No consensus on how to notify Target data breach victims

[Audrey McNeil <audrey () riskbasedsecurity com>]

http://www.detroitnews.com/article/20140310/BIZ02/303100040

The data breach at Target Corp. that exposed millions of credit card
numbers has focused attention on the patchwork of state consumer
notification laws and renewed a push for a single national standard.

Most states have laws that require retailers to disclose data breaches, but
the laws vary wildly. Consumers in one state might learn immediately that
their personal information had been exposed, but that might not happen in
another state, and notification requirements for businesses depend on where
their customers are located. Attorney General Eric Holder has joined the
call for a nationwide notification standard, but divisions persist, making
a consensus questionable this year.

"We're stuck with the state-by-state approach unless some compromise gets
done at the federal level," said Peter Swire, a privacy expert at Georgia
Tech and a former White House privacy official.

Despite general agreement on the value of a national standard, there are
obstacles to a straightforward compromise:

-- Consumer groups don't want to weaken existing protections in states with
the strongest laws.

-- Retailers want laws that are less burdensome to comply with and say too
much notification could cause consumers to tune out the problem.

-- Congress is looking at different proposals for how any federal standard
should be enforced and what the threshold should be before notification
requirements kick in.

The issue gained fresh urgency as part of a larger security debate after
data breaches involving retailers Neiman Marcus and Target. Target, the
nation's second-largest retail discounter, has said 40 million credit and
debit card accounts were exposed between Nov. 27 and Dec. 15.

The company went public with the breach on Dec. 19, several days after it
said it learned of the problem and soon after the news began leaking
online. Since then, sales, profit and stock prices have dropped, the
company's chief information officer has resigned and banks and retailers
are facing continued scrutiny about what more can be done to protect
consumer data.

The Justice Department is investigating the data theft, and Holder urged
Congress in a video statement last month to adopt a national notification
standard that would include exemptions for harmless breaches.

"This would empower the American people to protect themselves if they are
at risk of identity theft. It would enable law enforcement to better
investigate these crimes and to hold compromised entities accountable when
they fail to keep sensitive information safe," he said in the statement.

Such proposals have been around for years.

An Obama administration plan from 2011 would have required businesses that
collect personal information on more than 10,000 people in any 12-month
period to disclose potentially harmful breaches and for breaches that
affect more than 5,000 people to be reported to consumer credit reporting
agencies and the federal government.

Past congressional efforts to agree on a standard have failed. Currently,
46 states and the District of Columbia have their own breach notification
laws, according to the National Conference of State Legislatures.

Proposals now before Congress would require notification. But there are
differences in what information the notification would provide, the
threshold for notifying regulators and law enforcement, and the proposed
enforcement. Some bills seek criminal penalties for deliberately concealing
a breach; others do not.

Consumer groups fear that any national standard could turn out to be weaker
than the strongest state laws, such as one in California that requires a
business or state agency to notify any state resident whose data was
improperly obtained. Other state laws are more lenient, requiring notice
only in cases where a risk analysis determines that the breach is likely to
have actually harmed consumers.

"From industry's perspective, whether you're a bank or a merchant, you
don't want to have to notify consumers," said Ed Mierzwinski, consumer
program director at the U.S. Public Interest Research Group. "They want to
pre-empt, or override, the best state laws."

Retailers say they do support a federal notification standard but one that
would be triggered when sensitive material has been exposed -- as opposed
to, say, customers' shoe sizes -- and when there's a risk that it will be
used for theft or fraud.

"There are different kinds of data. There's data that can lead to an
identity theft (or) financial fraud, and there's data that probably doesn't
have much utility to the criminals," said David French, senior vice
president for government relations at the National Retail Federation. "If
you get 20 notices a month, at some point you just turn it off."

Meanwhile, retailers remain at odds with financial institutions over how
best to protect consumer data. Retailers say banks need to upgrade security
technology on the credit cards they issue. Banks say retailers need to do
more to enhance their own security.

"There's no agreement in the private sector among the major players about
what their responsibilities are, and that makes it more difficult for us in
the Congress to end up on the same page," said Sen. Tom Carper, D-Del.,
chairman of the Senate Homeland Security and Governmental Affairs
committee, in an interview.

He is sponsoring legislation that provides for notification in cases where
there is "substantial risk" of identity theft or account fraud.

Carper said he's hoping for a solution, because the "alternative is a
patchwork quilt that is a nightmare."

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