NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A8756
SPONSOR: Kavanagh TITLE OF BILL:
An act to amend the general business law and the state technology law,
in relation to notification of a security breach
PURPOSE:
New York's data breach notification law needs to be updated keep pace
with current technology. This bill broadens the scope of information
covered under the notification law and updates the notification require-
ments when there has been a breach of data. It also broadens the defi-
nition of a data breach to include an unauthorized person gaining access
to information. It also requires reasonable data security, provides
standards tailored to the size of a business, and provides protections
from liability for certain entities.
SUMMARY OF SPECIFIC PROVISIONS:
Section 1 of the bill names the act.
Section 2 of the bill amends the title of article 39-F of the General
Business Law.
Section 3 of the bill amends section 899-aa of the General Business Law.
The amendments would:
*update the notifications section of the General Business Law by adding
biometric data, email addresses or user names in combination with a
password or security question answer, and protected health information
held by a "covered entity" to the private information definition;
*update the notifications section of the General Business Law by adding
unauthorized access to the private information to the definitions of
"private information" and "breach of the security of the system";
*update the notification requirement by applying it to any person or
entity with private information of a New York resident, not just to
those that "conduct business" in New York State;
*add definitions for the terms credit card and debit card;
*correct typos and inconsistencies in language to clarify that breaches
of private information only (and not personal information) trigger
notice obligations and to make consistent all references to compromise
by an unauthorized person or a person without valid authorization;
*authorize businesses in certain circumstances to notify the consumer
via email of the breach and if the consumer's email is believed to have
been compromised authorize the business to use other electronic methods
to notify the consumer;
*require that, if a business is sending out a new credit or debit card
to a consumer, the consumer be notified that the card is on its way;
*outline penalties for businesses that fail to provide notice to consum-
ers of a breach and the limitations period for the attorney general to
act on any failure;
*require certain information to be included in the notice that would
direct consumers to federal and state data security prevention entities
and require businesses to send a template of their notice to consumers
to the attorney general and the Office of Information Technology
Services; and,
*task the Department of State with receiving and responding to data
breach complaints and with informing the public of data security and
breach prevention techniques.
Section 4 of the bill creates a new section 899-bb of the General Busi-
ness Law that would:
*require reasonable data security for private information, with a more
flexible standard for small businesses, without creating new require-
ments for entities subject to existing or future regulations by any
federal or other New York State government entity, and while providing
safe harbor from enforcement for entities that take steps to verify
their compliance with other existing data security regulations or stand-
ards; and
*deem failure to provide required reasonable data security to be a
violation of section 349 of the General Business Law, permitting the
attorney general to bring suit but not any private plaintiff.
Section 5 of the bill amends the State Technology Law. The amendments
would: *include the same terms as above in the definition of private
information;
*state that should a data breach occur in a State entity the Office of
Information Technology Services shall deliver a report on the scope of
the breach to the entity affected;
*require that an entity shall notify individuals affected by the data
breach as quickly as possible; and,
*task the office of information technology services to develop and
provide regular trainings to all entities on preventing data breaches.
Section 6 of the bill sets forth the effective date.
JUSTIFICATION:
New York's current data breach notification law needs to be updated to
keep pace with individuals' use and dissemination of private informa-
tion. New York also needs to join the increasing number of states that
require reasonable data security protections, without imposing duplicate
obligations on those already subject to other federal or New York State
data security regulations and without imposing excessive costs on small
business, while providing safe harbor from enforcement for entities that
take steps to verify their compliance with other existing data security
regulations or standards. This bill expands the scope of information
subject to the current data breach notification law to include biometric
information, email addresses and their corresponding passwords or secu-
rity questions and answers, and protected health information as defined
under HIPAA. It broadens the definition of a data breach to include
unauthorized access to private information. It applies the notification
requirement to any person or entity with private information of a New
York resident, not just to those that conduct business in New York
State. It also updates the notification procedures companies and state
entities must follow when there has been a breach of private informa-
tion. It also creates reasonable data security requirements tailored to
the size of a business and provides protections from liability for
certain entities that take steps to verify their safeguarding of private
information.
PRIOR LEGISLATIVE HISTORY:
FISCAL IMPACT ON THE STATE:
None.
FISCAL IMPACT ON LOCALITIES:
None.
IMPACT ON THE REGULATION OF BUSINESSES AND INDIVIDUALS:
The bill would impose stronger obligations on businesses handling
private data of customers, regarding security and proper notification of
breaches.
IMPACT ON FINES, IMPRISONMENT, FORFEITURE OF RIGHTS, OR OTHER PENAL
SANCTIONS:
None.
EFFECTIVE DATE:
This act shall take effect January 1, 2018.
STATE OF NEW YORK
________________________________________________________________________
8756
2017-2018 Regular Sessions
IN ASSEMBLY
October 31, 2017
___________
Introduced by M. of A. KAVANAGH, TITONE -- (at request of the Department
of Law) -- read once and referred to the Committee on Consumer Affairs
and Protection
AN ACT to amend the general business law and the state technology law,
in relation to notification of a security breach
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. This act shall be known and may be cited as the "New York
2 Data Security Act".
3 § 2. The article heading of article 39-F of the general business law,
4 as added by chapter 442 of the laws of 2005, is amended to read as
5 follows:
6 NOTIFICATION OF UNAUTHORIZED ACQUISITION OF PRIVATE
7 INFORMATION; DATA SECURITY PROTECTIONS
8 § 3. Subdivisions 1, 2, 3, 5, 6, 7 and 8 of section 899-aa of the
9 general business law, as added by chapter 442 of the laws of 2005, para-
10 graph (c) of subdivision 1, paragraph (a) of subdivision 6 and subdivi-
11 sion 8 as amended by chapter 491 of the laws of 2005 and paragraph (a)
12 of subdivision 8 as amended by section 6 of part N of chapter 55 of the
13 laws of 2013, are amended and a new subdivision 5-a is added to read as
14 follows:
15 1. As used in this section, the following terms shall have the follow-
16 ing meanings:
17 (a) "Personal information" shall mean any information concerning a
18 natural person which, because of name, number, personal mark, or other
19 identifier, can be used to identify such natural person;
20 (b) "Private information" shall mean either: (i) personal information
21 consisting of any information in combination with any one or more of the
22 following data elements, when either the personal information or the
23 data element is not encrypted, or encrypted with an encryption key that
24 has also been accessed or acquired:
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD13619-04-7
A. 8756 2
1 (1) social security number;
2 (2) driver's license number or non-driver identification card number;
3 [or]
4 (3) account number, credit or debit card number, in combination with
5 any required security code, access code, [or] password or other informa-
6 tion that would permit access to an individual's financial account;
7 (4) account number, credit or debit card number, if circumstances
8 exist wherein such number could be used to access an individual's finan-
9 cial account without additional identifying information, security code,
10 access code, or password; or
11 (5) biometric information, meaning data generated by automatic meas-
12 urements of an individual's physical characteristics, which are used to
13 authenticate the individual's identity;
14 (ii) a user name or e-mail address in combination with a password or
15 security question and answer that would permit access to an online
16 account; or
17 (iii) any unsecured protected health information held by a "covered
18 entity" as defined in the health insurance portability and accountabil-
19 ity act of 1996 (45 C.F.R. pts. 160, 162, 164), as amended from time to
20 time.
21 "Private information" does not include publicly available information
22 which is lawfully made available to the general public from federal,
23 state, or local government records.
24 (c) "Breach of the security of the system" shall mean unauthorized
25 access to or acquisition of, or access to or acquisition without valid
26 authorization, of computerized data that compromises the security,
27 confidentiality, or integrity of [personal] private information main-
28 tained by a business. Good faith access to, or acquisition of
29 [personal], private information by an employee or agent of the business
30 for the purposes of the business is not a breach of the security of the
31 system, provided that the private information is not used or subject to
32 unauthorized disclosure.
33 In determining whether information has been accessed, or is reasonably
34 believed to have been accessed, by an unauthorized person or a person
35 without valid authorization, such business may consider, among other
36 factors, indications that the information was viewed, communicated with,
37 used, or altered by a person without valid authorization or by an unau-
38 thorized person.
39 In determining whether information has been acquired, or is reasonably
40 believed to have been acquired, by an unauthorized person or a person
41 without valid authorization, such business may consider the following
42 factors, among others:
43 (1) indications that the information is in the physical possession and
44 control of a person without valid authorization or by an unauthorized
45 person, such as a lost or stolen computer or other device containing
46 information; or
47 (2) indications that the information has been downloaded or copied; or
48 (3) indications that the information was used by a person without
49 valid authorization or an unauthorized person, such as fraudulent
50 accounts opened or instances of identity theft reported.
51 (d) "Consumer reporting agency" shall mean any person which, for mone-
52 tary fees, dues, or on a cooperative nonprofit basis, regularly engages
53 in whole or in part in the practice of assembling or evaluating consumer
54 credit information or other information on consumers for the purpose of
55 furnishing consumer reports to third parties, and which uses any means
56 or facility of interstate commerce for the purpose of preparing or
A. 8756 3
1 furnishing consumer reports. A list of consumer reporting agencies shall
2 be compiled by the state attorney general and furnished upon request to
3 any person or business required to make a notification under subdivision
4 two of this section.
5 (e) "Credit card" shall mean any card or other credit device issued by
6 a financial institution to a consumer for the purpose of providing
7 money, property, labor or services on credit.
8 (f) "Debit card" shall mean any card or other device issued by a
9 financial institution to a consumer for use in initiating an electronic
10 fund transfer from the account of the consumer at such financial insti-
11 tution, for the purpose of transferring money between accounts or
12 obtaining money, property, labor or services.
13 2. Any person or business which [conducts business in New York state,
14 and which] owns or licenses computerized data which includes private
15 information shall disclose any breach of the security of the system
16 following discovery or notification of the breach in the security of the
17 system to any resident of New York state whose private information was,
18 or is reasonably believed to have been, accessed or acquired by a person
19 without valid authorization or by an unauthorized person. The disclo-
20 sure shall be made in the most expedient time possible and without
21 unreasonable delay, consistent with the legitimate needs of law enforce-
22 ment, as provided in subdivision four of this section, or any measures
23 necessary to determine the scope of the breach and restore the [reason-
24 able] integrity of the system.
25 3. Any person or business which maintains computerized data which
26 includes private information which such person or business does not own
27 shall notify the owner or licensee of the information of any breach of
28 the security of the system immediately following discovery, if the
29 private information was, or is reasonably believed to have been,
30 acquired by a person without valid authorization or by an unauthorized
31 person.
32 5. The notice required by this section shall be directly provided to
33 the affected persons by one of the following methods:
34 (a) written notice;
35 (b) electronic notice, provided that the person to whom notice is
36 required has expressly consented to receiving said notice in electronic
37 form and a log of each such notification is kept by the person or busi-
38 ness who notifies affected persons in such form; provided further,
39 however, that in no case shall any person or business require a person
40 to consent to accepting said notice in said form as a condition of
41 establishing any business relationship or engaging in any transaction.
42 (c) telephone notification provided that a log of each such notifica-
43 tion is kept by the person or business who notifies affected persons; or
44 (d) substitute notice, if a business demonstrates to the state attor-
45 ney general that the cost of providing notice would exceed two hundred
46 fifty thousand dollars, or that the affected class of subject persons to
47 be notified exceeds five hundred thousand, or such business does not
48 have sufficient contact information. Substitute notice shall consist of
49 all of the following:
50 (1) e-mail notice when such business has an e-mail address for the
51 subject persons, except if the breached information includes an e-mail
52 address in combination with a password or security question and answer
53 that would permit access to the online account, in which case the person
54 or business shall instead provide clear and conspicuous notice delivered
55 to the consumer online when the consumer is connected to the online
56 account from an internet protocol address or from an online location
A. 8756 4
1 which the person or business knows the consumer customarily uses to
2 access the online account;
3 (2) conspicuous posting of the notice on such business's web site
4 page, if such business maintains one; and
5 (3) notification to major statewide media.
6 5-a. Any credit or debit card issuer that issues a new credit or debit
7 card as a result of a breach of the security of the system pursuant to
8 paragraph (c) of subdivision one of this section, shall provide the
9 consumer notice that the issuance of the replacement credit or debit
10 card is due to a potential compromise of the prior card absent any
11 evidence of actual or potential unauthorized use of such credit or debit
12 card or other circumstances precipitating the issuance of a replacement
13 card.
14 6. (a) whenever the attorney general shall believe from evidence
15 satisfactory to him that there is a violation of this article he may
16 bring an action in the name and on behalf of the people of the state of
17 New York, in a court of justice having jurisdiction to issue an injunc-
18 tion, to enjoin and restrain the continuation of such violation. In
19 such action, preliminary relief may be granted under article sixty-three
20 of the civil practice law and rules. In such action the court may award
21 damages for actual costs or losses incurred by a person entitled to
22 notice pursuant to this article, if notification was not provided to
23 such person pursuant to this article, including consequential financial
24 losses. Whenever the court shall determine in such action that a person
25 or business violated this article knowingly or recklessly, the court may
26 impose a civil penalty of the greater of five thousand dollars or up to
27 [ten] twenty dollars per instance of failed notification, provided that
28 the latter amount shall not exceed [one] two hundred fifty thousand
29 dollars.
30 (b) the remedies provided by this section shall be in addition to any
31 other lawful remedy available.
32 (c) no action may be brought under the provisions of this section
33 unless such action is commenced within [two] three years [immediately]
34 after either the date [of the act complained of or the date of discovery
35 of such act] on which the attorney general became aware of the
36 violation, or the date of notice sent pursuant to paragraph (a) of
37 subdivision eight of this section, whichever occurs first.
38 7. Regardless of the method by which notice is provided, such notice
39 shall include contact information for the person or business making the
40 notification, the telephone numbers and websites of the relevant state
41 and federal agencies that provide information regarding security breach
42 response and identity theft prevention and protection information, and a
43 description of the categories of information that were, or are reason-
44 ably believed to have been, accessed or acquired by a person without
45 valid authorization or by an unauthorized person, including specifica-
46 tion of which of the elements of personal information and private infor-
47 mation were, or are reasonably believed to have been, so accessed or
48 acquired.
49 8. (a) In the event that any New York residents are to be notified,
50 the person or business shall notify the state attorney general, the
51 department of state and the [division of state police] office of infor-
52 mation technology services as to the timing, content and distribution of
53 the notices and approximate number of affected persons and shall provide
54 a copy of the template of the notice sent to affected persons. Such
55 notice shall be made without delaying notice to affected New York resi-
56 dents.
A. 8756 5
1 (b) In the event that more than five thousand New York residents are
2 to be notified at one time, the person or business shall also notify
3 consumer reporting agencies as to the timing, content and distribution
4 of the notices and approximate number of affected persons. Such notice
5 shall be made without delaying notice to affected New York residents.
6 § 4. The general business law is amended by adding a new section 899-
7 bb to read as follows:
8 § 899-bb. Data security protections. 1. Definitions. (a) "Compliant
9 regulated entity" shall mean any person or business that is subject to,
10 and in compliance with, any of the following data security requirements:
11 (i) regulations promulgated pursuant to Title V of the federal Gramm-
12 Leach-Bliley Act (15 U.S.C. 6801 to 6809), as amended from time to time;
13 (ii) regulations implementing the Health Insurance Portability and
14 Accountability Act of 1996 (45 C.F.R. parts 160 and 164), as amended
15 from time to time, and the Health Information Technology for Economic
16 and Clinical Health Act, as amended from time to time;
17 (iii) part five hundred of title twenty-three of the official compila-
18 tion of codes, rules and regulations of the state of New York, as
19 amended from time to time; or
20 (iv) any other data security rules and regulations of, and the stat-
21 utes administered by, any official department, division, commission or
22 agency of the federal or New York State government as such rules, regu-
23 lations or statutes are interpreted by such department, division,
24 commission or agency or by the federal or New York State courts.
25 (b) "Certified compliant entity" shall mean any person or business
26 that:
27 (i) is compliant with any of the data security requirements in para-
28 graph (a) of this subdivision or with the most up to date version of the
29 International Standards Organization Standard 27002 or with the most up
30 to date version of National Institute of Standards and Technology
31 Special Publication 800-53, as it relates to the protection of electron-
32 ic private information; and
33 (ii) has such compliance certified annually by an independent, third-
34 party assessment organization that is authorized to provide such certif-
35 ications by the official department, division, commissioner or agency or
36 standards body that promulgates the data security regulations or stand-
37 ards being certified.
38 (c) "Private information" shall have the same meaning as defined in
39 section eight hundred ninety-nine-aa of this article.
40 (d) "Small business" shall mean any person or business with (i) fewer
41 than fifty employees, including any independent contractors, of the
42 business; (ii) less than three million dollars in gross annual revenue
43 in each of the last three fiscal years; or (iii) less than five million
44 dollars in year-end total assets, calculated in accordance with general-
45 ly accepted accounting principles.
46 2. Reasonable security. (a) Any person or business that owns or
47 licenses computerized data which includes private information of a resi-
48 dent of New York shall develop, implement and maintain reasonable safe-
49 guards to protect the security, confidentiality and integrity of the
50 private information including, but not limited to, disposal of data.
51 (b) Small businesses subject to the requirements of paragraph (a) of
52 this subdivision shall be deemed to be in compliance with such require-
53 ment if they implement and maintain reasonable safeguards that are
54 appropriate to the size and complexity of the small business to protect
55 the security, confidentiality and integrity of the private information
56 including, but not limited to, disposal of data.
A. 8756 6
1 (c) A person or business shall be deemed to be in compliance with
2 paragraphs (a) and (b) of this subdivision if it either:
3 (i) is a compliant regulated entity as defined in subdivision one of
4 this section;
5 (ii) is a certified compliant entity as defined in subdivision one of
6 this section; or
7 (iii) implements a data security program that includes the following:
8 (A) administrative safeguards such as the following, in which the
9 person or business:
10 (1) designates one or more employees to coordinate the security
11 program;
12 (2) identifies reasonably foreseeable internal and external risks;
13 (3) assesses the sufficiency of safeguards in place to control the
14 identified risks;
15 (4) trains and manages employees in the security program practices and
16 procedures;
17 (5) selects service providers capable of maintaining appropriate safe-
18 guards, and requires those safeguards by contract; and
19 (6) adjusts the security program in light of business changes or new
20 circumstances; and
21 (B) technical safeguards such as the following, in which the person or
22 business:
23 (1) assesses risks in network and software design;
24 (2) assesses risks in information processing, transmission and stor-
25 age;
26 (3) detects, prevents and responds to attacks or system failures; and
27 (4) regularly tests and monitors the effectiveness of key controls,
28 systems and procedures; and
29 (C) physical safeguards such as the following, in which the person or
30 business:
31 (1) assesses risks of information storage and disposal;
32 (2) detects, prevents and responds to intrusions;
33 (3) protects against unauthorized access to or use of private informa-
34 tion during or after the collection, transportation and destruction or
35 disposal of the information; and
36 (4) disposes of private information within a reasonable amount of time
37 after it is no longer needed for business purposes by erasing electronic
38 media so that the information cannot be read or reconstructed.
39 (d) Any person or business required to comply with paragraph (a) or
40 (b) of this subdivision that fails to comply with such subdivisions
41 shall be deemed to have violated section three hundred forty-nine of
42 this chapter, and the attorney general may bring an action in the name
43 and on behalf of the people of the state of New York to enjoin such
44 violations and to obtain civil penalties under section three hundred
45 fifty-d of this chapter.
46 (e) Nothing in this section shall create a private right of action.
47 3. Safe harbor for certified compliant entities. A certified compli-
48 ant entity shall not be subject to an enforcement action by the attorney
49 general pursuant to subdivision two of this section if:
50 (a) it provides copies of its certifications of compliance to the
51 attorney general; and
52 (b) there is no evidence of willful misconduct, bad faith or gross
53 negligence.
54 § 5. Paragraph (a) of subdivision 1 and subdivisions 2, 3, 6, 7 and 8
55 of section 208 of the state technology law, paragraph (a) of subdivision
56 1 and subdivisions 3 and 8 as added by chapter 442 of the laws of 2005,
A. 8756 7
1 subdivision 2 and paragraph (a) of subdivision 7 as amended by section 5
2 of part N of chapter 55 of the laws of 2013 and subdivisions 6 and 7 as
3 amended by chapter 491 of the laws of 2005, are amended to read as
4 follows:
5 (a) "Private information" shall mean either: (i) personal information
6 consisting of any information in combination with any one or more of the
7 following data elements, when either the personal information or the
8 data element is not encrypted or encrypted with an encryption key that
9 has also been accessed or acquired:
10 (1) social security number;
11 (2) driver's license number or non-driver identification card number;
12 [or]
13 (3) account number, or credit or debit card number, in combination
14 with any required identifying information, security code, access code,
15 or password which would permit access to an individual's financial
16 account;
17 (4) account number, or credit or debit card number, if circumstances
18 exist wherein such number could be used to access to an individual's
19 financial account without additional identifying information, security
20 code, access code, or password; or
21 (5) biometric information, meaning data generated by automatic meas-
22 urements of an individual's physical characteristics, which are used to
23 authenticate the individual's identity;
24 (ii) a user name or e-mail address in combination with a password or
25 security question and answer that would permit access to an online
26 account; or
27 (iii) any unsecured protected health information held by a "covered
28 entity" as defined in the health insurance portability and accountabil-
29 ity act of 1996 (45 C.F.R. pts. 160, 162, 164), as amended from time to
30 time.
31 "Private information" does not include publicly available information
32 that is lawfully made available to the general public from federal,
33 state, or local government records.
34 2. Any state entity that owns or licenses computerized data that
35 includes private information shall disclose any breach of the security
36 of the system following discovery or notification of the breach in the
37 security of the system to any resident of New York state whose private
38 information was, or is reasonably believed to have been, accessed or
39 acquired by a person without valid authorization or an unauthorized
40 person. The disclosure shall be made in the most expedient time possi-
41 ble and without unreasonable delay, consistent with the legitimate needs
42 of law enforcement, as provided in subdivision four of this section, or
43 any measures necessary to determine the scope of the breach and restore
44 the [reasonable] integrity of the data system. The state entity shall
45 consult with the state office of information technology services to
46 determine the scope of the breach and restoration measures. Within nine-
47 ty days of the notice of the breach, the office of information technolo-
48 gy services shall deliver a report on the scope of the breach and recom-
49 mendations to restore and improve the security of the system to the
50 state entity.
51 3. Any state entity that maintains computerized data that includes
52 private information which such agency does not own shall notify the
53 owner or licensee of the information of any breach of the security of
54 the system immediately following discovery, if the private information
55 was, or is reasonably believed to have been, acquired by a person with-
56 out valid authorization or an unauthorized person.
A. 8756 8
1 6. Regardless of the method by which notice is provided, such notice
2 shall include contact information for the state entity making the
3 notification, the telephone numbers and websites of the relevant state
4 and federal agencies that provide information regarding security breach
5 response and identity theft prevention and protection information and a
6 description of the categories of information that were, or are reason-
7 ably believed to have been, accessed or acquired by a person without
8 valid authorization or an unauthorized person, including specification
9 of which of the elements of personal information and private information
10 were, or are reasonably believed to have been, so accessed or acquired.
11 7. (a) In the event that any New York residents are to be notified,
12 the state entity shall notify the state attorney general, the department
13 of state and the state office of information technology services as to
14 the timing, content and distribution of the notices and approximate
15 number of affected persons and provide a copy of the template of the
16 notice sent to affected persons. Such notice shall be made without
17 delaying notice to affected New York residents.
18 (b) In the event that more than five thousand New York residents are
19 to be notified at one time, the state entity shall also notify consumer
20 reporting agencies as to the timing, content and distribution of the
21 notices and approximate number of affected persons. Such notice shall be
22 made without delaying notice to affected New York residents.
23 8. The state office of information technology services shall develop,
24 update and provide regular training to all state entities relating to
25 best practices for the prevention of a breach of the security of the
26 system.
27 9. Any entity listed in subparagraph two of paragraph (c) of subdivi-
28 sion one of this section shall adopt a notification policy no more than
29 one hundred twenty days after the effective date of this section. Such
30 entity may develop a notification policy which is consistent with this
31 section or alternatively shall adopt a local law which is consistent
32 with this section.
33 § 6. This act shall take effect January 1, 2018.
