Download - February 8, 2013 Monika Jedrzejowska Associate Privacy and Data Security Practice Hunton & Williams LLP (212) 309-1047 [email protected] .

February 8, 2013

Monika JedrzejowskaAssociatePrivacy and Data Security PracticeHunton & Williams LLP(212) [email protected]

Overview of U.S. Privacy and Information Security Issues

NCHER Winter Legal Meeting

Roadmap• Introduction• Overview of U.S. Privacy and Data Security

Requirements– Federal – State

• U.S. Enforcement Climate– Federal– State

• Federal Policy Landscape

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What is Privacy?

• Privacy is the appropriate use of information as defined by:– Laws and regulations– Consumer expectations

• Security is the protection of information– Confidentiality of data– Data integrity– Availability of data

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Four Privacy Risks

• Legal compliance• Reputation• Investment• Reticence


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Overview of U.S. Privacy and Data Security

Requirements


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Patchwork of U.S. Privacy Laws

• U.S. has no overarching privacy scheme– Sectoral approach

• More than ten federal privacy laws• Hundreds of state laws• Plus industry standards (such as PCI DSS)• No uniform definition of “personal information”


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Major U.S. Federal Privacy Laws• Sectoral approach • Laws include:

– GLB: Financial institutions– HIPAA: Health care entities– Fair Credit Reporting Act (“FCRA”)/Fair and Accurate Credit

Transactions Act (“FACTA”): Consumer reporting agencies and others• FTC Disposal Rule• Red Flags Rule

– Children’s Online Privacy Protection Act (“COPPA”): Children’s data online

– Controlling the Assault of Non-Solicited Pornography and Marketing Act (“CAN-SPAM”): Commercial email

– Video Privacy Protection Act (“VPPA”): Video rental records– Driver’s Privacy Protection Act (“DPPA”): DMV records– Telephone Consumer Protection Act: Telemarketing– Privacy Act of 1974: Federal government


Gramm-Leach-Bliley Act (“GLB”) • GLB includes an extremely broad definition of “Financial

Institution” – The term “financial institution” means any institution the business

of which is engaging in financial activities as described in section 1843(k) of title 12

• Originally enforced by the FTC and various financial services regulators, including:– Office of the Comptroller of the Currency (“OCC”)– Federal Reserve Board (the “Board”)– Securities and Exchange Commission (“SEC”)

• Since 2011, Regulation P transferred authority over many financial institutions to the Consumer Financial Protection Bureau (“CFPB”)


GLB Privacy Rule Notice Obligations• Must provide “customers” with notice of privacy policies and practices

at the outset of the relationship and annually thereafter– Regulations call for “reasonably understandable” notice

• Notice must include:– Categories of nonpublic personal information the institution collects– Categories of information it discloses– Affiliates and nonaffiliated third parties to whom such information is

disclosed– Description of customer’s right to prevent certain disclosures to

nonaffiliated third parties• Final Model Privacy Notice Form – published in November 2009

– Safe Harbor if form is used, but use of model form is not required– “Opt out” and “no opt out” versions available


GLB Privacy Rule Disclosures to Non-Affiliates and Affiliates

• NPI may not be disclosed to non-affiliates, unless:

– Customer has received an initial privacy notice

– Customer has opportunity to opt out

• Opt out must be “clear and conspicuous”

– Customer does not opt out

• But affiliate sharing is not restricted by GLB

– Note: California’s Financial Information Privacy Act

– Note: FACTA Affiliate Marketing Rule• Broad exceptions permit nearly any legitimate business use:

– “as necessary to effect, administer, or enforce a transaction requested or authorized by the consumer”

– “with the consent or at the direction of the consumer” – Disclosure to CRAs is permitted– “as required by law”


Safeguards Rule• Must develop policies and procedures to:

– Ensure the security and confidentiality of customer records and information

– Protect against any anticipated threats or hazards to the security or integrity of customer records and information

– Protect against unauthorized access to or use of customer records or information that could result in substantial harm or inconvenience to any customer

• Must properly dispose of consumer report information


GLB Interagency Guidelines and Guidance

• Interagency Guidelines Establishing Information Security Standards – Requires a written security program overseen by Board of Directors (or

their designee)

– Requires that financial institutions take appropriate steps to protect information provided to a Service Provider (broadly defined)

• Interagency Guidance on Response Programs for Unauthorized Access to Customer Information and Customer Notice– Applies to certain financial institutions

– Prescribes a risk-based response program to address incident of unauthorized access to customer information, including procedures for notifying federal regulators, law enforcement authorities and customers

– May preempt certain state information security breach notification laws


Fair Credit Reporting Act• Enacted in 1970 to promote accuracy, fairness and the privacy of

personal information assembled by Consumer Reporting Agencies • CRAs must follow “reasonable procedures” to protect the

confidentiality, accuracy and relevance of credit information• FCRA requires that:

– Consumers be told by creditors why they have been turned down for credit and that the decision was based on a consumer report

– The CRA provides a free copy of the report to the consumer after an adverse action

– Consumers be allowed to dispute information in the report– The credit bureau reinvestigates the dispute– Data suppliers cooperate with the reinvestigation and report accurately

thereafter, and the CRA corrects the report after such reinvestigation• The “user” of a consumer report must have a permissible purpose

for obtaining the report


FACTA, Red Flags Rule and Affiliate Marketing• Fair and Accurate Credit Transactions Act (“FACTA”) was enacted in 2003

to amend the FCRA and two key rules resulted:• Red Flags Rule:

– Requires financial institutions and creditors to develop and implement an Identity Theft Prevention Program that identifies, detects and responds to “Red Flags” signaling fraud by identity theft

– Requires users of consumer reports to develop procedures for responding to notices of address discrepancy; imposes duties on credit card issuers regarding change of address notifications

• Affiliate Marketing Rule:

– Requires to provide notice to individuals that their information will be shared with affiliates for marketing purposes, and that they may elect to limit the use of their eligibility information to make solicitations

– Opt out must be effective for five years, unless revoked by customer, with renewal requirements at end of five years


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State Privacy Laws

• Examples:– Website privacy notices (CA, NE, PA)– Marketing restrictions (e.g., telemarketing)– Restrictions on sharing information with third parties

for marketing purposes (CA)– SSN use restrictions– Child protection registry laws (MI, UT)– Radio frequency identification (RFID)– Anti-spyware– Credit reports


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State Information Security Laws

• Several states have laws mandating security measures to protect PI– Example: California’s AB 1950 requires reasonable security

procedures and contracts with service providers– Massachusetts requires businesses to develop, implement and

maintain a comprehensive WISP to protect personal information, including:

• Developing information security policies• Requiring service providers by contract to implement security

measures for personal information• Implementing numerous computer system security requirements

– Nevada requires encryption of data in transit


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Information Security Breach Notification Laws

• 90% of U.S. companies have experienced a hacking event in the last year

• The term “security breach” defines a broad range of activities• 50 U.S. jurisdictions have security breach notification laws

– California’s SB 1386 started the trend

– There are also federal breach notification requirements pursuant to HIPAA and GLB

• Recent breaches have been game changers– Companies notifying when not legally required to do so (Epsilon)

– Huge volumes of affected individuals (Sony)

– Security companies targeted (RSA)


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Breach Laws: Requirements• Generally, duty to notify arises as a result of unauthorized access or

acquisition of unencrypted computerized “personal information”

• “Personal information” typically is name combined with:

– SSN

– driver’s license or state ID card number

– account, credit or debit card number, along with password or access code

• But state laws differ:

– Definition of PI

– Computerized v. paper data

– Notification to state agencies

– Notification to CRAs

– Timing of individual notification

– Harm threshold

– Contents of notification letter


U.S. Enforcement Climate

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Federal Privacy Enforcement • FTC Act provides the principal enforcement tool for

privacy issues• Section 5 of the FTC Act:

– Prohibits “unfair or deceptive acts or practices in or affecting commerce”

– FTC privacy enforcement actions typically result from (1) security breaches, (2) deceptive statements in privacy policies, and (3) lack of conspicuous notice

– Google Buzz settlement changed the landscape

• Director of Consumer Protection Bureau kept his promise to bring more “pure privacy” actions

• HHS is now also proactive

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State Privacy Enforcement and Class Actions

• State AGs are now proactive – Regularly make inquiries and bring enforcement

actions• Class actions filed with increasing regularity

– Common after data breaches, particularly (but not necessarily) when there is harm

– Recent privacy and information security class actions:• Sony was sued for its PlayStation Network data

breaches• Google was sued for Street View Wi-Fi data

collection


Federal Policy Landscape

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Federal Policy Landscape

• Existing privacy law framework in the U.S. is under pressure

• Over a dozen significant privacy bills proposed in 2011-12, including:

– Data Breach Notification Act of 2011 (Sen. Dianne Feinstein)– Personal Data Protection and Breach Accountability Act of 2011 (Sen. Richard

Blumenthal)

• Policy landscape– FTC Report (March 2012)

– White House (February 2012)

– Commerce Green Paper (December 2010)

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Questions?

Monika Jedrzejowska

AssociatePrivacy and Data Security PracticeHunton & Williams LLP

(212) [email protected]

www.huntonprivacyblog.com