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U.S. Senate’s Data Breach Bill Full Of Flawed Assumptions

Written by Evan Schuman
July 26th, 2009

The chairman of the powerful U.S. Senate Judiciary Committee, Sen. Patrick Leahy, is trying—after two failed attempts—to get his data breach bill made into law. But even though his bill would answer the pleas of many retailers by creating one single national standard for handling major retail data breaches, the bill’s details don’t deliver the comprehensive relief promised. In short, the bill is trying to make it more difficult for major retail chains to hide large data breaches when, in fact, the wording will make it easier for them to hide such breaches.

Leahy is pushing the Personal Data Privacy and Security Act was introduced July 22 and said it was “one of my highest legislative priorities as Chairman of the Judiciary Committee.” (Details details. Is that “one of my top two highest priorities” or “one of my top 10,000 highest priorities”?)

“This is a comprehensive bill that not only deals with the need to provide Americans with notice when they have been victims of a data breach, but that also deals with the underlying problem of lax security and lack of accountability to help prevent data breaches from occurring in the first place,” the Senator said in a statement.

The parts of the bill relevant for retails chains would increase criminal penalties for identity theft involving electronic personal data and make it a crime to “intentionally or willfully conceal a security breach involving personal data.” That last part carries a punishment of either a fine or imprisonment of as long as 5 years, or both. It allows allows the Federal Trade Commission to impose “a civil penalty of not more than $5,000 per violation, per day and a maximum penalty of $500,000 per violation. Intentional and willful violations of these sections are subject to an additional civil penalty of $5,000 per violation, per day and an additional maximum penalty of $500,000 per violation.”

There’s the possibility that some smaller retail chains may be exempt, as the introduced version of the bill only applies to “business entities that compile, access, use, process, license, distribute, analyze or evaluate personally identifiable information in electronic or digital form on 10,000 or more U.S. persons.” A provision requires media notification “if the number of residents in a particular state whose information was, or is reasonably believed to have been, compromised exceeds 5,000 individuals.” Section 316 requires that business entities and federal agencies notify the Secret Service of the fact that a security breach occurred within 14 days of the breach, if the data security breach involves: (1) more than 10,000 individuals; (2) a database that contains information about more than 1 million individuals.

It also requires internal testing “to ensure that third parties or customers who are authorized to access this information have a valid legal reason for accessing or acquiring the information.”

Most importantly, the bill would replace a wide range of conflicting state laws, as it specifically “preempts state laws relating to administrative, technical, and physical safeguards for the protection of sensitive personally identifying information.”

But the core of the bill is where things get a bit dicey. It requires retailers to notify consumers impacted by a breach “without unreasonable delay” but it doesn’t say how much time retailers can take. Without that specific, it would seem difficult to enforce the law.

Even worse, the exemptions for notification are so broad as to make it unlikely that any retailer would actually be impacted. For example, the bill provides a blanket exemption as long as a chain “provides a written certification to the U.S. Secret Service that providing such notice would impede a criminal investigation or damage national security.” The Secret Service then has to perform a review to determine if it’s a warranted claim.


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