If we fired an employee for stealing a client’s credit card information to commit credit card fraud, what obligation do we have to notify our other clients to of the security breach?

Asked on August 28, 2014 under Business Law, Hawaii

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 6 years ago | Contributor

If you do not notify them, you could be liable for all loses and expenses they incur as a result  of the theft, since it is, at a minimum, negligent, or unreasonably careless, to not notify customers of a stolen credit card. By not notifying them, you prevent them from taking their own precautionary measures (like closing the affected account) and therefore may have to reimburse them for their losses. You can best protect your company by making a timely and proper announcement. You are, however, advised to seek legal counsel before doing so, to shape your announcment in a way that best insulates you from liability; the lawyer can also advise you as to other steps to take. (For example, if you haven't reported the theft to the authorities, you probably should, since that shows you are taking all reasonable measures--your attorney can discuss this with you.) You may also wish to consider hiring a PR firm to help you.


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