Back in 2003, California became the first state in the U.S. to pass a security breach notification law. California’s Security Breach Notification Law applies to any business that conducts business in California, which of course means that the law reaches nearly all companies that have an e-commerce presence. In a nut shell, the statute requires businesses to notify California residents when the security of such residents’ personal information has been breached. The rationale behind the law is that breach notification ensures that residents become aware of a breach, thereby allowing them to take actions to mitigate potential financial losses due to fraudulent use of their personal information.
Fast forward ten years. California Attorney General’s specialized eCrime Unit found that increasingly “criminals are targeting Internet Web sites with inadequate security, including some social media Internet Web sites, to harvest email addresses, user names, and passwords,” and “[b]ecause most people do not use unique passwords for each of their accounts, acquiring the information on one account can give a thief access to [many different] accounts.”
And so, on September 10, the California legislature passed and sent to the Governor’s desk a bill that would amend California’s security breach notification law in a significant way. This is the second bill in as many weeks to reach the Governor’s desk addressing consumer privacy. Last week it was AB-370, which I discussed here. This week, it is California Senate Bill 46 (SB-46), which would expand the definition of “personal information” subject to California’s existing security breach disclosure requirements to include “a user name or email address, in combination with a password or security question and answer that permits access to an online account.” This could have a significant impact, given that notification requirements following a security breach incident depend upon whether the compromised data falls within the definition of “personal information”.
Overview of California’s Security Breach Notification Law
California’s Security Breach Notification Law (Section 1798.82 of the California Civil Code) requires businesses that own or license computerized data consisting of personal information to disclose any breach of the security of the system following discovery of such breach to any resident of California whose unencrypted personal information was believed to be acquired by an unauthorized person. The triggering event is a “breach of the security of the system”, which means the unauthorized acquisition of computerized data that compromises the security, confidentiality, or integrity of personal information maintained by the business. Likewise, 1798.82 requires businesses that maintain (but do not own or license) computerized data consisting of personal information to notify the owner or licensee of the information of any associated security breach immediately following the discovery of such breach.
Where a data breach occurs and a business is required to issue a notification, the law requires that the notification be written in plain language, and include (1) the name and contact information of the business, (2) the types of personal information that were believed to have been the subject of a breach, (3) the estimated date, or date range, of the breach, (4) the date of the notice, (5) whether the notification was delayed as a result of a law enforcement investigation, (6) a general description of the breach incident, (7) the toll-free telephone numbers and addresses of the major credit reporting agencies if the breach exposed a social security number or a driver’s license number. Additionally, at the discretion of the business, the notification may also include information about what the business has done to protect individuals whose information has been breached and advice on steps the individual may take to protect him/herself.
Up until what appears to be the imminent passage of SB-46, the definition of “personal information” meant an individual’s first name or first initial and last name in combination with that individual’s (1) social security number, (2) driver’s license or California ID number, (3) account number, in combination with any required security code, PIN, or password that would permit access to that individual’s financial account, (4) medical information, or (5) health insurance information, when either the name or any of the data elements (1)-(5) are not encrypted.
How SB-46 Amends Section 1798.82
SB-46, if signed by Gov. Jerry Brown, would amend 1798.82 in three notable ways. First, and probably most significantly, SB-46 would broaden the definition of “personal information” to include “a user name or email address, in combination with a password or security question and answer that would permit access to an online account.” Unlike the existing data elements (e.g., social security number, medical information, etc.), this new category of personal information does not need to be in combination with the individual’s name to be deemed personal information.
Second, and perhaps in an effort to mitigate the impact that will surely be felt by companies, the bill would provide a streamlined notification process for breaches concerning the new online account information category of personal information. The streamlined notification process would allow the business to comply with notification requirements by providing the security breach notification in “electronic or other form that directs the person whose personal information has been breached promptly to change his or her password and security question or answer, as applicable, or to take other steps appropriate to protect the online account with the business and all other online accounts for which the person whose personal information has been breached uses the same user name or email address and password or security question or answer.”
Third, the bill would create a variation on the streamlined notification process for breaches concerning login credentials of an email account that is furnished by the business. For these businesses (i.e., email service providers) the business must provide notice by the traditional method required under the current notification requirements (i.e., non-streamlined) or “by clear and conspicuous notice delivered to the resident online when the resident is connected to the online account from an Internet Protocol address or online location from which the business knows the resident customarily accesses the account.”
Certainly, with the occurrence of data breaches on the rise, and while usernames/email addresses and passwords are commonly collected by companies with an eCommerce or social network presence, the additional category of personal information introduced by SB-46 will have a compounding effect on companies’ notification obligations. Companies, going forward, would be wise to put together a strategy to treat usernames/emails in combination with passwords (or security questions/answers) just as they would a person’s name in combination of a social security number under their existing information security policies.