Senators Introduce Breach Notice Measure To Set Federal Standard, Preempt States

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Data breach notification laws in 46 states and the District of Columbia would be preempted under a bill (S. 1193) introduced June 20.

The measure, which was introduced by Sens. Pat Toomey (R-Pa.), Angus King (I-Maine), and John Thune (R-S.D.), would establish a single federal standard for when companies would be required to notify individuals if their unencrypted personal data in electronic form had been breached.

Risk of Harm Trigger

The Data Security and Breach Notification Act of 2013 includes a risk of harm threshold for when notification would be required. Under the proposed law, a company would not be required to notify individuals of a breach of their personal data unless it reasonably believed a breach had or would lead to identity theft “or other actual financial harm.”

Not all of the state breach notice laws include a similar risk of harm trigger. Such a threshold has been one of the primary motivations for those seeking a single federal standard.

“A number of recent high-profile data breaches combined with the messy patchwork of 46 different state laws highlight how difficult it is for consumers to know their personal information is secure and they are not at risk of identity theft or other financial harm,” Toomey said in a June 20 statement.

“Congress needs to provide businesses and consumers with certainty and establish a single reasonable standard for information security and breach notification practices. Our bill would eliminate the burden of complying with varying standards and laws, ensuring that all consumers and their personal information are afforded the same level of protection,” he said.

Notice Without 'Unreasonable Delay.'

S. 1193 would require companies to notify the U.S. Secret Service and FBI of a breach if it affected the personal information of 10,000 or more individuals.

Third-party contractors who process or store personal data for another company would be required under the bill to notify the primary company of breaches. A communications service provider would be required to notify a party using its service if it discovered a breach.

Companies would be required under the proposed law to provide notice of a breach “as expeditiously as practicable and without unreasonable delay.”

A delay in providing notice would be considered reasonable if it was requested by law enforcement or national security officials or was to allow a company “time to determine the scope of the breach of security, to identify individuals affected by the breach of security, and to restore the reasonable integrity of the data system that was breached … .”

The bill would allow companies to provide notice to individuals by posting a notice online if the cost of providing direct notice was prohibitive.

FTC Enforcement, Penalties

The Federal Trade Commission would be charged with enforcing the proposed law under its FTC Act Section 5 unfair and deceptive practices authority.

In a June 20 statement, CTIA--The Wireless Association welcomed the bill, saying that it demonstrates “that it is possible to protect consumers while providing clear, consistent guidelines to businesses.”

The bill would set a maximum civil penalty of $500,000 for violations of the law.

The measure specifically provides that there would be no private cause of action to allow individuals to sue.

Companies covered under the Gramm-Leach-Bliley Act or the Health Insurance Portability and Accountability Act would be exempt from the proposed law.

Full text of S. 1193, as introduced, is available at