Evan Schuman's StorefrontBacktalk

Massachusetts has watered down its proposed retail data security regulations to make them more palatable to small businesses. Calling for a “risk-based” approach that takes into account a business’ size and the risk of identity theft posed by its operations, the revised regulations are intentionally vague instead of specific in several areas.

For example, in discussing third-party service-providers with access to personal information, the initial regulations called for “limiting the amount of personal information collected to that reasonably necessary to accomplish the legitimate purpose for which it is collected; limiting the time such information is retained to that reasonably necessary to accomplish such purpose; and limiting access to those persons who are reasonably required to know such information in order to accomplish such purpose or to comply with state or federal record retention requirements.”

Companies were also charged with “identifying paper, electronic and other records, computing systems, and storage media, including laptops and portable devices used to store personal information, to determine which records contain personal information, except where the comprehensive information security program provides for the handling of all records as if they all contained personal information.”

That section was slimmed down in the revision, which calls for “requiring such third-party service providers by contract to implement and maintain such appropriate security measures for personal information.” The older version required companies to take steps to “verify” that these providers have the capacity to protect the information in a manner specified by law.

The revised section removes the word “verify” and says businesses must take reasonable steps “to select and retain third-party service providers that are capable of maintaining appropriate security measures to protect such personal information” consistent with Massachusetts and federal regulations.

Also, the revised regulation eliminates the original requirement that companies craft “a written procedure that sets forth the manner in which physical access” to personal information records is restricted. Instead, it says companies must impose “reasonable restrictions upon physical access” to those records and “storage of such records and data in locked facilities, storage areas or containers.”

The state said the revised regulations, scheduled to become effective March 1, 2010, maintain identity theft protections while reinforcing “flexibility in compliance” by small businesses. Barbara Anthony, the state Undersecretary of the Office of Consumer Affairs and Business Regulation, said the state listened “to the concerns of small business leaders,” and learned “there were issues regarding the impact these regulations have on those companies.” She said the updated regulations “feature a fair balance between consumer protections and business realities.”

Many of the wording changes are subtle. For example, the revised document says the standards apply to persons “who own or license personal information about a resident” of Massachusetts. The prior version of the sentence said the regs apply to those who “own, license, store or maintain” the personal information.