Shocking Poor Security at the Social Security Administration
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Cite: http://oig.ssa.gov/sites/default/files/audit/full/pdf/A-14-1...
Based on the password requirements, they have something like 2.6 trillion possible passwords. If your account is locked out after 3 failed login attempts, if they limit to one attempt per second, or if they have a forced password change every month, etc. there are a number of ways to tighten this up.
Their password policy is anachronistic, and this /could/ be a symptom of other issues. However by itself, it seems more like a usability issue than a security issue.
In fact, they could be attempting to discourage password reuse with other sites. That would be a security bonus if it worked (I doubt it works).
The point of effective passwords isn't that someone is going to guess it on login - it's that if the database gets dumped all the passwords aren't recoverable from the hashes.
Insecure passwords are insecure at rest no matter how they are stored..
If you're mad about 8 char mandatory case insensitive password rules maybe leaking data, you'll probably be super mad when they just lose the whole db on their end to hacks. Perhaps they should code a 2fa option through one of the many useful api's, as so many other companies have.
That obviously means that the whole password is rarely sent over the network. It also means that they can use the same validation system over the phone for telephone banking.
The system is however far from ideal of course.