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Cord Blood Bank Settles with FTC Over Alleged Breach Involving 300,000

January 30, 2013
by Rajiv Leventhal
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The operator of Cbr Systems, Inc., a cord blood bank based in San Bruno, Calif., agreed to settle Federal Trade Commission (FTC) charges that it failed to protect the security of customers’ personal information, and that its inadequate security practices contributed to a breach that exposed Social Security numbers and credit and debit card numbers of nearly 300,000 consumers.

 “The FTC can and will take action to make sure that companies live up to the privacy promises they make to consumers, particularly when it comes to highly sensitive information like the health information collected by Cbr,” FTC chairman Jon Leibowitz said in a statement. “The exposure of this information has the potential to cause real harm to consumers.”          

Cbr Systems is a leading provider of umbilical cord blood and umbilical cord tissue banking services.  Consumers pay to preserve and store a newborn’s cord blood and cord tissue because they contain stem cells, the use of which researchers are investigating to treat some diseases and conditions.

In its privacy policy, according to an FTC statement, Cbr claimed that “[w]henever CBR handles personal information, regardless of where this occurs, CBR takes steps to ensure that your information is treated securely and in accordance with the relevant Terms of Service and this Privacy Policy. . . . ” 

According to the FTC, Cbr failed to use reasonable and appropriate procedures for handling customers’ personal information, making its privacy policy claim deceptive under the FTC Act.  According to the complaint, Cbr did not have reasonable policies and procedures to protect the security of information it collected and maintained.  In addition, Cbr allegedly created unnecessary risks to personal information by, among other things, transporting backup tapes, a thumb drive, and other portable data storage devices containing personal information in a way that made the information vulnerable to theft.  According to the FTC, Cbr also failed to take sufficient measures to prevent, detect, and investigate unauthorized access to computer networks.

The settlement is part of the FTC’s ongoing efforts to protect the security and confidentiality of consumers’ sensitive health and financial information.  It requires Cbr to establish and maintain a comprehensive information security program and submit to security audits by independent auditors every other year for 20 years.  The settlement also bars Cbr from misrepresenting its privacy and security practices.     

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