The Secure Times

An online forum of the ABA Section of Antitrust Law's Privacy and Information Security Committee


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Yesterday at FTC, President Obama Announced Plans for new data privacy and security laws: Comprehensive Data Privacy Law, Consumer Privacy Bill of Rights, and Student Digital Privacy Act

Yesterday afternoon, President Barak Obama gave a quip-filled speech at the Federal Trade Commission where he praised the FTC’s efforts in protecting American consumers over the past 100 years and unveiled his plans to implement legislation to protect American consumers from identity theft and to protect school children’s personal information from being used by marketers.   These plans build upon past legislative efforts and the Administration’s focus on cybersecurity, Big Data, and Consumer Protection.  Specifically, On February 23, 2012, the White House released “Consumer Data Privacy in a Networked World: A Framework for Protecting Privacy and Promoting Innovation in the Global Digital Economy” (the “Privacy Blueprint”) and in January 2014, President Obama asked his Counselor, John Podesta, to lead a working group to examine Big Data’s impact on government, citizens, businesses, and consumers.  The working group produced Big Data: Seizing Opportunities, Preserving Values on May 1, 2014.

In his speech, the President highlighted the need for increased privacy and security protections as more people go online to conduct their personal business—shop, manage bank accounts, pay bills, handle medical records, manage their “smart” homes, etc.—stating that “we shouldn’t have to forfeit our basic privacy when we go online to do our business”.  The President referenced his “Buy Secure” initiative that would combat credit card fraud through a “chip-and-pin” system for credit cards and credit-card readers issued by the United States government.  In that system, a microchip would be imbedded in a credit card and would replace a magnetic strip since microchips are harder than magnetic strips for thieves to clone.   A pin number would also need to be entered by the consumer into the credit card reader just as with an ATM or debit card.  The President praised those credit card issuers, banks, and lenders that allowed consumers to view their credit scores for free.   He also lauded the FTC’s efforts in the efforts to help identity theft victims by working with credit bureaus and by providing guidance to consumers on its website, identitytheft.gov.

The first piece of legislation the President discussed briefly was a comprehensive breach notification law that would require companies to notify consumers of a breach within 30 days and that would allow identity thieves to be prosecuted even when the criminal activity was done overseas. Currently, there is no federal breach notification law and many states have laws requiring companies to notify affected consumers and/or regulators depending on the type of information compromised and the jurisdiction in which the organization operates.  The state laws also require that breach notification letters to consumers should include certain information, such as information on the risks posed to the individual as a result of the breach along with steps to mitigate the harm.   This “patchwork of laws,” President Obama noted, is confusing to customers and costly for companies to comply with.  The plan to introduce a comprehensive breach notification law adopts the policy recommendation from the Big Data Report that Congress pass legislation that provides for a single national data breach standard along the lines of the Administration’s May 2011 Cybersecurity legislative proposal.  Such legislation should impose reasonable time periods for notification, minimize interference with law enforcement investigations, and potentially prioritize notification about large, damaging incidents over less significant incidents.

The President next discussed the second piece of legislation he would propose, the Consumer Privacy Bill of Rights.  This initiative is not new.  Electronic Privacy Bills of Rights of 1998 and 1999 have been introduced.  In 2011, Senators John Kerry, John McCain, and Amy Klobucher introduced S.799 – Commercial Privacy Bill of Rights Act of 2011.   The Administration’s  Privacy Blueprint of February 23, 2012 set forth the Consumer Privacy Bill of Rights and, along with the Big Data Report, directed The Department of Commerce’s The National Telecommunications and Information Administration (NTIA) to seek comments from stakeholders in order to develop legally-enforceable codes of conduct that would apply the Consumer Privacy Bill of Rights to specific business contexts.

The Big Data Report of May 1, 2014 recommended that The Department of Commerce seek stakeholder and public comment on big data developments and how they impact the Consumer Privacy Bill of Rights draft and consider legislative text for the President to submit to Congress.  On May 21, 2014, Senator Robert Menendez introduced S.2378 – Commercial Privacy Bill of Rights Act of 2014.  The Consumer Privacy Bill of Rights set forth seven basic principles:

1) Individual control – Consumers have the right to exercise control over what information data companies collect about them and how it is used.

2) Transparency – Consumers have the right to easily understandable and accessible privacy and security practices.

3) Respect for context – Consumers expect that data companies will collect, use, and disclose the information they provided in ways consistent with the context it was provided.

4) Security – consumers have the right to secure and responsible handling of personal data.

5) Access and accuracy – Consumers have the right to access and correct their personal data in usable formats in a manner that is appropriate to the data’s sensitivity and the risk of adverse consequences if the data is not accurate.

6) Focused Collection – Consumers have the right to reasonable limits on the personal data that companies collect and retain.

7) Accountability – Consumers have the right to have companies that collect and use their data to have the appropriate methods in place to assure that they comply with the consumer bill of rights.

The President next discussed the third piece of legislation he would propose, the Student Digital Privacy Act.  The President noted how new educational technologies including tailored websites, apps, tablets, digital tutors and textbooks transform how children learn and help parents and teachers track students’ progress.  With these technologies, however, companies can mine student data for non-educational, commercial purposes such as targeted marketing.  The Student Privacy Act adopts the Big Data Report’s policy recommendation of ensuring that students’ data, collected and gathered in an educational context, is used for educational purposes and that students are protected against having their data shared or used inappropriately.  The President noted that the Student Digital Privacy Act would not “reinvent the wheel” but mirror on a federal level state legislation, specifically the California law to take effect next year that bars education technology companies from selling student data or using that data to target students with ads.   The current federal law that protects student’s privacy is the Family Educational Rights and Privacy Act of 1974, which does not protect against companies’ data mining that reveals student’s habits and profiles for targeted advertising but rather protects against official educational records from being released by schools. The President highlighted current self-regulation, the Student Privacy Pledge, signed by 75 education technology companies committing voluntary not to sell student information or use education technologies to send students targeted ads.  It has been discussed whether self-regulation would work and whether the proposed Act would go far enough.  The President remarked that parents want to make sure that children are being smart and safe online, it is their responsibility as parents to do so but that structure is needed for parents to ensure that information is not being gathered about students without their parents or the kids knowing about it.  This hinted at a notification requirement and opt-out for student data mining that is missing from state legislation but is a requirement of the Children’s Online Privacy Protection Act of 1998.  Specifically, COPPA requires companies and commercial website operators that direct online services to children under 13, collect personal information from children under 13, or that know they are collecting personal information from children under to children under 13 to provide parents with notice about the site’s information-collection practices, obtain verifiable consent from parents before collecting personal information, give parents a choice as to whether the personal information is going to be disclosed to third parties, and give parents access and the opportunity to delete the children’s personal information, among other things.

President Obama noted that his speech marked the first time in 80 years—since FDR—that a President has come to the FTC.   His speech at the FTC on Monday was the first of a three-part tour leading up to his State of the Union address.  Next, the President also planned to speak at the Department of Homeland Security on how the government can collaborate with the private sector to ward off cyber security attacks.  His final speak will take place in Iowa, where he will discuss how to bring faster, cheaper broadband access to more Americans.

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Rep. Stearns Introduces New Privacy Bill

Rep. Cliff Stearns, (R-FL), introduced yesterday a new privacy bill, H.R.1528, “To protect and enhance consumer privacy, and for other purposes.” Rep. Stearns had worked on a draft privacy bill with Rep. Rick Boucher (D-VA) during the last Congress. Rep. Boucher was defeated during the last election.

Rep. Stearns said: “Using my privacy legislation from the 109th Congress as a base, I took the comments submitted to Chairman Boucher and worked with stakeholders on developing this bill.  The introduction of this bill is not the end of the process.  I will continue to work to improve the language to ensure that regulatory distinctions are not being made on like services and that privacy is administered by a single agency, across the entire Internet economy.”

Violation of any provision of the Act would be an unfair or deceptive act or practice unlawful under 16 section 5(a)(1) of the Federal Trade Commission Act. The Act would not provide any private right of action, and would preempt state laws.

The bill would apply to an entity, its agents, or affiliates that “collects, sells, discloses for consideration, or uses personally identifiable information of more than 5,000 consumers during any consecutive 12-month period.” This definition includes non-profit organizations, but does not include governmental agencies, provider of professional services, and data processing outsourcing entities, Section 3(4).

Regulating the “cloud”

Data processing outsourcing entities would be have to be “contractually obligated to comply  with security controls specified by [covered entities] and [would have] no right to use the covered entity’s personally identifiable information other than for performing data processing outsourcing services for the covered entity or as required by contract or law,” Section 3(5).

Notice to consumers before using personally identifiable information for a purpose unrelated to the transaction

Covered entities would have to notify consumers before using any personally identifiable information they collected for a purpose unrelated to a transaction, Section 4(a)(1).

Notice to consumers of any material change in their privacy policy

Covered entities would have to provide notice to consumers after making a material change to their privacy policies, Section 4(a)(2).

Establishing a written and clear privacy policy, and a security policy

Covered entities would have to establish a privacy policy with respect to the collection, sale, disclosure, dissemination, use, and security of the personally identifiable information of consumers, Section 5(a), using written “brief, concise, clear, and conspicuous (… ) plain language,” Section 5(b)(1). The privacy policy would inform consumers about the “types of information that may be collected or used, how  the information may be used, and whether the consumer is required to provide the information in order to do business with the covered entity,” Section 5(b)(3). 

The policy would also inform consumers about the extent to which their information is “subject to sale or disclosure for consideration to a covered entity that is not an information sharing affiliate of the covered entity,” Section (b)(3)(E), and whether the information security practices of the covered entity meet “security requirements necessary to prevent unauthorized disclosure or release of personally identifiable information,” Section (b)(3)(F).

Indeed, covered entities would have to implement an “information security policy applicable to the information security practices and treatment of personally identifiable information maintained by the covered entity, that is designed to prevent the unauthorized disclosure or release of such information,” Section 8.

Providing consumers the opportunity to preclude the sale or disclosure of their information to any organization that is not an information-sharing partner

Covered entities would have to provide consumers, at no charge, the “opportunity to preclude any sale or disclosure for consideration of the consumer’s personally identifiable information, provided in a particular data collection, that may be used for a purpose other than a transaction with consumer, to any covered entity that is not an information-sharing affiliate of the covered entity providing such opportunity,” Section 6(a)(1). This preclusion would remain in effect during 5 years, or until the consumer indicates otherwise, whichever occurs sooner, Section 6(a)(2). Covered entities could provide the consumer an opportunity to allow the sale or disclosure “in exchange for a benefit to the consumer, “Section (6)(b).

Self-regulatory programs approved by the FTC

The Federal Trade Commission (“FTC”) would presume that a covered entity complies with the provisions of the Act if it participates in a self-regulatory program, Section 9(a), which would have to be approved by the FTC, Section 9(b). Denial of approval of a self-regulatory program would be subject to judicial review, Section 9(b)(5).

Self-Regulatory consumer dispute resolution process

If a consumer has a dispute with a participant in a self-regulatory program, and if this dispute pertains to the entity’s privacy policy or practices required for participation in the self-regulatory program, the consumer would have to initially seek resolution through a dispute resolution process, Section 9(d).