Congress Taking Action to Protect Data Security

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In the wake of major customer data breaches at Target and Neiman Marcus, lawmakers on Capitol Hill have quickly swung into action, scheduling a slew of hearings and introducing legislation designed to address the issue of data security to better protect Americans' personal information and ensure their privacy.

On January 8, Senate Judiciary Chairman Patrick Leahy (D-VT) and four other Senate Democrats introduced the Personal Data Privacy and Security Act of 2014. The legislation, which Leahy has introduced every Congress since 2005, would create a national standard for data breach notification and require businesses to keep the consumer information they collect safe from hackers. The bill would also toughen criminal penalties for those who conceal a damaging breach, require companies that keep data to establish safety policies and update penalties for computer hacking attempts.

The legislation further defines "sensitive personally identifiable information" to include: (1) specified combinations of data elements in electronic or digital form, such as an individual's name, home address or telephone number, mother's maiden name, and date of birth; (2) a non-truncated social security number, driver's license number, passport number, or government-issued unique identification number; (3) unique biometric data; (4) a unique account identifier; and (5) any security code, access code, password, or secure code that could be used to generate such codes or passwords.

Leahy's aim was to create a balance between the need for clear and meaningful punishment, with the need to encourage innovation and protect privacy and civil liberties. Leahy stated that the recent data breach at Target is "a reminder that developing a comprehensive national strategy to protect data privacy and cybersecurity remains one of the most challenging and important issues facing our Nation." The Senate Judiciary Committee has scheduled a hearing on data breaches for February 4 that will focus on "privacy in the digital age," including how to prevent data breaches and combat cybercrime.

One week after Leahy introduced his bill, Senate Homeland Security and Government Affairs Committee Chairman Senator Tom Carper (D-DE) and Republican Senator Roy Blunt (R-MO) introduced the Data Security Act of 2014. The bipartisan legislation is intended to help protect consumers from identity theft and account fraud and is designed to establish clear and consistent rules of the road nationally for public and private institutions to follow to prevent and respond to data breaches.

The bill would require entities including financial institutions, retailers, and federal agencies to better safeguard sensitive information, investigate security breaches, and notify consumers when there is a substantial risk of identity theft or account fraud. The proposed requirements would apply to all businesses that take credit or debit card information, data brokers that compile private information, and government agencies that possess nonpublic personal information.

The Data Security Act marks another federal attempt to protect consumers by replacing the current patchwork of state laws with a single set of national standards. Currently, 49 states and U.S. territories have enacted laws governing data security and data breach notification standards. Inconsistent and conflicting state-by-state standards force public and private entities to comply with multiple regulations, leaving many consumers in a confusing web of regulation depending on the state. This legislation would provide clarity and certainty to all parties involved.

Under the proposed legislation, if the financial establishment, retailer, federal agency or other entity determines that sensitive information was compromised or may have been compromised, the entity is required to investigate the scope of the breach, the type of information compromised or potentially compromised, and determine whether the information will likely be used to cause an individual harm or bank fraud. If it is determined that the information was compromised and will cause harm, the entity must then notify the appropriate federal government regulatory agency, law enforcement, national consumer reporting agencies and all consumers affected by the breach.

The Data Security Act of 2014 is modeled after the data security and breach-response regime established under the Gramm-Leach-Bliley Act of 1999 and subsequent regulations. It builds on existing law to better ensure data security procedures are uniformly applied. Three Democratic members of the Senate Banking Committee have urged Chairman Tim Johnson (D-SD) and ranking member Mike Crapo (R-ID) to hold a hearing on how companies can better protect themselves against data breaches.

Lastly, in addition legislative proposals, House Oversight and Government Reform Committee Chairman Darrell Issa (R-CA) agreed to a request made by Rep. John Tierney (D-MA) to investigate criminal groups attempting to hack the federal Health Insurance Exchange website, healthcare.gov, in order to steal consumer information. Rep. Tierney, Ranking Member of the Subcommittee on National Security, suggested that the Committee spend more time investigating the criminal activities of domestic hackers, foreign entities, and others seeking to gain access to the personal information of American consumers instead of spending so much time criticizing federal officials charged with protecting the website. Chairman Issa agreed, stating that cybersecurity is part of the Committee's core jurisdiction and that it is an area of not only interest but one that he is willing to put time into. Chairman Issa stated that we can "count on there being a series of briefings and possible Committee hearings" on the issue.

- J.C. Boggs, Lauren M. Donoghue