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California Expands Existing Data Privacy Breach Law

California Expands Existing Data Privacy Breach Law

By Angelina Bruno-Metzger

Governor Jerry Brown recently signed bill SB46 into law, which amends California’s data breach notification law by expanding the definition of “personal information.” The current law requires alerts to be sent to consumers when a database has been breached in a way that could expose a consumer’s social security number, driver license number, credit card number(s), or medical/health insurance information. Under this new amendment, website operators will be obligated to send out privacy notifications after the breach of a “user name or email address, in combination with a password or security question and answer that would permit access to an online account.” Additionally this law requires notifications, even when no other personal information has been breached, in cases when a breach of a user name or email address used in combination with a password or security question could permit access to an online account. Currently, as with the new “Do Not Track” law, California is the only state whose breach notification statute incorporates breaches solely by the loss of a user name or email address.

This law will go into effect on January 1, 2014 and a company’s notification obligations under this new law are different depending on the type of personal data that has been breached. When the security breach does not involve login credentials for an email account, the operator is allowed to notify affected customers through the use of a “security breach electronic form”. This form would direct the person whose personal information has been compromised to immediately change his/her password and security question(s) or answer(s) – as well as direct the user to take appropriate precautionary measures with all other virtual accounts that use the same user name or email address and password. However, when the security breach does involve login credentials for an email account the operator, logically, may not provide notification to that email address. Alternatively, the operator may provide “clear and conspicuous notice delivered to the resident online when the resident is connected to the online account from an IP address or online location from which the person or business knows the resident customarily accesses the account.”

As with the other recently passed cyber laws, the implications of this new data privacy breach law will likely be felt nationally and internationally, as almost every company that offers online personalized services requires a consumer to create a username and password. While there remains some uncertainty about exactly what businesses must abide by this new regulation, as not all companies can readily, if at all, confirm affected users are California residents, since sharing of home addresses is often optional, it is best for businesses to abide by the old “better safe than sorry” adage. The two best ways companies can come into compliance with this regulation are to: (1) ensure that all usernames, passwords, security questions and answers are stored in an encrypted form, and (2) update existing protocols, or create new internal protocols that are consistent with this law’s reporting requirements.

See OlenderFeldman LLP’s predictions for what should happen in 2013 within the data privacy field and compare it with this new data privacy breach law in California.