civil fine cannot be paid by cyber insurance, so the CFPB is essentially saying “we will hit you right in the pocketbook when we fine you.”

“It’s gotten people to pay attention,” he said. “This way, if you follow the guidelines you can stay off the CFPB’s radar and out of trouble.”

Sending a Signal


He added that federal agencies assessing fines that are not covered by insurance has been done in the past relating to D&O coverage, but this is the first time he has seen it in the cyber arena.

“The CFPB is clearly sending a signal to the entire marketplace that if the businesses are not going to implement and adhere to best practices, the government will step in and set the standards,” Hite said.

In this case, he said, Dwolla got off relatively lightly and may have benefited from the situation because it forced them to get ahead of the curve. If the enforcement action had come after a data breach, it would have been more expensive, as the cost of post-breach processes, such as credit monitoring can be high.

Jennifer Coughlin, partner, Lewis Brisbois Bisgaard & Smith

Jennifer Coughlin, partner, Lewis Brisbois Bisgaard & Smith

In fact, the silver lining in the legal action taken against Dwolla is that the CFPB recommendations can — and should — be used as a roadmap for all companies.

Many of the necessary steps laid out by the CFPB in its decision are best practices for data security, he said. Companies that are not doing these kinds of security procedures would have a very hard time obtaining cyber insurance in the first place.

Jennifer Coughlin, a partner in Lewis Brisbois Bisgaard & Smith’s Philadelphia office, said the CFPB’s action in Dwolla is in line with the trends her firm has seen over the past decade or so: Regulators are using long-held enforcement power to investigate and seek penalties for violations of consumer protection and data security laws.

Such investigations can result in agreements by the entity to not only pay a fine, but also be under the thumb of the regulator for several years after the agreement is reached, she said.

Aggressive Regulators

Her firm expects that trend will continue, and that there will be an increase in the list of regulators launching inquiries and pursing actions.

“We also predict that these investigations will become more and more aggressive,” she said.

Coughlin said that any business engaging in offering or providing a consumer financial product or service is subject not only to the CFPB, but to other state and federal laws regulating data privacy and security.

She agreed that the Dwolla scenario offered a roadmap for companies regarding protection of consumer data.


Several best practices to follow include ensuring accuracy of external and internal privacy policies, and an organization’s compliance with these representations; maintaining appropriate cyber and other insurance coverage, because a cyber event can spawn E&O and D&O claims, in addition to regulator inquiry and fines and litigation; and closely reviewing all contracts with vendors to ensure appropriate notification and indemnification language is contained those contracts.

“Companies need to understand what is legally required of them and ensure they practice what they preach,” she said. “Preparedness is key.”

Tom Starner is a freelance business writer and editor. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.


That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.


Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]