The day-to-day operations of real estate agents, property managers, and landlords all involve the handling of clients’ sensitive personal information. For this reason, it is essential that all agents take the proper steps in order to protect their clients’ information/identity.
If an agent fails to protect that sensitive information (especially during tenant verification and credit screening), a data breach can occur. And if a data breach does occur, it can be devastating for the victims and for anyone involved.
When a data breach occurs due to your own negligence, it is difficult to ever fully recover.
This is a very real issue for a surprising amount of individuals. According to a study done by Trustwave, small businesses are the victims of 90% of all data breaches. Also, According to first data market insight the average cost of a data breach for a small business is $36,000! That’s not pocket change! Keep in mind that the costs can add up in many ways and can far exceed $36,000 depending how severe the breach is.
The Cost of a Data Breach
Forensic Examination – The Payment Card Industry Data Security Standard requires that all merchants who suspect that their data was breached to go through an examination to see how the breach happened and to what extent. This process can take anywhere from a few days to a couple of months and can cost anywhere from $20,000 to $50,000.
Informing Clients – Most states require that you inform all of your clients if financial information is compromised by a data breach. For example, when the University of North Carolina experienced a data breach in 2013 affecting 6,000 people, it cost the university about $32,000 it cost the university about $32,000to properly notify everyone.
Credit Monitoring – For each client affected you may be required to provide up to a year's worth of credit card monitoring and credit screening services.
Liability Charges – It’s easy to think that you won't be held liable for a data breach because you were not the one conducting illegal activity. However, you can be held liable! You may be faced with several lawsuits due to sloppy tenant verification and credit screening practices.
Time and Energy –Time and energy might be the most exhausting part of a data breach. The amount of time you’ll have to spend dealing with this problem could have gone towards closing more leads and making more money. A data breach will leave you exhausted and drained, making it harder to do your job.
Reputation – Besides everything else you lose, your reputation might be the most valuable and damaging thing at stake. According to a study done by Ponemon , 57% of consumers who were notified by a breach said they had lost complete trust in the company. Another 31% stopped doing business with the company. In another Ponemon study it was found that 75% of the executives whose companies suffered a data breach said that the event caused a significant impact on their professional reputations.
- In our previous post we talked about how word of mouth is the most trusted source of marketing, with a study done by Nielsen saying that 92% of consumers trust recommendations from friends and family over any other source. When 31% of your clients stop doing business with you, you aren’t just losing them, you are also losing their family and friends.
What is Considered Sensitive Information?
Sensitive information is any information that can be used to identify a person. Such as
- First and Last Name
- Social Security Number
- Driver's License Number
- Email Address
- And more...
Although, all of these are considered sensitive information, some are more sensitive than others. For example, a social security number is linked back to only one person. If a SSN were stolen it would be easy for a thief to steal that identity. On the other hand a name is not as sensitive as multiple people could have the same name.
According to a 2017 FICO study, more people were concerned about their identity being stolen rather than their own death. This shows the magnitude of how important it is to keep sensitive information protected, as more people are worried about their identity than their own death.
Data breaches are no joke. So what can you do to reduce your liability?
How to Lower your Risk of a Data Breach
The best way to not have to worry about a data breach is to not collect any personal information. Since that is virtually impossible for a real estate agent, we instead focus on how to protect against a data breach. Minimizing the amount of data that is stored, securing all paperwork, safeguarding computers, and proper tenant verification practices are some effective ways to lower the risk of a data breach.
Minimize the Amount of Data that is Stored – Since it essential for real estate agents to collect sensitive information especially during the tenant verification process, it is crucial for you to keep only what you need. Holding on to more information than necessary makes it more difficult to protect and gives cyber criminals more information to steal. Once the information is no longer needed, it should be disposed of properly. If there are paper documents, identifying information should be blacked out and all papers should be shredded. If information is electronic it should be discarded appropriately. However, be sure you always adhere to your state’s applicable document retention laws and requirements.
Secure all Paperwork – Paperwork that is kept should be protected. Paperwork with sensitive information, such as credit reports should be kept in a locked cabinet in a locked room to defend against theft.
Safeguarding Computers – Information that is stored on computers is an especially susceptible target for data breaches. Agents can protect their digital information by encrypting their computer, having a strong password and changing it often, only collecting and keeping the information they need, install antivirus software, and use secure software to manage sensitive information.
Tenant Verification Service- Tenant verification services, especially those that provide for credit screening, are a crucial way to combat monetary costs and other losses that result from data breaches. Since it is extremely important for agents to to verify all potential renters, it's best for agents to use a tenant verification service. These services allow for the tenants to get verified without the agent ever having to handle their most sensitive information. If an agent never has possession of the information, then they have nothing to protect and liability is drastically reduced.
Data breaches are terrible and happen way too often. The best way to protect yourself is to never take possession of someone else’s sensitive information. By using an online tenant verification service which provides credit screening, you will be able to easily collect all the reports you need while saving yourself time, money, and a lot of headaches. However, if you do end up collecting data, make sure to keep only what you need and that it’s kept secure.