Proposed House Bill Would Set National Data Security Standards for Financial Services Industry
A new bill introduced by House Financial Services subcommittee Chairman Rep. Blaine Luetkemeyer would significantly change data security and breach notification standards for the financial services and insurance industries. Most notably, the proposed legislation would create a national standard for data security and breach notification and preempt all current state law on the matter.
Breach Notification Standard
The Gramm-Leach-Bliley Act (GLBA) currently requires covered entities to establish appropriate safeguards to ensure the security and confidentiality of customer records and information and to protect those records against unauthorized access to or use. The proposed House bill would amend and expand GLBA to mandate notification to customers “in the event of unauthorized access that is reasonably likely to result in identify theft, fraud, or economic loss.”
To codify breach notification at the national level, the proposed legislation requires all GLBA covered entities to adopt and implement the breach notification standards promulgated by the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of Thrift Supervisor in its Interagency Guidance on Response Programs for Unauthorized Access to Customer Information and Customer Notice. This guidance details the requirements for notification to individuals in the event of unauthorized access to sensitive information that has or is reasonably likely to result in misuse of that information, including timing and content of the notification.
While the Interagency Guidance was drafted specifically for the banking sector, the proposed legislation also covers insurance providers, investment companies, securities brokers and dealers, and all businesses “significantly engaged” in providing financial products or services.
If enacted, this legislation will preempt all laws, rules, and regulations in the financial services and insurance industries with respect to data security and breach notification.
Cohesiveness in the Insurance Industry
The proposed legislation provides uniform reporting obligations for covered entities – a benefit particularly for insurance companies who currently must navigate a maze of something conflicting state law breach notification standards. Under the proposed legislation, an assuming insurer need only notify the state insurance authority in the state in which it is domiciled. The proposed legislation also requires the insurance industry to adopt new codified standards for data security.
To ensure consistency throughout the insurance industry, the proposed legislation also prohibits states from imposing any data security requirement in addition to or different from the standards GLBA or the Interagency Guidance.
If enacted, this proposed legislation will substantially change the data security and breach notification landscape for the financial services and insurance industries. Entities within these industries should keep a careful eye on this legislation and proactively consider how these proposed revisions may impact their current policies and procedures.