Take On Payments, a blog sponsored by the Retail Payments Risk Forum of the Federal Reserve Bank of Atlanta, is intended to foster dialogue on emerging risks in retail payment systems and enhance collaborative efforts to improve risk detection and mitigation. We encourage your active participation in Take on Payments and look forward to collaborating with you.
Federal Reserve Web Sites
Other Bank Regulatory Sites
June 20, 2011
Is a national data breach notification law on the horizon?
Extensive privacy regulations exist that provide a framework for promoting identity theft prevention, data security, use of data limitations, requirements for data destruction, notice, user content, and accountability. Some of these laws are the Fair Credit Reporting Act, the Right to Financial Privacy Act, and the Gramm-Leach Bliley Act, among others. Each of these financial privacy laws has been amended several times since their enactment, but none have standardized data breach notification rules.
On the state level, some legislatures have tackled data breaches by stepping up privacy and encryption requirements for organizations that handle credit and debit card data. According to the National Conference of State Legislatures, 46 states, the District of Columbia, Puerto Rico, and the Virgin Islands have passed laws that require some form of notification when security breaches involving personal information occur. Most of the state laws have common themes, yet several differences exist among them, making it difficult, costly, and burdensome to develop a consistent and effective security incident response plan.
A push for national data breach laws
In 2009, there were two federal data security laws pending that cleared the U.S. Senate Judiciary Committee. One even cleared the U.S. House of Representatives. However, neither became law. One was the Personal Data Privacy and Security Act of 2009 (Data Privacy Act), and the other was the Data Breach Notification Act. The Data Privacy Act sought to mitigate identity theft, ensure privacy, and require that breached individuals be notified. The Data Breach Notification Act also imposed notification requirements but provided a safe harbor whereby organizations were not required to report the breach if a risk assessment determined the incident would not harm consumers.
Other efforts were seen when the Federal Trade Commission (FTC) and the U.S. Department of Commerce (DoC) both released reports within days of each other with recommendations for protecting consumer privacy online. The FTC's report came out on December 2, 2010, and the DoC's report came out on December 16. The DoC report focuses on national consistency surrounding security breach notification rules. The DoC recommends the implementation of a "[f]ederal commercial data security breach notification (SBN) law that sets national standards, addresses how to reconcile inconsistent State laws, and authorizes enforcement by State authorities."
Seeking exemption from the FTC and DoC recommendations
Not everyone is on board with the DoC and FTC recommendations. On January 31, 2011, the Securities Industry and Financial Markets Association (SIFMA), a consortium of financial firms, sent a letter to the FTC and DoC asking that their recommendations on privacy exclude industries—including the financial services industry—already subject to sector-specific regulations. SIFMA's letter expressed the view that existing national privacy laws like the Fair Credit Reporting Act, the Gramm-Leach Bliley Act, and the Electronic Communications Privacy Act are sufficiently addressing the management of consumers' personal data.
SIFMA did express support of the introduction of a uniform national breach notification law that would preempt state laws, but only by requiring that consumers be notified of a breach when there is a significant risk of identity theft. SIFMA pointed out that "requiring notification if there is no significant risk of identity theft could have the unanticipated effect of overwhelming consumers with notices that might cause confusion and likely desensitize them to future notices."
Finding common ground
The deadline for comments to the FTC report closed February 18, 2011. Both the FTC and DoC are expected to issue final reports and guidance this year. The coincident timing of the FTC's and DoC's reports seems to have renewed focus on online privacy and what best practices should be used to address perceived shortcomings.
Perhaps the FTC and DoC recommendations can shed some light on whether the need for a national data breach notification law is warranted or whether the existing national and state-level laws sufficiently address the management of consumers' personal data. For now, it appears that most industry watchdogs believe that consumers and businesses alike could benefit from a national standard for security breach obligations, mainly because the differences in form and substance between states make it increasingly complicated for effectively reporting data breaches to the public and present undue costs to business and burden streamline industry compliance.
By Ana Cavazos-Wright, senior payments risk analyst in the Retail Payments Risk Forum at the Atlanta Fed
TrackBack URL for this entry:
Listed below are links to blogs that reference Is a national data breach notification law on the horizon?:
- EMV Comments That Make Me Cringe
- Taking a Quantum Leap into Payment Security
- Looming Questions with the Rollout of NACHA's Mandated Same-Day ACH Rules Change
- AdmiNISTering Passwords: New Conventional Wisdom
- Mobile Banking and Payments—What's Changed?
- Risk Mitigation Isn't Just for Banks
- The Simple Consider Three but Four is the Key
- As with Nuclear Disarmament, So with ACH: Trust, but Verify
- The Personal Cost of Fraud
- When Fraud Hits Home: Questioning Today’s Authentication Methods
- October 2016
- September 2016
- August 2016
- July 2016
- June 2016
- May 2016
- April 2016
- March 2016
- February 2016
- January 2016
- account takeovers
- ATM fraud
- bank supervision
- banks and banking
- card networks
- check fraud
- consumer fraud
- consumer protection
- cross-border wires
- data security
- debit cards
- emerging payments
- financial services
- identity theft
- law enforcement
- mobile banking
- mobile money transfer
- mobile network operator (MNO)
- mobile payments
- money laundering
- money services business (MSB)
- online banking fraud
- payments risk
- payments study
- payments systems
- phone fraud
- remotely created checks
- risk management
- Section 1073
- social networks
- third-party service provider
- trusted service manager
- Unfair and Deceptive Acts and Practices (UDAP)
- wire transfer fraud
- workplace fraud