Three more states add laws on data breaches

Companies face a growing list of notification statutes with different provisions

Companies struggling to keep up with a patchwork of state laws related to data privacy and information security have three more to contend with, as new security-breach notification laws went into effect in Illinois, Louisiana and New Jersey on Jan. 1.

Like existing statutes in more than 20 other states, the new laws prescribe various actions that companies are required to take in the event of a security breach involving the compromise of personal data about their customers.

For instance, New Jersey's Identity Theft Prevention Act requires businesses to destroy all unneeded customer data and to notify consumers when sensitive data about them has been accessed by an unauthorized person. The law also limits the use of Social Security numbers on all items that are sent via postal mail.

Louisiana's Database Security Breach Notification Law requires entities that collect information on the state's residents to notify affected individuals of security breaches involving their confidential data. Government officials also need to be notified, according to the law. Illinois' Personal Information Protection Act is similar, although it doesn't require companies to inform the state government when breaches occur.

For companies that do business nationally or in various states, the smorgasbord of state laws poses a growing problem, because the measures often specify different triggers for notifications and set varying requirements on what needs to be disclosed, to whom and when, said Kirk Herath, chief privacy officer at Nationwide Mutual Insurance Co. in Columbus, Ohio.

In addition, some states require companies to provide credit-monitoring services to affected customers, whereas others don't, Herath said. And not all of the states offer safe-harbor provisions exempting from their laws companies that encrypt data, he said.

"What I would prefer to see is something that would be uniform and preemptive [of state laws]," Herath said. "Otherwise, you have a very inconsistent application of the law, with some states requiring you to do nothing [and] some hammering you to the point of being unfair." He added that it would be better to have a single law managed by a central regulatory authority, in much the same manner that the CAN-SPAM Act and the National Do Not Call Registry are.

"We're hoping a federal law will help clarify the situation," said the director of information security at a specialty retail chain based in California.

Until that comes to pass, the retailer plans to continue to use the SB 1386 breach-disclosure law that went into effect in California more than two years ago as a "baseline" for developing its security incident response and notification strategy, said the director, who asked not to be identified.

The retail chain also plans to develop an information grid that will help it quickly go through a checklist of requirements for each state in case it triggers a notification statute. Nationwide already has such a grid, according to Herath.

"What the situation is crying out for is a federal version of the state laws," said Arshad Noor, CEO of StrongAuth Inc., a compliance management services firm in Sunnyvale, Calif. But such a law would have to be at least as strong as the existing state regulations are for it to win approval from federal legislators, Noor said.

Copyright © 2006 IDG Communications, Inc.

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