What are the Legal Consequences of Failing to Protect Consumer Data?

man checking on data in tablet

In September 2017, Equifax, one of the three largest credit reporting agencies in the United States, announced that it had suffered a data breach. The personal information of over 140 million people, including Social Security numbers, addresses, and birthdates, was compromised. This breach is believed to have occurred due to a website vulnerability exploited by hackers.

Businesses collect and store large amounts of consumer data. It is their responsibility to protect this data from potential cyber threats. In today’s digital world, business owners have various options when it comes to data security. However, with so many options available, it can be challenging to determine which solution is the best for your business. This is where reliable data privacy consultants come in. These consultants are experts in data security and can help you select the right solutions for your business. They help develop comprehensive data privacy strategies that consider the type of data you have, the way it is collected, and how it is stored. In addition, they can also help you assess the potential risks associated with your data and develop a plan to mitigate these risks.

So, what happens if a business fails to adequately protect consumer data? Below, we’ll explore the legal consequences businesses may face if they fail to take measures to protect consumer data. Unfortunately, as countless high-profile data breaches have shown, many companies fail to safeguard consumer information adequately. And the consequences of these lapses can be severe.

What is a data breach?

A data breach occurs when personal information is stolen or exposed without the individual’s consent. This can happen when hackers gain access to a company’s systems or when a company improperly stores or handles consumer data. Data breaches can have serious legal consequences for both businesses and individuals.

Consequences for Companies

Data breaches can result in significant financial penalties for companies. In 2018, for example, Facebook was fined $644 million by the U.K.’s Information Commissioner’s Office (ICO) for failing to protect the personal data of 87 million users. And in 2019, Google was hit with a $170 million fine from the U.S. Federal Trade Commission (FTC) for violating children’s privacy laws. These are just two examples of the multimillion-dollar fines regulators have levied against companies in recent years for failing to protect consumer data.

stressed business owner due to data breach

In addition to monetary penalties, companies that experience data breaches also often suffer reputational damage that can take years to recover. For example, the Equifax data breach—one of the largest in history—still ripple effects on the company more than two years later. In 2019, Equifax agreed to pay up to $650 million in fines and restitution after exposing the personal data of 147 million people. The company has since been accused of mishandling the fallout from the breach and faces multiple lawsuits from consumers, shareholders, and state attorneys general.

Loss of Consumer Confidence May Lead to Loss of Business

In addition to investigations and lawsuits, businesses that fail to protect consumer data risk losing consumer confidence and trust. Once consumers lose faith in a business’s ability to keep their personal information safe from cyber threats, it can be difficult (if not impossible) to regain that trust. This loss of confidence may lead consumers to take their business elsewhere, resulting in a significant loss of revenue for the affected business.

Consequences for Individuals

While companies are usually the ones facing legal fallout from data breaches, individuals whose personal information is exposed can also suffer consequences. Sometimes, stolen data may be used to commit identity theft or fraud. Victims struggle to recover their finances and repair their credit scores. In other cases, leaked sensitive information—such as medical records—can lead to embarrassment or discrimination.

Protecting your data

There are several steps businesses can take to protect consumer data. For instance, implementing strong security measures, such as firewalls and encryption, can help to safeguard data from cyber attacks. This provides a higher level of security for both businesses and consumers. Additionally, developing comprehensive data privacy policies and procedures can help ensure that data is appropriately collected, stored, and used.

Ensuring that your business has adequate data protections in place is not only crucial for protecting consumers—it’s also critical for avoiding the legal consequences that can result from a data breach. By taking measures to safeguard consumer data, businesses can help avoid the significant financial and reputational damages resulting from a breach.

The bottom line

Data breaches can have serious legal consequences for both companies and individuals alike. Companies may be fined millions of dollars by regulators, while individuals may suffer financial losses or damage to their reputations due to stolen data. Being proactive in protecting consumer data can help businesses avoid these negative outcomes. Failing to do so could result in serious financial and reputational damage.

Expanding knowledge in legal matters is possible with a few clicks. Get access to various legal insights and stay informed to make better decisions.

Scroll to Top