Study Finds More Than 70 Percent of Lenders Send Client Info Unsecurely

January 30, 2014

Cybersecurity firm HALOCK Security Labs found many of the nation's large and small mortgage lenders allow for information sharing practices that may put applicants' personal and financial data at risk during transmission from the applicant to the lender.
HALOCK investigated 63 U.S. mortgage lenders and found that more than 45 (70 percent) permitted applicants to send personal and financial information over unencrypted e-mail as e-mail attachments. This information includes tax documents and W-2's. Eight out of the 11 top U.S. lenders were found to allow for the same unsecure practices as smaller lenders. Additionally, nearly 70 percent of the surveyed lenders encourage faxing sensitive data, which may reduce risks of breach, but are still not as secure as encryption. More than 40 percent of lenders provided a postal mail option, while only 12 percent offered a secure email portal. When asked why a secure email portal was not offered to applicants several of the surveyed lenders responded that it was a matter of what the customer was "most comfortable with."
While these responses suggest that lenders prioritize their customers' ease-of-use over their security, they also suggest an unawareness that their customers are losing confidence in their banks' commitment to customer privacy. A study by the Ponemon Institute published on Oct. 10, 2013 shows a 10-year decline in customer confidence in their banks' commitment to privacy, approximately 65 percent of respondents disagreeing with the statement, "My bank is committed to ensuring the privacy of my personal information is protected."
A former mortgage lender commented anonymously that, "Oftentimes, it was easier to have my clients send documents like W-2's through email because everyone has access to an email account.  Most of us [lenders] didn't want to take the time to explain what a secure portal was and how to use it.  Everyone understands what email is."  The comment underscores the lack of security knowledge surrounding email pervasive in the mortgage industry.
According to internationally recognized security expert Graham Cluley, publisher of Graham Cluley Security News, it's worth the extra effort to go through the paces of using a secure portal because it's a commonly accessible way to transmit documents safely. "E-mail by its very nature is unsecure: 99.9 percent of it is sent unencrypted. If it was invented today no one would use it. Emailing unencrypted documents 'in the clear' creates a potential chain of issues."
Methods to transfer files securely are prevalent today, but are underutilized by businesses and their employees. 
"We understand the business need to smooth the way for our customers, but there are many secure file transfer technologies that are both easy for customers to use, and safe from network snooping. And as the public becomes more demanding of their banks to ensure privacy and security, it's no longer feasible to rely on unsecure email for the transfer of financial documents," says Terry Kurzynski, Senior Partner at HALOCK Security Labs. "Any type of weak link in a system involving sensitive information exposes people to unnecessary risk. It takes months to recover from an identity theft and minutes to log into a secure portal. Do the math."

Compliance, Trends