DocuSign Breach a Strong Reminder for the Mortgage Industry to Manage Third-Party Service Provider Risks

by Ballard Spahr LLP

Ballard Spahr LLP

On May 16, DocuSign confirmed that a data breach resulted in widespread malware phishing attacks targeting its customers. DocuSign provides electronic signature solutions for many companies in the mortgage banking industry that may have been victims of the phishing campaigns launched during the past week. Companies should move swiftly to protect themselves from the impact of the DocuSign breach as well as consider what next steps may be appropriate as part of any ongoing relationship with DocuSign.

As one of the most dominant players in providing mortgage technology solutions, the DocuSign  name and brand has frequently been exploited in phishing emails; but this particular attack was able to target more than 100 million customer email addresses that had been hacked from what DocuSign characterizes as “a separate, non-core system.” These phishing emails appeared to be sent from DocuSign with the goal of tricking recipients into opening an attached Word document that, when clicked, installs malicious software. DocuSign recommends that its customers delete any emails with the following subject lines:

  • Completed: [domain name]  – Wire transfer for recipient-name Document Ready for Signature”; or
  • Completed [domain name/email address] – Accounting Invoice [Number] Document Ready for Signature”.

DocuSign has stated that its “core” systems, which contain all other customer files, remain secure, and that only email addresses were accessed. No names, physical addresses, passwords, Social Security numbers, or credit card information was accessed by the hackers. DocuSign has also purportedly put further security controls in place to protect against any future such hacks.

All companies that use DocuSign as a third-party service provider should be evaluating what additional steps should be taken in the wake of the breach. The Consumer Financial Protection Bureau (CFPB) has articulated clear expectations with regard to companies’ relationships with their third-party service providers. While the CFPB recognizes that the use of service providers like DocuSign is often an appropriate business decision for companies that may not have the in-house expertise with E-SIGN and other relevant laws and regulations, the CFPB will hold companies accountable for any consumer harms that may arise from the use of such service providers. Companies should consider:

  • Refreshing any employee training to recognize phishing emails that may be received following the DocuSign breach.
  • Reviewing any existing agreement with DocuSign to determine:
    • whether DocuSign is satisfying all of its breach-related obligations;
    • whether the company can audit DocuSign to confirm that the breach was isolated to just email addresses and what further security measures DocuSign has implemented since the breach;
    • whether additional monitoring of DocuSign operations may be appropriate; and
    • whether the company can exercise any appropriate and enforceable consequences arising from the DocuSign breach, up to and including terminating the DocuSign agreement.
  • Contacting the company’s cyber insurance carrier—although the breach originated at a third-party service provider, companies should review their policies to confirm whether they are covered for any breach-related costs.
  • Preparing a uniform message that the company can use with consumers that may have questions about the potential impact of the DocuSign breach.
  • Evaluating the company’s own information security programs and data breach response policies and procedures.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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