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Searching for the One Ring to Rule Them All: A Look at 8 U.S. Federal Privacy Bills

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This article is Part 1 of 2 in a series exploring proposed federal privacy laws in the United States. Part 2 will discuss the constitutional challenges facing not only a proposed federal privacy law but those facing existing state privacy laws as well.

As predicted in our Privacy Law Forecast for 2019, legislators have raced to introduce national privacy regulation in both the House and Senate this year.

In contrast to the European Union’s GDPR, a hodgepodge of sectoral laws govern privacy in specific industries: medical, financial, educational, and marketing sectors, among others. States have enacted laws to protect their residents. And on top of that, Section 5 of the Federal Trade Commission Act (15 U.S.C. § 45) grants authority to the FTC to enforce against unfair and deceptive acts and practices.

This all results in a confusing and burdensome “patchwork” of national, state and sectoral rules. (For more in-depth discussion on the current U.S. privacy regulatory landscape, please see American Privacy Laws in a Global Context.)

Given this regulatory environment, legislators are keen to put forth a single federal privacy law to standardize this “patchwork” and forestall the passage of dozens more state privacy bills. Some have set a deadline, hoping to pass a federal privacy law before the CCPA comes into effect on January 1, 2020. Since the start of 2019, lawmakers have introduced about 230 bills that regulate privacy in some way in either the House or Senate.

The following is a sample of comprehensive bills from both sides of the aisle. Though these bills are unlikely to pass committee, they indicate what policies lawmakers are considering in the current negotiations:

Title Introduction Date Sponsor Notes
American Data Dissemination Act of 2019 (“ADD Act”) January 16, 2019 Senator Marco Rubio (R-FL) This bill would require the FTC to submit recommended privacy regulations on “covered providers” (defined as any person that provides services over the internet) to Congress. If Congress fails to enact a law based on the FTC’s recommendations, the FTC would promulgate a final rule incorporating its proposed regulations. Only the FTC has powers of enforcement. This bill further allows for the preemption of state law.
Social Media Privacy Protection and Consumer Rights Act of 2019 January 17, 2019 Senator Amy Klobuchar (D-MN) This bill would require online platforms to inform the user of any data collection and use, offer the user a copy of their personal data, and allow the user to opt out of data tracking. The bill also requires breach notification within 72 hours of detection. Only the FTC and state attorneys general have the power to enforce violations.
Digital Accountability and Transparency to Advance Privacy Act (“DATA Privacy Act”) February 27, 2019 Senator Catherine Cortez Masto (D-NV) This bill would require companies to provide users with a fair processing notice and to allow users to access, port, or delete their own records. It would mandate users’ opt-in consent in situations involving sensitive data or data outside the parameters of the business-consumer relationship. Companies that collect data on more than 3,000 people a year and revenues greater than $25 million per year must appoint a Data Protection Officer (DPO). The FTC, state attorneys general, and any other officer authorized by the State to bring civil actions would have the power to enforce this law.
Own Your Own Data Act March 14, 2019 Senator John Kennedy (R-LA) This bill would require social media companies to have a “prominently and conspicuously displayed icon” that a user can click to easily access and port their information. It would characterize user account registration as a “licensing agreement” wherein the user would license the user’s data to the social media company.
Information Transparency & Personal Data Control Act April 1, 2019 Representative Suzan DelBene (D-WA) This bill would require any company to first procure users’ opt-in consent before processing sensitive data. Companies must also provide users with fair processing information. The bill requires companies to obtain third-party privacy audits and to submit the audits to the FTC biannually. Only the FTC would enforce this law. This bill further allows for the preemption of state law.
Balancing the Rights of Web Surfers Equally and Responsibly Act of 2019 (“BROWSER Act”) April 10, 2019 Senator Marsha Blackburn (R-TN) This bill would require providers of broadband internet access service and edge services to notify users of the providers’ privacy policies; obtain users opt-in consent in order to process sensitive information and opt-out consent for non-sensitive information; and prohibits providers from conditioning services on waivers of privacy rights. The bill further allows for the preemption of state law.
Privacy Bill of Rights April 11, 2019 Senator Edward Markey (D-MA) This bill would require companies provide users with fair processing information and the right to access, port, or delete their own records. Companies would be prohibited from offering “take-it-or-leave-it” arrangements or financial incentives in exchange for users’ personal information. Companies would also have to procure users’ opt-in consent before processing personal information. Under this bill, companies must designate an employee in charge of privacy/security compliance, no matter the size or annual revenue of the company. The FTC, state attorneys general, and individuals would be able to sue to enforce the law.
Do Not Track Act May 21, 2019 Senator Josh Hawley (R-MO) This bill would establish a national Do Not Track (DNT) system and require any website or application operator to search for a DNT signal upon connection. The bill would make it illegal to collect data from devices displaying a DNT signal. Only the FTC and state attorneys general have the power to enforce violations.

As we can see, the fault lines are clear and not surprising. Democratic lawmakers generally favor a private right of action for consumers to sue a company that has mishandled consumer data. Republican lawmakers are generally against including such a provision. Republican lawmakers typically favor an express right of preemption, so that a laxer federal privacy law may preempt stringent state laws such as the CCPA. Democratic lawmakers are largely against the inclusion of such provisions, unless the bill provides consumer rights equivalent in scope and depth to the CCPA.

Regardless of whether or not a federal privacy law passes, businesses and the courts have their work cut out for them. Constitutional and interpretive challenges will plague the reach of any state or federal comprehensive privacy law, making it difficult to assess coverage for overlapping sector, state, and federal rules.

Consequently, as we will discuss further in our next article, legislators should consider these constitutional challenges head on prior to passing the “one” best bill to rule them all. Without clearly articulating the scope of any privacy law (e.g. does it extend across state borders and internationally), its preemption over or exclusions for other laws (e.g. GLBA, HIPAA, COPPA), and its relationship to third parties that only touch data incidentally – any comprehensive legislation will just add to the quagmire of current laws.

California Consumer Privacy Act vs GDPR

The 2019 Capital One Breach Compared to the 2017 Equifax Breach: Evolving and Improving Attitudes toward Data Security, Breach Detection, and Breach Notification

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On September 7, 2017, Equifax announced that it had suffered a data breach that exposed the personal data of nearly 147 million people. Two years following the Equifax breach, Capital One also suffered a data breach nearly as massive in scope, affecting approximately 100 million users in the United States and 6 million users in Canada.

A casual observer might think that the two breaches are similar. After all, they both affected a large financial institution and encompassed over a million financial records. The similarities end there, however. Capital One implemented security measures to protect its customer data and engaged in a speedy response to an insider threat. Equifax failed to implement even basic data protection measures and was laggardly in reporting the inevitable breach.

Only time will tell what the full repercussions will be of these two breaches. But based on the facts in front of us, Capital One’s quick response to this breach will ultimately protect more customers in the long run. Comparing the circumstances surrounding the two breaches show a positive trend toward companies taking their customers’ data more seriously and mindfulness of ever-increasing consumer vigilance about their own data.

The Timeline of Each Breach – Head in the Sand v. Speedy Responder

In the case of Equifax, the company detected a breach on July 29, 2017, but failed to notify the public until September—40 days later.

To make matters worse, the breach was not detected until several months after the actual breach, even though the security vulnerability was reportedly known to Equifax. Months prior to the actual breach, a security researcher attempted to inform Equifax about the researcher’s inadvertent and unauthorized access to millions of Equifax customers’ sensitive personal data records. This included social security numbers and birthdates. Although it would have taken a matter of hours or minutes to deploy a fix, Equifax never addressed the reported vulnerability until after the breach had occurred.

In comparison, the Capital One breach occurred when former Amazon Web Services (AWS) employee Paige Thompson stole customer data and posted it to her GitHub, a repository for software development coding and programs. 

On July 17, 2019, a security researcher alerted Capital One to this potential breach, by emailing Capital One through an address exclusively reserved for “ethical” hacker disclosures. Based off the information in this email (i.e., Thompson’s GitHub account), Capital One launched an internal investigation of the breach. That led to detection of the breach on July 19. On July 29, 2019, Capital One announced to the public the details of its investigation.

All told, only 10 days passed from the moment of detection to notification of the public in the Capital One breach. Capital One’s quick response may have been influenced by public resentment of how long it took for Equifax to notify its customers of a breach—long enough for senior executives to collectively sell millions of dollars’ worth of stocks within days of detecting the breach in 2017.

Recently, the FTC announced a settlement with Equifax for at least $575 million for damages relating to its data breach in 2017. While a substantial amount to be sure, many have also criticized perceived inaction by both legislators and the Consumer Financial Protection Bureau (CFPB) in response to the Equifax breach. There is substantial public opinion that Equifax got off easy with an FTC settlement that essentially equates to a “cost of doing business.” 

Better Security Control—Protecting What’s In Your Wallet

Following the announcement of Equifax’s data breach, Equifax was lambasted in media reports for its egregious security practices, in particular, its storage of administrative credentials and passwords in unencrypted plain text files. By using plain text instead of encryption, Equifax exposed its sensitive data to hackers without protection. 

In contrast, Capital One encrypted all customer data as standard practice. Due to the circumstances of the breach, Thompson was also able to decrypt the data. However, Capital One also noted in its press release that it tokenizes select fields that are particularly sensitive, including Social Security numbers and account numbers. Tokenization provides an additional layer of protection by replacing the sensitive field with a unique “token” or “cryptographically generated” placeholder. The original sensitive information is stored in a different location and remains protected. Capital One’s practice of tokenization likely protected over 99% of its held Social Security numbers and bank account numbers. Capital One’s adoption of stronger security measures, beyond basic encryption, shows its awareness of and protection against increasingly sophisticated hacks.

While breach incidents are unfortunately becoming more common, Capital One’s response to its recent breach shows that incident response plans are becoming more robust. Corporate attitudes are trending toward privacy and security teams being an integral part of an organization, as well as investments in technical and operational security controls having great value.

Breaches in the Future?

Looking forward, we can all use the Equifax and Capital One breaches to inform us with respect to all businesses’ privacy and security obligations. As just a few high-level takeaways:

  1. Properly encrypt all personal data held on customers and employees, based on the data’s level of sensitivity.
  2. Assess whether your current privacy and information security team needs additional support and/or training to handle your organization’s size and sensitivity of data.
  3. Implement proper security controls, including access permissions and physical facility controls.
  4. Don’t forget that “insider threats” caused by employee and ex-employee handling of data is just as problematic as outside hacks.
  5. Promptly investigate “ethical hacker” or security researcher notifications about your company’s security.
  6. Have an incident-response plan in place to guide decision-making following a detected breach.

Above all, be prepared! Organizations of all sizes now handle massive amounts of data collected both on physical servers and on cloud databases. It is critical that they understand not just the current minimum data protection obligations imposed upon them, but also learn from past security incidents and realize that the bar for compliance is continually in motion with every breach.