By Eduard Goodman,

We’ve been waiting for a federal data breach notification law for well over five years now. So when I read the , I was disappointed to the point of being grumpy.

The intention was for Congress to take federal action to unify the nation’s 50-plus different notification laws and requirements. Past legislative attempts barely got off the ground because they weakened state laws on breach notification. While state laws may not be easy for business, they’re meant to protect consumers.

The proposed bill is nothing more than an outdated, bandwagon approach that creates more red tape for businesses, weakens state law, and overprotects small- to medium-sized companies that suffer data breaches. Bottom line: It offers little, meaningful help to the consumer.

Here are five weaknesses of the bill:

1.    The definition of personal information is so retro. Our understanding of personal identifiable information (PII) continues to evolve. We have to think of it as more than a name, a Social Security number, or an account number. PII should include a more encompassing definition that covers other identifiers such as usernames, email addresses, geolocation data, religious affiliations, geotagged metadata in JPEG photos, and so on. Perhaps in an attempt to avoid being considered too much like the Europeans, these points are conspicuously absent from the proposed bill. On the bright side: At least the bill gives the Federal Trade Commission the power to amend the definition at a later date.

2.    It doesn’t cover paper records. Several states have seen fit to cover hard copy records in addition to computerized data in their statutes. Unfortunately, the loss of paper records isn’t covered under the proposed bill.

3.    It overprotects small businesses. Buried in page two of the bill is language specifying that it applies only to “any business entity engaged in or affecting interstate commerce, that uses accesses, transmits, stores, disposes of or collects sensitive personally identifiable information about more than 10,000 individuals during any 12 month period” (§101 a). First, if your business is limited to only your state, then it could be argued that your business is not “engaged in or affecting interstate commerce.” Second, if a business deals with the information of 8,000 people a year, it could be argued that the bill won’t cover it—even if the business has a data breach affecting a decade’s worth of past customers. (In my example, 80,000 people.)

4.    It’s missing a private right of action. Most state laws provide for enforcement through the state attorney general but many include a private right of action, or the ability for citizens to sue the company themselves. The Obama bill puts the power to enforce solely in the hands of either the state AGs or the FTC. Now, while the FTC and many state AGs have a strong record on data privacy and breaches, this will become a lower-level priority when budget cuts kick in. The consumer won’t have any recourse when businesses fail to notify or delay notification regarding a breach of security or disclosure of the consumers’ PII.

5.   It trumps state law. The statute weakens different state laws in an effort to provide a uniform solution to data breach notification policy. Chalk this up to another win for big business and another hit to the consumer.

Unfortunately, the Obama administration and Congress are still thinking of data breach notification requirements like it’s 1999.

A lot has happened since California passed the nation’s first data breach notification law in 2003. Since then we have seen the birth and widespread proliferation of Facebook, smartphones, cloud computing (SaaS), geolocation technologies, Web analytics and much more.

So in 2011, lets ask for a better, more flexible and future-proof federal data breach notification bill. Money may be tight, but we can do better than this.

 

 

Eduard Goodman, Chief Privacy Officer,
An internationally trained attorney and privacy expert, Eduard has more than a decade of experience in privacy law, fraud and identity management. He is a member of the state bar of Arizona and served as the 2008-2009 section chair of the bar’s Internet, E-Commerce & Technology Law Practice Section.

5 Responses

  1. Joe Lazzarotti says:

    Especially nice piece on this topic.

    Moving in the direction you suggest in point number 1 would be quite an undertaking, but may indeed be the direction we are headed as technology becomes even more pervasive. Until now, the focus has been to curb identity theft, hence the limited scope of protected personal identifiable information. While religious affiliation is personal and sensitive, and could be used to harm someone, it is not required information on a credit card application or medical insurance enrollment form. That is, it is not an element of data that facilitates the crime of identity theft, the number 1 complaint to the FTC over the last 10 years or so.

    Some other points that I think would improve such legislation include:

    - making clear that the protections apply to all individuals, not just “consumers” and not just “employees”

    - providing guidance on what it means to be the “owner” of the information, so as to clarify who has the notification obligation

    - clarify the standard for providing the notification “without unreasonable delay”. In the trenches it is often time consuming even with diligent effort to be conducting the forensic investigation to determine who was affected; collecting address information of those affected; investigate, contract with and coordinate with a monitoring company; establish and train a call center; develop a notification strategy including the notice itself, distributing the notice, handling returned notices and so on.

    - a private right of action could be problematic for businesses as affected individuals could file class action lawsuits without any damages. While many of these kinds of suits have been filed and dismissed because of a lack of damages, companies spend significant dollars defending them through the dismissal stage.

    - focus more on preventive steps for safeguarding information in the first place through the use of comprehensive risk assessments and written information security programs, among other things.

    Unfortunately, however, given the track record of these bills over the past few years, I am not convinced that this step by the White House will lead to meaningful legislation.

    We’ll see . . .

  2. Joe,

    All good points, but as someone much smarter than me was once quoted saying:

    “We tend to overestimate the short term impact of a technology and underestimate the long term impact.
    — Dr. Francis Collins – Director of the Human Genome Project

    I think America’s limited view of privacy as a mere consumer protection issue (meaning the release of information should not place the data subject at an increased risk of identity theft) needs to be rectified with the rest of the world’s broader view of “data protection” and privacy for the sake of privacy.

    You are correct that (for now) religious affiliation or even geo-location information may not be used to commit identity theft. BUT- Considering it is part of the profile of over half a billion Facebook users around the world, maybe it deserves to be viewed as a protected class of information?

    But even if it doesn’t, what about an E-mail address? 5 years ago it would have definitely been considered public information. However, considering it is now becoming the default username for countless online services (One of two levels of identification/authentication used for many services in addition to a password) you can see how having a more expansive definition could be useful, even within the limited scope of consumer protection based privacy that take in the United States…

  3. says:

    [...] definition of personal information is so retro,” Eduard Goodman, the chief privacy officer of Identity Theft 911, wrote on the consumer rights group’s 911 blog. He thought e-mail addresses, geo-location data, [...]

  4. says:

    Eduard;

    Simply stated, your review is 100% on target with my thinking. “So in 2011, lets ask for a better, more flexible and future-proof federal data breach notification bill. Money may be tight, but we can do better than this”.

    Joe Craney
    480-221-1059

  5. says:

    [...] “The proposed bill is nothing more than an outdated, bandwagon approach that creates more red tape for businesses, weakens state law, and overprotects small- to medium-sized companies that suffer data breaches,” Eduard Goodman, chief privacy officer at Credit.com’s sister company, Identity Theft 911, wrote in a recent editorial. [...]

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