Companies that fail to notify people when their data is at risk could face jail under an expected bipartisan bill.
Senate Judiciary Committee Chairman Arlen Specter and Sen. Patrick Leahy, the committee's top Democrat, would also restrict a freewheeling trade in Social Security numbers that are prized by identity thieves.
The bill, the first to draw Republican sponsorship, comes on the heels of the largest security breach announced to date after an outsider gained access to 40 million credit card accounts held by CardSystems Solutions, a payment processor.
Dozens of similar breaches have been disclosed this year after a California state law required businesses to make such incidents public.
Businesses and consumers have urged the Republican-controlled Congress to pass a national version of the California notification law.
Specter and Leahy's bill would require businesses across the nation to make data security breaches public. Those that do not could face criminal prosecution.
According to a summary obtained by Reuters, the bill also would sharply limit the trade in Social Security numbers that can be used in identity theft.
Businesses would not be able to require consumers to reveal their Social Security numbers in return for goods or services, and they would be forbidden to buy or sell Social Security numbers without consumer permission.
Consumers would also be able to access the profiles maintained by data brokers like ChoicePoint and fix any errors, as they are currently able to do with credit reports.
Businesses would have to protect consumer accounts from unauthorized access, and criminal penalties for such activity would be increased.
At least three Senate Democrats have introduced data security bills, but business groups have been quietly lobbying against them, out of concern that the regulations would be too strict.
Republicans in the House of Representatives are preparing efforts of their own. Texas Republican Rep. Joe Barton, who chairs the House Energy and Commerce Committee, is working on a bill that would also limit the trade in Social Security numbers. Florida Republican Rep. Cliff Stearns, who chairs a consumer-protection subcommittee, is drafting a bill that would include incentives for businesses to improve their security.
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