Identity Theft Lawsuits
I firmly believe that class action identity theft lawsuits are going to increase in the very near future. By this statement, I don’t mean to ignore the existence of past and currently pending identity theft legal cases against companies, but rather the future identity theft lawsuit cases will be a) more frequent, b) large, well publicized and costly, c) commonly inflicted upon companies of all sizes but especially the ones who stand to lose the most, and, d) most often won against the companies.
There are many factors which have led me to conclude my opinion on this emerging business threat for most companies. I use the term emerging for many reasons but most importantly because a) based on the 2008 security incident statistics, the crime of identity theft is on the rise, b) the security incidents appear to be repetitive in nature caused by the same reckless practices of companies, their employees and third party service providers, c) the impact of the crime in terms of the number of victims and financial losses is huge, d) consumers are outraged, e) the various governments and regulators are paying attention, and f) lawyers are always looking for opportunities to expand their business.
The recent identity theft regulations such as the Red Flags Rules which are just an extension of the existing FACT Act, appear to be supporting the consumer outrage which have forced the regulators to take action following many highly publicized identity security breaches. Although, identity theft laws appear to be offered in piecemeal at the Federal and State levels, I expect these regulations to be consolidated over time and impact all segments beyond the typical industries such as healthcare and financial services. Thus far, only certain institutions such as banks were impacted by identity theft regulations, but the laws are changing to impact companies of all sizes, segments and industries such as all creditors who collect the personal information of their customers whether they're extending credit to sell insurance, car, or a boat. The downward state of the economy has also a lot to do with the consumer rationalization to commit fraud as well as excessive cost consciousness on the part of companies to ignore control weaknesses in their environment leading to repeated security incidents which could have been prevented in most cases. At the end, such rationalizations on the part of both consumers and businesses to respectively commit fraud and ignore preventive measures to protect consumer and employee identities will come back to bite all of us as costs related to fraud and identity theft lawsuits are always passed on to consumers. That being said, I also believe that companies which understand the long term risks of identity theft and take actions to properly manage their identity theft risks will have a competitive and leadership advantage against their industry peers as they will gain increasing trust of customers and reduce their long term identity theft cost by being proactive.
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