North Carolina AG Seeks Breach Notification for Ransomware, Other Enhancements to Data Breach Law
Thursday, January 10, 2019
data protection, north carolina

According to SC Magazine, an escalating number of victims of data breaches in 2017 have led Attorney General Josh Stein and state Rep. Jason Saine to propose updates to the state’s existing data breach notification law – “Act to Strengthen Identity Theft Protections.”

The Act would make a number of changes to the existing law, including:

  • Expand the definition of “security breach” to include “ransomware” attacks. Ransomware attacks generally result in the encryption of an organization’s system files, preventing the owner from accessing the files unless the owner buys (usually through some form of cryptocurrency) a valid encryption code from the attackers, which may never be delivered. In many cases, the malware deployed by the attackers does not enable them to access or acquire the organization’s information. However, sponsors of the law change would like the victim organization to notify both the affected consumers and the Attorney General’s office, empowering the affected person and the Attorney General’s Office to determine the risk of harm – not the breached organization.

  • Mandate reasonable safeguards. The Act would require businesses that own or license personal information to implement and maintain reasonable security procedures and practices – appropriate to the nature of personal information – to protect the personal information from a security breach. It does not appear that the new law would provide specific requirements for safeguarding personal information. States such as Massachusetts and Colorado have provided more specific requirements for the safeguards covered entities must put in place.

  • Update definition of personal information. The Act would update the definition of personal information to include medical information and insurance account numbers.

  • Shorter (15-day) notification period. The Act would require notification to the affected consumer(s) and the Attorney General’s office within 15 days. The hope is this would give consumers more time to freeze their credit across all major credit reporting agencies and take other preventative measures to prevent identity theft before it occurs.

  • Free credit freezes and credit reports. The Act would permit consumers to place and lift a credit freeze on their credit report at any time, for free. They also would be able to access three free credit reports from each consumer reporting agency that compiles and maintains files on consumers on a nationwide basis. Notably, if consumer reporting agencies experience a security breach, they will have to provide five years of free credit monitoring to affected consumers.

  • Penalty clarification. The Act would provide that businesses that suffer a breach and that failed to maintain reasonable security procedures will have committed a violation of the state’s Unfair and Deceptive Trade Practices Act and each person affected by the breach would constitute a separate and distinct violation of the law triggering a penalty.

If the Act is passed into law, North Carolina would join a number of other states that have and continue to update and strengthen their state laws requiring notification following a breach, and that have added obligations requiring reasonable safeguards to protect personal information. All organizations should be reviewing these developments and take appropriate steps to safeguard personal information they maintain about individuals, as well evaluating and enhancing their breach response readiness.


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