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

Evan Schuman | May 14, 2014
The White House's big report on big-data privacy has several shortcomings.

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.

 

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