Alston & Bird Consumer Finance Blog

Privacy and Cybersecurity

California Releases Modified CCPA Regulations

On February 7, 2020, the California Office of the Attorney General released Modified Regulations to the California Consumer Privacy Act (“CCPA”). The Modified Regulations update the Initial Proposed Regulations, which were previously published on October 11, 2019. The deadline to submit written comments is February 24, 2020 at 5:00 pm PST.

Alston & Bird’s Privacy & Data Security team will be publishing a blog post with a more detailed discussion of the Modified Regulations.

Warning: Iranian Cyber Response Possible Against Private Industry

After Friday’s announcement of the killing of Major General Qassem Soleimani, a leader of Iran’s Quds Force, several regulators have put industry on high alert of the increased potential for cyber-attack.  Iran has a known history of launching cyber-attacks against US industry, and regulators warn industry to prepare for a possible rise in cyber-attacks.

The Cybersecurity and Infrastructure Security Agency (CISA), part of the U.S. Department of Homeland SecurityNew York Department of Financial Services and even ISACs like the Health Information Sharing and Analysis Center issued alerts this week, to name a few.

While it is important to note that there is no specific, credible, threat of new Iranian attack, Iran has a proven track record of attacks on health care, financial services, educational institutions, energy, telecommunications, other critical infrastructure and large corporations.  In addition to U.S. government alerts, many tech companies, service providers and security companies have released alerts regarding Iranian attacks against private industry.

Recommended Actions from CISA – Things to do Today

CISA outlines five steps to do today to strengthen basic cyber defenses:

  1. Prepare the Organization for Response:  Review incident and crisis response plans, consume and operationalize threat intelligence, minimize IT/security staffing coverage gaps and ensure your phone trees are up-to-date to respond.
  2. Increase Organizational Vigilance:  Ensure your security personnel know how to identify anomalous behavior that may indicate compromise.  Flag Iranian indications of compromise (IoCs). For more information on patterns of publicly known Iranian Advanced Persistent Threats, please see the CISA alert (describing common Iranian attack techniques such as, use of: credential dumping, obfuscated files/information, data compression, PowerShell, user execution, scripting, and registry run keys/startup folder).
  3. Confirm Reporting Processes:  Ensure your organization’s staff members know how and when to report an incident.
  4. Exercise Your Incident Response Plan:  Ensure your incident response team is aware of the plan (with any related crisis response plans) and can execute the steps that they need to take during an incident.
  5. Confirm Backups:  Confirm your organization has appropriate backups, and ensure it has offline backups, because attackers commonly attack backup sources.

In addition to these basic steps, our team can assist you with greater organizational awareness of cyber security for Iranian threats and beyond.  Please contact the authors or the Alston & Bird attorney with whom you normally work if you would like more information on cyber threat preparedness and what technical, operational and legal actions companies should take.

Alston & Bird Expands Privacy and Cybersecurity Capabilities with Former FTC Veteran

Alston & Bird has expanded its privacy and cybersecurity litigation practice in Washington, D.C. with partner, Kathleen Benway. Benway, a former U.S. Federal Trade Commission (FTC) chief of staff, brings exceptional experience at the FTC, FCC, and in the Senate with consumer protection law and policy, especially in privacy and data security. She arrives from Wilkinson Barker Knauer LLP.

Benway has more than 12 years of service at the FTC, including most recently as chief of staff for the agency’s Bureau of Consumer Protection (BCP). While at the FTC, Benway served as chief of staff to three former directors of the agency’s BCP, where she managed day-to-day operations, represented the bureau in interactions with FTC commissioners, and assisted with congressional relations.

Benway also held a number of other positions at the FTC. In addition to serving as attorney advisor to former FTC Commissioner Julie Brill and counsel to the director of the BCP, she led investigations and litigated enforcement actions as a senior attorney in the bureau’s Privacy and Identity Protection Division and Marketing Practices Division. Additionally, she served two details as counsel to the Senate Committee on Commerce, Science, and Transportation, where she assisted in investigations and advised senators, staff, and other stakeholders on proposed legislation and policy issues within the FTC’s jurisdiction.

Benway also served at the U.S. Federal Communications Commission, where she was assistant chief of the Enforcement Bureau.

The addition of Benway represents the latest expansion of Alston & Bird’s Privacy & Cybersecurity Litigation practice. She follows Wim Nauwelaerts, who joined as partner in the firm’s Brussels office in October, and Amy Mushahwar, who joined as partner in Washington, D.C. in April.

To read the full press release, click here.

SHIELD Act Overhauls New York’s Data Breach Notification Framework

On October 23, 2019, New York’s new breach notification provisions came into effect, a result of New York’s passage of the Stop Hacks and Improve Electronic Data Security Act (SHIELD Act) in July. That Act overhauled New York’s data privacy framework, expanding the list of data elements that are considered “private information” while growing the types of incidents and covered entities that may trigger New York’s notification requirement. The SHIELD Act also imposes a new legal obligation for owners and licensors of private data to comply with the Act’s “reasonable security requirement.” Some regulated businesses, like those in the healthcare and financial industries, will be deemed compliant with the SHIELD Act’s reasonable security requirement if they already comply with laws like HIPAA or the GLBA. In an attempt to mitigate its potential burdens on smaller operations, the SHIELD Act explicitly defines small businesses, for whom the Act’s “reasonable security requirement” will be assessed with regard to factors like a business’s “size and complexity.”

The SHIELD Act’s breach notification provisions went into effect on October 23, 2019, while the new data security requirement goes into effect on March 21, 2020.

The Act’s main provisions are described below.

Expanding the Types of Incidents and Entities Covered Under Breach Notification:

The SHIELD Act expands the pool of incidents which trigger mandatory notification to data subjects.  Prior to the SHIELD Act, New York required individual notifications only when certain private information was acquired by an unauthorized individual. Under the SHIELD Act, New York now requires individual notifications where such information is either accessed OR acquired. In deciding whether such information has been unlawfully accessed under the statute, the Act directs businesses to consider whether there exist any “indications that the information was viewed, communicated with, used, or altered by a person without valid authorization or by an unauthorized person.”  So now under the SHIELD Act, if an unauthorized entity merely views information and does not download or copy it, New York requires individual notifications.

The SHIELD Act also expands which entities may be required to make disclosures under New York’s notification requirement. Previously, New York required notifications only from those entities which conducted business in New York and owned or licensed the PI of New York residents.  Under the SHIELD Act, New York’s notification requirement applies more broadly to any business which owns or licenses the private information of New York residents, regardless of whether it conducts business in state.
Expanding the Definition of Private Information

Not only does the SHIELD Act expand the types of breaches which may trigger notifications, it further expands New York’s definition of private information (“PI”) by incorporating biometric data and broadening the circumstances in which financial data is considered PI.  The Act defines biometric data as that which is “generated by electronic measurements of an individual’s unique physical characteristics,” such as fingerprints, voice prints, and retina or iris images.  And while account numbers and credit/debit card numbers were previously only considered PI in combination with security codes and passwords that permitted access to financial accounts, now under the SHIELD Act, such information is considered PI under any circumstances where it could be exploited to gain access to an individual’s financial accounts, even when security codes and passwords remain secure.

Under the SHIELD Act, New York now joins those states that protect online account usernames and e-mail addresses when stored in combination with passwords or security questions that could provide access to online accounts.  The Act does not require usernames and e-mail addresses to be paired with other personal information, beyond that needed to access an online account, to constitute PI.

Clarification of Substitute Notice by E-mail:

Prior to the passage of the SHIELD Act, New York more broadly permitted notification by e-mail when the notifying business had access to the e-mail addresses of all affected data subjects. The SHIELD Act, however, creates a new exception where notice by e-mail is no longer permissible when the breached information includes the data subject’s e-mail address in combination with a password or security question and answer.  This provision appears aimed at preventing businesses from notifying by e-mail when the notification itself may be sent to a compromised account.

Breach Notification Content Requirements and Exemptions:

The SHIELD Act expands the required content of notifications by requiring a business to include the telephone numbers and websites of the relevant state and federal agencies responsible for providing breach response and identity theft services.

On the other hand, the Act also carves out new exceptions in the case of inadvertent disclosures or where notification may already be required under another statute. The SHIELD Act exempts businesses from New York’s breach notification requirement if information was disclosed inadvertently by persons authorized to access the information and the business reasonably determines that such exposure will not likely result in the misuse of information or other financial or emotional harm to the data subject.  Such determinations, however, must be documented in writing and maintained by the disclosing company for at least five years.  If the disclosure affects more than five hundred New York residents, a business availing itself of this exemption must provide the written determination of non-harmfulness to the New York Attorney General within ten days of making the determination.

The Act further exempts certain businesses from making additional notifications where they are already required to notify under other federal or state laws.  Under the SHIELD Act, no further notice is required if notice of a breach is made under any of the following:

1)      Title V of the Gramm-Leach-Bliley Act (GLBA)
2)      the Health Insurance Portability and Accountability Act (HIPAA) or Health Information Technology for Economic and Clinical Health Act (HITECH);
3)      New York Department of Financial Services’ Cybersecurity Requirements for Financial Services Companies (23 NYCRR 500), or;
4)      any other security rule or regulation administered by any official department, division, commission, or agency of the federal or New York state governments.

Reporting HIPAA and HITECH Breaches to the State Attorney General:

Any covered entity required to provide notification of a breach to the Secretary of Health and Human Services under HIPAA or HITECH must also notify the New York Attorney General within five business days of notifying HHS.  Thus, while the SHIELD Act exempts HIPAA and HITECH regulated companies from re-notifying affected individuals, it nevertheless requires an additional notification to the state Attorney General.

Creation of the Reasonable Security Requirement:

Effective March 21, 2020, the SHIELD ACT imposes a new “reasonable security requirement” on every covered owner or licensor of New York residents’ private information. The SHIELD Act requires businesses to develop and maintain reasonable administrative, technological, and physical safeguards to ensure the integrity of private information.

Reasonable administrative safeguards include:

(1) Designating one or more employees to coordinate security; (2) Identifying reasonably foreseeable internal and external risks; (3) Assessing the sufficiency of the safeguards in place to control identified risks; (4) Training and managing employees in the security program practices and procedures; (5) Selecting service providers capable of maintaining safeguards, and requiring those safeguards by contract; (6)Adjusting the security program to account for business changes or other new circumstances.

Reasonable technical safeguards include:

(1) Assessing in network and software design risks; (2) Assessing risks in information processing, transmission, and storage; (3) Detecting, preventing, and responding to attacks or system safeguards; (4) Regular testing and monitoring of key controls, systems, and procedures.

Reasonable physical safeguards include:

(1) Assessing the risks of information storage and disposal; (2) Detecting, preventing, and responding to intrusions; (3) Protecting against unauthorized access or use of private information during data collection, transportation, and destruction; (4) Disposing of private information within a “reasonable amount of time after it is no longer needed for business purposes by erasing electronic media so that the information cannot be read or reconstructed.”

Applying the Reasonable Security Requirement to Small Businesses:

The SHIELD Act makes special provision for small businesses, presumably to avoid overly burdening them. Under the statute, a small business is defined as any business with “(I) fewer than fifty employees; (II) less than three million dollars in gross annual revenue in each of the last three fiscal years; or (III) less than five million dollars in year-end total assets.”  While small businesses are still subject to the reasonable security requirement, their safeguards need only be “appropriate for the size and complexity of the small business, the nature and scope of the small business’s activities, and the sensitivity of the personal information” the small business collects about consumers.

Implications of the SHIELD Act’s Security Requirement for Compliant Regulated Entities:

Just like businesses may be exempted from the SHIELD Act’s notification requirements if they comply with another statute, businesses may also be deemed to be in compliance with the SHIELD Act’s reasonable security requirement if they are already subject to and in compliance with the following data security requirements:

1)      Title V of the GLBA;
2)      HIPAA or HITECH;
3)      23 NYCRR 500, or;
4)      Any other security rule or regulation administered by any official department, division, commission, or agency of the federal or New York state governments.

Penalties for Noncompliance:

The SHIELD Act increases the penalties for noncompliance with New York’s notification requirements. Previously, businesses faced a fine of the greater of $5,000 or $10 dollars per instance of failed notification, so long as the latter did not exceed $150,000.  Now, penalties may grow as large as $20 per incident with a maximum limit of $250,000.

The Act also lengthens the time in which legal actions for failure to notify may commence from two years to three years. This time is measured from either the date on which the New York Attorney General became aware of the violation, or the date a business sends notice to the New York Attorney General, whichever is first. Regardless, in no case may an action be brought “after six years from the discovery of the breach by the company unless the company took steps to hide the breach.”

The SHIELD Act empowers the New York Attorney General to sue both for injunctions and civil penalties when businesses fail to comply with the Act’s reasonable security requirements. It explicitly excludes, however, any private right of action under the reasonable security requirement provisions.

Alston & Bird Details 21 Potentially Significant Impacts from Draft CCPA Regulations

Late last week, the California Attorney General published much-anticipated proposed Regulations under the California Consumer Privacy Act (“CCPA”). The Regulations are extensive and contain a number of potentially material business impacts.

To help companies work through the Regulations, Alston & Bird’s Privacy & Data Security team published a client advisory outlining “21 Potentially Significant Business Impacts” from the proposed CCPA Regulations. View the full advisory here.

This advisory tackles a number of issues likely of interest to companies attempting to get ready for CCPA, including:

  • Why posting a CCPA privacy policy on your website may not be enough to satisfy your CCPA notice obligations – instead you may need additional “just in time” notices at every specific point where you collect data (or lose the right to collect it);
  • Why you may hear discussions about a potential return of Do Not Track in the online context, this time as a “Do Not Sell My Info” request;
  • Why brick-and-mortar interactions with consumers may require companies to facilitate “offline” CCPA rights requests; and
  • Why companies that take a position as vendor or service provider may need to examine any aspect of their business that involves pooling customer data for regulatory risk.

Alston & Bird is closely following the development of the CCPA and its Regulations. For more information, contact Jim HarveyDavid KeatingAmy MushahwarKaren Sanzaro, or Daniel Felz.