WASHINGTON (AP) — The data breach at Target Corp. that
exposed millions of credit card numbers has focused attention on the
patchwork of state consumer notification laws and renewed a push for a
single national standard.
Most states have laws that require
retailers to disclose data breaches, but the laws vary wildly.
Consumers in one state might learn immediately that their personal
information had been exposed, but that might not happen in another
state, and notification requirements for businesses depend on where
their customers are located. Attorney General Eric Holder has joined the
call for a nationwide notification standard, but divisions persist,
making a consensus questionable this year.
"We’re stuck with the
state-by-state approach unless some compromise gets done at the federal
level," said Peter Swire, a privacy expert at Georgia Tech and a former
White House privacy official.
Despite general agreement on the value of a national standard, there are obstacles to a straightforward
compromise:
—Consumer groups don’t want to weaken existing protections in states with the strongest laws.
—Retailers
want laws that are less burdensome to comply with and say too much
notification could cause consumers to tune out the problem.
—Congress
is looking at different proposals for how any federal standard should
be enforced and what the threshold should be before notification
requirements kick in.
The issue gained fresh urgency as part of a
larger security debate after data breaches involving retailers Neiman
Marcus and Target. Target, the nation’s second-largest retail
discounter, has said 40 million credit and debit card accounts were
exposed between Nov. 27 and Dec. 15.
The company went public with
the breach on Dec. 19, several days after it said it learned of the
problem and soon after the news began leaking online. Since then, sales,
profit and stock prices have dropped, the company’s chief information
officer has resigned and banks and retailers are facing continued
scrutiny about what more can be done to protect consumer data.
The
Justice Department is investigating the data theft, and Holder urged
Congress in a video statement last month to adopt a national
notification standard that would include exemptions for harmless
breaches.
"This would empower the American people to protect
themselves if they are at risk of identity theft. It would enable law
enforcement to better investigate these crimes and to hold compromised
entities accountable when they fail to keep sensitive information safe,"
he said in the statement.
Such proposals have been around for years.
An
Obama administration plan from 2011 would have required businesses that
collect personal information on more than 10,000 people in any 12-month
period to disclose potentially harmful breaches and for breaches that
affect more than 5,000 people to be reported to consumer credit
reporting agencies and the federal government.
Past congressional
efforts to agree on a standard have failed. Currently, 46 states and the
District of Columbia have their own breach notification laws, according
to the National Conference of State Legislatures.
Proposals now
before Congress would require notification. But there are differences in
what information the notification would provide, the threshold for
notifying regulators and law enforcement, and the proposed enforcement.
Some bills seek criminal penalties for deliberately concealing a breach;
others do not.
Consumer groups fear that any national standard
could turn out to be weaker than the strongest state laws, such as one
in California that requires a business or state agency to notify any
state resident whose data was improperly obtained. Other state laws are
more lenient, requiring notice only in cases where a risk analysis
determines that the breach is likely to have actually harmed consumers.
"From
industry’s perspective, whether you’re a bank or a merchant, you don’t
want to have to notify consumers," said Ed Mierzwinski, consumer program
director at the U.S. Public Interest Research Group. "They want to
pre-empt, or override, the best state laws."
Retailers say they do
support a federal notification standard but one that would be triggered
when sensitive material has been exposed — as opposed to, say,
customers’ shoe sizes — and when there’s a risk that it will be used for
theft or fraud.
"There are different kinds of data. There’s data
that can lead to an identity theft (or) financial fraud, and there’s
data that probably doesn’t have much utility to the criminals," said
David French, senior vice president for government relations at the
National Retail Federation. "If you get 20 notices a month, at some
point you just turn it off."
Meanwhile, retailers remain at odds
with financial institutions over how best to protect consumer data.
Retailers say banks need to upgrade security technology on the credit
cards they issue. Banks say retailers need to do more to enhance their
own security.
"There’s no agreement in the private sector among
the major players about what their responsibilities are, and that makes
it more difficult for us in the Congress to end up on the same page,"
said Sen. Tom Carper, D-Del., chairman of the Senate Homeland Security
and Governmental Affairs committee, in an interview.
He is
sponsoring legislation that provides for notification in cases where
there is "substantial risk" of identity theft or account fraud.
Carper said he’s hoping for a solution, because the "alternative is a patchwork quilt that is a
nightmare."
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