Obama's data-breach initiative has privacy advocates optimistic, cautious

Proposed legislation would establish a national standard for how companies respond to data breaches, with advocates on both sides of the issue supportive of the concept.

Forrester Research Group's global heat map of government protections for consumer data shows the US lags behind many other countries. Screenshot by Seth Rosenblatt/CNET

There may finally be a standard set of rules for how US companies protect customer's data in the aftermath of a breach, if new proposed rules from the president become law.

For years, companies in America have contended with a patchwork of laws regarding how they treat customer information. Some states have strict rules, designed to ensure consumer protection. Others have none.

President Barack Obama wants that to change, and so do consumers. A Pew Research study conducted last year found 18 percent of consumers have seen their credit card, bank account, or Social Security number stolen, up from 11 percent only six months earlier.

They have reason to be concerned. The Identity Theft Resource Center said data breaches in the US were up 27.5 percent in 2014 over the year before. The past couple of years have been filled with headlines about catastrophic data breaches from Target and Home Depot, as well as arts and crafts chain Michaels and restaurant chain P.F. Chang's. In November, Sony Pictures suffered one of the worst hacks in corporate history.

Now, the government may step in, at least to ensure consumers are protected. President Obama on Monday proposed a new law called the Personal Data Notification and Protection Act, which would create a basic set of rules for how companies handle their customer information. It also would criminalize international trade in stolen personal identity information.

Aside from one specific rule that would require companies to notify customers within 30 days of the discovery of a data breach, there aren't many other details available yet about Obama's proposal. The president is expected to outline more specifics in his State of the Union speech next week.

In the mean time, tech industry executives and privacy advocates are excited at the prospect of a renewed effort to create a national standard. They say the bills that succeed are typically aimed at the government and how it handles information, rather than corporations.

Now that could change.

"This is a huge shot in the arm to a much-needed advancement for our legislative protections," said Scott Talbott, who heads up government relations for the trade group Electronic Transactions Association.

Some, like Alvaro Bedoya, the executive director of the Center on Privacy and Technology at Georgetown University, are cautiously optimistic. "Some states tend to have very strong data breach laws," he said. "We're going to need to put the Obama proposal side-by-side with those states' laws and see how they stack up."

Many questions still remain

While 47 states have laws requiring companies to at least notify consumers of security breaches involving their personal information, according to the National Conference of State Legislatures, the similarities often end there.

The toughest state laws, said Bedoya, have strong provisions for credit monitoring, requiring companies give affected consumers at least a year of free credit protection. Companies must notify consumers that their information has been compromised within 30 days. California, for example, lets its residents attempt to recover damages, making it one of most aggressive.

But South Dakota, Alabama and New Mexico have no data breach protections at all for consumers, according to Heidi Shey, a security and risk analyst at research firm Forrester.

The Electronic Privacy Information Center, a research group that tracks privacy and civil liberties issues, said the proposal would greatly impact consumers in those places, while also creating a minimum set of rules that all companies would have to follow.

President Obama isn't the first to propose such nationwide measures. In the previous session of Congress alone, which lasted from 2013 to 2015, there were four similar bills in the House of Representatives and two in the Senate. All of them went nowhere.

But that was before the latest string of privacy breaches. "It's important to have this in place from a consumer perspective," said Forrester's Shey. "If we have 50 separate laws, it makes it so much harder for a company to respond. It gets easy to drop the ball."

Featured Video