Evan Schuman: One law to rule all data breaches -- but let's make it a real law

The White House's big report on big-data privacy has several shortcomings

When the White House issued its big-data privacy report on May 1, it recommended the passage of federal breach legislation "to replace a confusing patchwork of state standards." Although that may have sounded like good news to the development community -- the folk who generally bear the brunt of complying with such security requirements -- it's only a step in the right direction if your goal is falling off of a cliff.

Having one federal standard rather than a large number of state standards is an unquestionably good thing. I'm not arguing against that. But the exceptions spelled out in the report and one rather obvious omission make the whole effort rather pointless. (Let's leave aside the question of whether putting any nuanced business problem in the hands of Congress and expecting them to figure out a realistic solution is akin to administering an astrophysics final to your pet rock. No need to belabor the obvious.)

Let's start with what the report recommends. In discussing big data, it makes a reasonable point: "Amalgamating so much information about consumers makes data breaches more con-sequential, highlighting the need for federal data breach legislation to replace a confusing patchwork of state standards. The sheer number of participants in this new, inter-connected ecosystem of data collection, storage, aggregation, transfer, and sale can disadvantage consumers."

In short, the more you collect, the more you can lose.

Here's where things get dicey: "Such legislation should impose reasonable time periods for notification, minimize interference with law enforcement investigations, and potentially prioritize notification about large, damaging incidents over less significant incidents."

Let's take those one at a time:

Reasonable time period for notification

What is a reasonable time period? Many retailers would argue that it's reasonable to wait until the report can be confirmed as accurate, which means allowing a comprehensive set of forensic analysis plus other testing. And maybe a second or third opinion.

Reporting the matter quickly is almost always going to mean delivering preliminary and wrong data. To the extent that such disclosure helps anyone -- an assumption that I challenge -- isn't disclosing incorrect data harmful?

This also raises the question of when the clock should start. Is it from when the breach occurs? When the company is told that there might have been a breach? When it's confirmed?

Please remember that large companies can get thousands of reports of potential breaches every day, from software that looks for any anomalies. Knowing that more than 99.99% of those reports turn out be of no concern, when should the notification clock start?

Prioritize large over small

Is this relative to the size of the company involved, or is it a fixed number of people affected? Given that it will likely be a fixed number -- Congress has never been a big fan of nuance -- doesn't that let tons of smaller and midsize companies off the hook?

And what is the value of such a distinction? If you're arguing that disclosure helps people somehow, wouldn't all disclosures do that even better?

One fear that's often expressed about disclosing all breaches, big and small, is that consumers might get used to them and stop taking action. But what actions are they supposed to take? They can take their business elsewhere, or they can -- well, never mind; I really can't think of anything. So what is the benefit of these disclosures? How exactly are we making shoppers more secure with such disclosures?

Minimize interference with law enforcement investigations

On the surface, it's hard to argue with this. But scratch the surface and you see how this provision could nullify the whole objective.

The law enforcement exemption -- which exists in every state data breach disclosure law -- is ludicrously easy to obtain. If you've been breached, just ask any law enforcement investigator whether it would be better to keep the details quiet. The typical, kneejerk response: "Sure. That's always helpful." And so you get your exemption.

The federal law needs to implement serious oversight. The only way to get such an exemption should be to make a filing to a federal court, where a judge will hold an in-chambers hearing to determine if there's a true law enforcement need. The federal prosecutor should aggressively challenge any such attempts, leaving it up to the judge to decide. There should be a strong presumption against any such exemption.

As things stand now, law enforcement exemptions are common. They should be rare.

What's left out

The big omission in this data breach recommendation is that it fails to address the lack of any law -- federal or state -- that requires companies to reasonably protect payment card data and privacy-related data. A few states try to support PCI, but PCI is inconsistent and riddled with conflicts of interest. (For example, the qualified security assessor who determines what you need is also able to sell you those exact services. It's like gas stations that also perform state car inspections. "Can't pass you without new brakes. Just pull into that bay and we'll get you all set up.")

Before Target, the most notorious and largest retail data breach was from the TJX group of off-price chains (Marshalls, TJMaxx, HomeGoods, etc.). TJX successfully fought off two class-action federal suits, even though there was evidence aplenty that TJX's security measures were woefully inadequate. It argued that its security was not meaningfully worse than other major chains -- which was sadly true. But it was a bigger issue that it's a not a crime to not seriously protect data, even payment card data.

If the law specified clean and objective standards for data security and said, in effect, "If you want to encourage consumers to use payment cards in your stores, you have a legal obligation to aggressively protect that data. If you're found to have been reckless with that data, you won't just be sued; you'll be guilty of a federal felony," then you would start to see some real security measures.

Evan Schuman has covered IT issues for a lot longer than he'll ever admit. The founding editor of retail technology site StorefrontBacktalk, he's been a columnist for CBSNews.com, RetailWeek and eWeek. Evan can be reached at eschuman@thecontentfirm.com and he can be followed at twitter.com/eschuman. Look for his column every other Tuesday.

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