Homeowners associations deal with all sorts of private information — from the names of members to their individual bank account numbers. Protecting such information is paramount to skirting potential liability. But, how exactly can an association prevent an HOA data breach?
What Is an HOA Data Breach?
Simply put, an HOA data breach is when the private or personal information of a homeowners association and/or its members becomes compromised. Today, data breaches are growing more common as more and more information gets stored online or through digital means. Plenty of companies has experienced large-scale data breaches, facing both criticism and liability in the aftermath. While homeowners associations are incomparable to these corporations by size and profit margin, they are still vulnerable to cybersecurity threats.
In the past, HOAs relied on printed documents, storing them in physical file cabinets. These documents were harder to get to and, thus, information was harder to steal. Moving into the digital age, computer hackers have made quite a living off of illegally accessing banking information and scamming the more gullible. To simultaneously protect owners’ information and prevent potential liability, HOAs must do what they can to avoid data breaches.
Understanding Homeowner Data Confidentiality and Privacy
In many states, homeowners associations are required to produce HOA documents for inspection upon the request of a member. Some documents, though, include personal information such as addresses and contact details. Additionally, most state provisions do not get specific about what kinds of documents HOAs can provide members. Because of this, it is often difficult to balance these requests with homeowner data privacy rights.
There are a few states that have enacted laws prohibiting HOAs from disclosing homeowner information to third parties. One such state is Nevada. In Texas, members cannot inspect private information relating to a member or an employee of the association. A similar provision exists in California, giving associations the authority to redact private, confidential, or sensitive information.
How to Prevent a Homeowners Data Breach in an HOA
Homeowners associations should make it a goal every year to protect HOA data. Even for boards that are not self-managed, it is imperative to make sure that the HOA management company hired also has these precautions in place. Achieving a satisfactory level of protection, while easier said than done, is possible by implementing one or more of the tips below.
1. Use a Secure Password
Perhaps one of the most obvious ways to boost HOA data protection is to use a secure password. This applies to board members accessing HOA files as well as homeowners who log into the member portal.
It is a good idea to make passwords fairly long. Most experts agree that passwords should be at least 8-12 characters long, though the length is not always a sign of security. To consider a password truly secure, it should be more complex. That means it should contain at least one of each of the following:
- Uppercase letters
- Lowercase letters
- Special characters
2. Apply Multi-Factor Authentication
A multi-factor authentication simply means a user must present two pieces of evidence confirming their identity before receiving access to a protected file, application, or website. Many companies already use multi-factor authentication, and HOAs should consider doing the same. There are several websites and programs that come built-in with two- or even three-factor authentication to promote homeowners’ data security.
3. Use Sophisticated Encryption Software
Encrypting files can greatly help homeowners associations protect their data. There are a few different types of encryption, though 128-bit encryption works best. This ensures that an association’s servers and information are shielded from cybersecurity attacks. Of course, not all board members are well-versed when it comes to HOA data security. As such, it is a smart move to outsource the job to an experienced professional.
4. Consider Hosting to a Cloud Server
If an HOA does not have the funds or expertise to encrypt data, it would do well to host data to a cloud server instead. This puts the burden of HOA data protection on the third-party provider instead of the association.
Most cloud hosting services already come equipped with all the security bells and whistles one would want. Plus, it adds another layer of protection by ensuring back-ups of data in case of accidental deletion.
5. Create Strict Policies for Data Access
One of the most basic ways to prevent an HOA data breach is to control who has access to the data in the first place. Sometimes, breaches don’t come from hackers; instead, they come from within the organization itself. Board members likely have full access to all of the association’s information. But, committee members and regular homeowners typically shouldn’t. Associations should also look for a website or program that comes with an audit trail so that they can trace back individual board members’ actions (i.e. see who downloaded what, etc.).
6. Warn Employees, Volunteers, and Homeowners
Phishing emails can also usher in an HOA data breach. This happens when a user clicks on a link sent to their email which then grants a hacker access to their files and information. These emails usually take the form of fake contest wins or threats that an account will get shut down unless the user clicks on the link. To prevent this, it is imperative to warn all employees, volunteers, and even homeowners not to click on suspicious links in emails.
7. Hire a Good HOA Management Company
Many HOA management companies already have existing policies and protocols that protect homeowner data. Still, it is important for HOAs to survey companies and do some in-depth research themselves. When interviewing companies, ask the following questions:
- How does the HOA management company host its data?
- What protocols does the company have in place to encrypt and protect its data?
- Who has access to data?
- How is access managed or controlled?
- What is their process for data recovery?
After the Fact: What Boards Should Do After an HOA Data Breach
In case of a data breach, the last thing HOA boards should do is to keep it a secret from members. Homeowners have a right to know that their information has been compromised. And not letting them know will only invite further discord and distrust. Of course, it is important to inform owners of the breach in a calm and professional way. Along with the announcement of the breach, boards should let owners know what actions the board will take following the event.
Boards must report the incident to the proper authorities, though doing so does not always guarantee the capture of the offender. If the breach included banking information, boards must also let the banks know. Next, boards must check their cyber liability insurance and initiate the claims process.
Homeowners associations should examine their insurance policies every year. Cyber liability insurance, otherwise known as data breach insurance, should cover the following:
- Computer fraud
- Funds transfer fraud
- Fraudulently induced transfers
A Top Priority
An HOA data breach is far from the first thing on the minds of HOA boards when it comes to security. But, given the way technology is now and how it is going to be in the future, cybersecurity should definitely make every HOA’s priority list.
Get a head start on data protection with help from an established HOA management company like Clark Simson Miller. Call us today at 865.315.7505 or contact us online to request a free proposal.
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