Five Issues With Obama’s Breach Notification Policy

Tuesday, May 31, 2011

Kelly Colgan


Article by Eduard Goodman, Identity Theft 911

5 Reasons Why Obama’s Breach Notification Policy Makes Me Grumpy

We’ve been waiting for a federal data breach notification law for well over five years now. So when I read the White House’s proposed notification bill, 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 data breach 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.

imageThe proposed bill is nothing more than an outdated, bandwagon approach that creates more red tape for businesses, weakens state law, and overprotects small- to medium-sized companies that suffer data breaches.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.

image Eduard Goodman, Chief Privacy Officer, Identity Theft 911 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.

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