Plaintext Password Storage Risks

This question asks if passwords are stored in readable form anywhere in your system - like keeping them in a spreadsheet or database where anyone with access can read them directly. It's equivalent to writing down everyone's passwords on sticky notes. Passwords should be scrambled using one-way encryption (hashing) so even your own team can't read them.

Storing passwords in plaintext is a catastrophic security failure that violates virtually every compliance standard and can result in massive fines under GDPR, CCPA, and other regulations. A single breach exposing plaintext passwords destroys customer trust permanently and often leads to lawsuits, regulatory penalties, and business closure. This practice is so egregious that discovering it typically ends vendor relationships immediately and can trigger mandatory breach notifications even without an actual attack.

Some teams encrypt passwords but store the decryption key in the same database, which is effectively the same as plaintext. Another mistake is properly hashing passwords in the main database but storing them in plaintext in logs, backups, or email systems. Development and staging environments are often overlooked, with plaintext passwords lingering in test databases.