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S. 1897 (113th): Personal Data Privacy and Security Act of 2014


The text of the bill below is as of Jan 8, 2014 (Introduced). The bill was not enacted into law.


II

113th CONGRESS

2d Session

S. 1897

IN THE SENATE OF THE UNITED STATES

January 8, 2014

(for himself, Mr. Schumer, Mr. Franken, and Mr. Blumenthal) introduced the following bill; which was read twice and referred to the Committee on the Judiciary

A BILL

To prevent and mitigate identity theft, to ensure privacy, to provide notice of security breaches, and to enhance criminal penalties, law enforcement assistance, and other protections against security breaches, fraudulent access, and misuse of personally identifiable information.

1.

Short title; table of contents

(a)

Short title

This Act may be cited as the Personal Data Privacy and Security Act of 2014 .

(b)

Table of Contents

The table of contents of this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Findings.

Sec. 3. Definitions.

TITLE I—Enhancing punishment for identity theft and other violations of data privacy and security

Sec. 101. Organized criminal activity in connection with unauthorized access to personally identifiable information.

Sec. 102. Concealment of security breaches involving sensitive personally identifiable information.

Sec. 103. Penalties for fraud and related activity in connection with computers.

Sec. 104. Trafficking in passwords.

Sec. 105. Conspiracy and attempted computer fraud offenses.

Sec. 106. Criminal and civil forfeiture for fraud and related activity in connection with computers.

Sec. 107. Limitation on civil actions involving unauthorized use.

Sec. 108. Reporting of certain criminal cases.

Sec. 109. Damage to critical infrastructure computers.

Sec. 110. Limitation on actions involving unauthorized use.

TITLE II—Privacy and security of personally identifiable information

Subtitle A—A Data Privacy and Security Program

Sec. 201. Purpose and applicability of data privacy and security program.

Sec. 202. Requirements for a personal data privacy and security program.

Sec. 203. Enforcement.

Sec. 204. Relation to other laws.

Subtitle B—Security Breach Notification

Sec. 211. Notice to individuals.

Sec. 212. Exemptions.

Sec. 213. Methods of notice.

Sec. 214. Content of notification.

Sec. 215. Coordination of notification with credit reporting agencies.

Sec. 216. Notice to law enforcement.

Sec. 217. Enforcement.

Sec. 218. Enforcement by State attorneys general.

Sec. 219. Effect on Federal and State law.

Sec. 220. Reporting on exemptions.

Sec. 221. Effective date.

TITLE III—Compliance with statutory Pay-As-You-Go Act

Sec. 301. Budget compliance.

2.

Findings

Congress finds that—

(1)

databases of personally identifiable information are increasingly prime targets of hackers, identity thieves, rogue employees, and other criminals, including organized and sophisticated criminal operations;

(2)

identity theft is a serious threat to the Nation's economic stability, national security, homeland security, cybersecurity, the development of e-commerce, and the privacy rights of Americans;

(3)

security breaches are a serious threat to consumer confidence, homeland security, national security, e-commerce, and economic stability;

(4)

it is important for business entities that own, use, or license personally identifiable information to adopt reasonable procedures to ensure the security, privacy, and confidentiality of that personally identifiable information;

(5)

individuals whose personal information has been compromised or who have been victims of identity theft should receive the necessary information and assistance to mitigate their damages and to restore the integrity of their personal information and identities;

(6)

data misuse and use of inaccurate data have the potential to cause serious or irreparable harm to an individual's livelihood, privacy, and liberty and undermine efficient and effective business and government operations;

(7)

government access to commercial data can potentially improve safety, law enforcement, and national security; and

(8)

because government use of commercial data containing personal information potentially affects individual privacy, and law enforcement and national security operations, there is a need for Congress to exercise oversight over government use of commercial data.

3.

Definitions

In this Act, the following definitions shall apply:

(1)

Affiliate

The term affiliate means persons related by common ownership or by corporate control.

(2)

Agency

The term agency has the same meaning given such term in section 551 of title 5, United States Code.

(3)

Business entity

The term business entity means any organization, corporation, trust, partnership, sole proprietorship, unincorporated association, or venture established to make a profit, or nonprofit.

(4)

Data system communication information

The term data system communication information means dialing, routing, addressing, or signaling information that identifies the origin, direction, destination, processing, transmission, or termination of each communication initiated, attempted, or received.

(5)

Designated entity

The term designated entity means the Federal Government entity designated by the Secretary of Homeland Security under section 216(a).

(6)

Encryption

The term encryption

(A)

means the protection of data in electronic form, in storage or in transit, using an encryption technology that has been generally accepted by experts in the field of information security that renders such data indecipherable in the absence of associated cryptographic keys necessary to enable decryption of such data; and

(B)

includes appropriate management and safeguards of such cryptographic keys so as to protect the integrity of the encryption.

(7)

Identity theft

The term identity theft means a violation of section 1028(a)(7) of title 18, United States Code.

(8)

Personally identifiable information

The term personally identifiable information means any information, or compilation of information, in electronic or digital form that is a means of identification, as defined by section 1028(d)(7) of title 18, United States Code.

(9)

Public record source

The term public record source means the Congress, any agency, any State or local government agency, the government of the District of Columbia and governments of the territories or possessions of the United States, and Federal, State or local courts, courts martial and military commissions, that maintain personally identifiable information in records available to the public.

(10)

Security breach

(A)

In general

The term security breach means compromise of the security, confidentiality, or integrity of, or the loss of, computerized data that result in, or that there is a reasonable basis to conclude has resulted in—

(i)

the unauthorized acquisition of sensitive personally identifiable information; and

(ii)

access to sensitive personally identifiable information that is for an unauthorized purpose, or in excess of authorization.

(B)

Exclusion

The term security breach does not include—

(i)

a good faith acquisition of sensitive personally identifiable information by a business entity or agency, or an employee or agent of a business entity or agency, if the sensitive personally identifiable information is not subject to further unauthorized disclosure;

(ii)

the release of a public record not otherwise subject to confidentiality or nondisclosure requirements or the release of information obtained from a public record, including information obtained from a news report or periodical; or

(iii)

any lawfully authorized investigative, protective, or intelligence activity of a law enforcement or intelligence agency of the United States, a State, or a political subdivision of a State.

(11)

Sensitive personally identifiable information

The term sensitive personally identifiable information means any information or compilation of information, in electronic or digital form that includes the following:

(A)

An individual's first and last name or first initial and last name in combination with any two of the following data elements:

(i)

Home address or telephone number.

(ii)

Mother's maiden name.

(iii)

Month, day, and year of birth.

(B)

A non-truncated social security number, driver's license number, passport number, or alien registration number or other government-issued unique identification number.

(C)

Unique biometric data such as a fingerprint, voice print, a retina or iris image, or any other unique physical representation.

(D)

A unique account identifier, including a financial account number or credit or debit card number, electronic identification number, user name, or routing code.

(E)

Any combination of the following data elements:

(i)

An individual's first and last name or first initial and last name.

(ii)

A unique account identifier, including a financial account number or credit or debit card number, electronic identification number, user name, or routing code.

(iii)

Any security code, access code, or password, or source code that could be used to generate such codes or passwords.

(12)

Service provider

The term service provider means a business entity that provides electronic data transmission, routing, intermediate and transient storage, or connections to its system or network, where the business entity providing such services does not select or modify the content of the electronic data, is not the sender or the intended recipient of the data, and the business entity transmits, routes, stores, or provides connections for personal information in a manner that personal information is undifferentiated from other types of data that such business entity transmits, routes, stores, or provides connections. Any such business entity shall be treated as a service provider under this Act only to the extent that it is engaged in the provision of such transmission, routing, intermediate and transient storage or connections.

I

Enhancing punishment for identity theft and other violations of data privacy and security

101.

Organized criminal activity in connection with unauthorized access to personally identifiable information

Section 1961(1) of title 18, United States Code, is amended by inserting section 1030 (relating to fraud and related activity in connection with computers) if the act is a felony, before section 1084.

102.

Concealment of security breaches involving sensitive personally identifiable information

(a)

In General

Chapter 47 of title 18, United States Code, is amended by adding at the end the following:

1041.

Concealment of security breaches involving sensitive personally identifiable information

(a)

In general

Whoever, having knowledge of a security breach and of the fact that notice of such security breach is required under title II of the Personal Data Privacy and Security Act of 2014 , intentionally and willfully conceals the fact of such security breach, shall, in the event that such security breach results in economic harm to any individual in the amount of $1,000 or more, be fined under this tile or imprisoned for not more than 5 years, or both.

(b)

Person defined

For purposes of subsection (a), the term person has the meaning given the term in section 1030(e)(12).

(c)

Notice requirement

Any person seeking an exemption under section 212(b) of the Personal Data Privacy and Security Act of 2014 shall be immune from prosecution under this section if the Federal Trade Commission does not indicate, in writing, that such notice be given under section 212(b)(3) of such Act.

.

(b)

Conforming and Technical Amendments

The table of sections for chapter 47 of title 18, United States Code, is amended by adding at the end the following:

1041. Concealment of security breaches involving sensitive personally identifiable information.

.

(c)

Enforcement authority

(1)

In general

The United States Secret Service and Federal Bureau of Investigation shall have the authority to investigate offenses under section 1041 of title 18, United States Code, as added by subsection (a).

(2)

Nonexclusivity

The authority granted in paragraph (1) shall not be exclusive of any existing authority held by any other Federal agency.

103.

Penalties for fraud and related activity in connection with computers

Section 1030(c) of title 18, United States Code, is amended to read as follows:

(c)

The punishment for an offense under subsection (a) or (b) of this section is—

(1)

a fine under this title or imprisonment for not more than 20 years, or both, in the case of an offense under subsection (a)(1) of this section;

(2)
(A)

except as provided in subparagraph (B), a fine under this title or imprisonment for not more than 3 years, or both, in the case of an offense under subsection (a)(2); or

(B)

a fine under this title or imprisonment for not more than ten years, or both, in the case of an offense under paragraph (a)(2) of this section, if—

(i)

the offense was committed for purposes of commercial advantage or private financial gain;

(ii)

the offense was committed in the furtherance of any criminal or tortious act in violation of the Constitution or laws of the United States, or of any State; or

(iii)

the value of the information obtained, or that would have been obtained if the offense was completed, exceeds $5,000;

(3)

a fine under this title or imprisonment for not more than 1 year, or both, in the case of an offense under subsection (a)(3) of this section;

(4)

a fine under this title or imprisonment of not more than 20 years, or both, in the case of an offense under subsection (a)(4) of this section;

(5)
(A)

except as provided in subparagraph (D), a fine under this title, imprisonment for not more than 20 years, or both, in the case of an offense under subsection (a)(5)(A) of this section, if the offense caused—

(i)

loss to 1 or more persons during any 1-year period (and, for purposes of an investigation, prosecution, or other proceeding brought by the United States only, loss resulting from a related course of conduct affecting 1 or more other protected computers) aggregating at least $5,000 in value;

(ii)

the modification or impairment, or potential modification or impairment, of the medical examination, diagnosis, treatment, or care of 1 or more individuals;

(iii)

physical injury to any person;

(iv)

a threat to public health or safety;

(v)

damage affecting a computer used by, or on behalf of, an entity of the United States Government in furtherance of the administration of justice, national defense, or national security; or

(vi)

damage affecting 10 or more protected computers during any 1-year period;

(B)

a fine under this title, imprisonment for not more than 10 years, or both, in the case of an offense under subsection (a)(5)(B), if the offense caused a harm provided in clauses (i) through (vi) of subparagraph (A) of this subsection;

(C)

if the offender attempts to cause or knowingly or recklessly causes death from conduct in violation of subsection (a)(5)(A), a fine under this title, imprisonment for any term of years or for life, or both; or

(D)

a fine under this title, imprisonment for not more than 1 year, or both, for any other offense under subsection (a)(5);

(6)

a fine under this title or imprisonment for not more than 10 years, or both, in the case of an offense under subsection (a)(6) of this section; or

(7)

a fine under this title or imprisonment for not more than 10 years, or both, in the case of an offense under subsection (a)(7) of this section.

.

104.

Trafficking in passwords

Section 1030(a) of title 18, United States Code, is amended by striking paragraph (6) and inserting the following:

(6)

knowingly and with intent to defraud traffics (as defined in section 1029) in—

(A)

any password or similar information through which a protected computer as defined in subparagraphs (A) and (B) of subsection (e)(2) may be accessed without authorization; or

(B)

any means of access through which a protected computer as defined in subsection (e)(2)(A) may be accessed without authorization.

.

105.

Conspiracy and attempted computer fraud offenses

Section 1030(b) of title 18, United States Code, is amended by inserting for the completed offense after punished as provided.

106.

Criminal and civil forfeiture for fraud and related activity in connection with computers

Section 1030 of title 18, United States Code, is amended by striking subsections (i) and (j) and inserting the following:

(i)

Criminal Forfeiture

(1)

The court, in imposing sentence on any person convicted of a violation of this section, or convicted of conspiracy to violate this section, shall order, in addition to any other sentence imposed and irrespective of any provision of State law, that such person forfeit to the United States—

(A)

such person’s interest in any property, real or personal, that was used, or intended to be used, to commit or facilitate the commission of such violation; and

(B)

any property, real or personal, constituting or derived from any gross proceeds, or any property traceable to such property, that such person obtained, directly or indirectly, as a result of such violation.

(2)

The criminal forfeiture of property under this subsection, including any seizure and disposition of the property, and any related judicial or administrative proceeding, shall be governed by the provisions of section 413 of the Comprehensive Drug Abuse Prevention and Control Act of 1970 ( 21 U.S.C. 853 ), except subsection (d) of that section.

(j)

Civil Forfeiture

(1)

The following shall be subject to forfeiture to the United States and no property right, real or personal, shall exist in them:

(A)

Any property, real or personal, that was used, or intended to be used, to commit or facilitate the commission of any violation of this section, or a conspiracy to violate this section.

(B)

Any property, real or personal, constituting or derived from any gross proceeds obtained directly or indirectly, or any property traceable to such property, as a result of the commission of any violation of this section, or a conspiracy to violate this section.

(2)

Seizures and forfeitures under this subsection shall be governed by the provisions in chapter 46 relating to civil forfeitures, except that such duties as are imposed on the Secretary of the Treasury under the customs laws described in section 981(d) shall be performed by such officers, agents and other persons as may be designated for that purpose by the Secretary of Homeland Security or the Attorney General.

.

107.

Limitation on civil actions involving unauthorized use

Section 1030(g) of title 18, United States Code, is amended—

(1)

by inserting (1) before Any person; and

(2)

by adding at the end the following:

(2)

No action may be brought under this subsection if a violation of a contractual obligation or agreement, such as an acceptable use policy or terms of service agreement, constitutes the sole basis for determining that access to the protected computer is unauthorized, or in excess of authorization.

.

108.

Reporting of certain criminal cases

Section 1030 of title 18, United States Code, is amended by adding at the end the following:

(k)

Reporting certain criminal cases

Not later than 1 year after the date of the enactment of this Act, and annually thereafter, the Attorney General shall report to the Committee on the Judiciary of the Senate and the Committee on the Judiciary of the House of Representatives the number of criminal cases brought under subsection (a) that involve conduct in which—

(1)

the defendant—

(A)

exceeded authorized access to a non-governmental computer; or

(B)

accessed a non-governmental computer without authorization; and

(2)

the sole basis for the Government determining that access to the non-governmental computer was unauthorized, or in excess of authorization was that the defendant violated a contractual obligation or agreement with a service provider or employer, such as an acceptable use policy or terms of service agreement.

.

109.

Damage to critical infrastructure computers

(a)

In general

Chapter 47 of title 18, United States Code, is amended by inserting after section 1030 the following:

1030A.

Aggravated damage to a critical infrastructure computer

(a)

Definitions

In this section—

(1)

the terms computer and damage have the meanings given such terms in section 1030; and

(2)

the term critical infrastructure computer means a computer that manages or controls systems or assets vital to national defense, national security, national economic security, public health or safety, or any combination of those matters, whether publicly or privately owned or operated, including—

(A)

gas and oil production, storage, and delivery systems;

(B)

water supply systems;

(C)

telecommunication networks;

(D)

electrical power delivery systems;

(E)

finance and banking systems;

(F)

emergency services;

(G)

transportation systems and services; and

(H)

government operations that provide essential services to the public.

(b)

Offense

It shall be unlawful to, during and in relation to a felony violation of section 1030, intentionally cause or attempt to cause damage to a critical infrastructure computer, and such damage results in (or, in the case of an attempt, would, if completed have resulted in) the substantial impairment—

(1)

of the operation of the critical infrastructure computer; or

(2)

of the critical infrastructure associated with the computer.

(c)

Penalty

Any person who violates subsection (b) shall be fined under this title, imprisoned for not less than 3 years nor more than 20 years, or both.

(d)

Consecutive sentence

Notwithstanding any other provision of law—

(1)

a court shall not place on probation any person convicted of a violation of this section;

(2)

except as provided in paragraph (4), no term of imprisonment imposed on a person under this section shall run concurrently with any other term of imprisonment, including any term of imprisonment imposed on the person under any other provision of law, including any term of imprisonment imposed for the felony violation section 1030;

(3)

in determining any term of imprisonment to be imposed for a felony violation of section 1030, a court shall not in any way reduce the term to be imposed for such crime so as to compensate for, or otherwise take into account, any separate term of imprisonment imposed or to be imposed for a violation of this section; and

(4)

a term of imprisonment imposed on a person for a violation of this section may, in the discretion of the court, run concurrently, in whole or in part, only with another term of imprisonment that is imposed by the court at the same time on that person for an additional violation of this section, provided that such discretion shall be exercised in accordance with any applicable guidelines and policy statements issued by the United States Sentencing Commission pursuant to section 994 of title 28.

.

(b)

Technical and conforming amendment

The table of sections for chapter 47 of title 18, United States Code, is amended by inserting after the item relating to section 1030 the following:

1030A. Aggravated damage to a critical infrastructure computer.

.

110.

Limitation on actions involving unauthorized use

Section 1030(e)(6) of title 18, United States Code, is amended by striking alter; and inserting alter, but does not include access in violation of a contractual obligation or agreement, such as an acceptable use policy or terms of service agreement, with an Internet service provider, Internet website, or non-government employer, if such violation constitutes the sole basis for determining that access to a protected computer is unauthorized;.

II

Privacy and security of personally identifiable information

A

A Data Privacy and Security Program

201.

Purpose and applicability of data privacy and security program

(a)

Purpose

The purpose of this subtitle is to ensure standards for developing and implementing administrative, technical, and physical safeguards to protect the security of sensitive personally identifiable information.

(b)

Applicability

A business entity engaging in interstate commerce that involves collecting, accessing, transmitting, using, storing, or disposing of sensitive personally identifiable information in electronic or digital form on 10,000 or more United States persons is subject to the requirements for a data privacy and security program under section 202 for protecting sensitive personally identifiable information.

(c)

Limitations

Notwithstanding any other obligation under this subtitle, this subtitle does not apply to the following:

(1)

Financial institutions

Financial institutions—

(A)

subject to the data security requirements and standards under section 501(b) of the Gramm-Leach-Bliley Act ( 15 U.S.C. 6801(b) ); and

(B)

subject to the jurisdiction of an agency or authority described in section 505(a) of the Gramm-Leach-Bliley Act ( 15 U.S.C. 6805(a) ).

(2)

HIPAA regulated entities

(A)

Covered entities

Covered entities subject to the Health Insurance Portability and Accountability Act of 1996 ( 42 U.S.C. 1301 et seq.), including the data security requirements and implementing regulations of that Act.

(B)

Business entities

A business entity shall be deemed in compliance with this Act if the business entity—

(i)

is acting as a business associate, as that term is defined under the Health Insurance Portability and Accountability Act of 1996 ( 42 U.S.C. 1301 et seq.) and is in compliance with the requirements imposed under that Act and implementing regulations promulgated under that Act; and

(ii)

is subject to, and currently in compliance, with the privacy and data security requirements under sections 13401 and 13404 of division A of the American Reinvestment and Recovery Act of 2009 (42 U.S.C. 17931 and 17934) and implementing regulations promulgated under such sections.

(3)

Service providers

A service provider for any electronic communication by a third party, to the extent that the service provider is exclusively engaged in the transmission, routing, or temporary, intermediate, or transient storage of that communication.

(4)

Public records

Public records not otherwise subject to a confidentiality or nondisclosure requirement, or information obtained from a public record, including information obtained from a news report or periodical.

(d)

Safe Harbors

(1)

In general

A business entity shall be deemed in compliance with the privacy and security program requirements under section 202 if the business entity complies with or provides protection equal to industry standards or standards widely accepted as an effective industry practice, as identified by the Federal Trade Commission, that are applicable to the type of sensitive personally identifiable information involved in the ordinary course of business of such business entity.

(2)

Limitation

Nothing in this subsection shall be construed to permit, and nothing does permit, the Federal Trade Commission to issue regulations requiring, or according greater legal status to, the implementation of or application of a specific technology or technological specifications for meeting the requirements of this title.

202.

Requirements for a personal data privacy and security program

(a)

Personal Data Privacy and Security Program

A business entity subject to this subtitle shall comply with the following safeguards and any other administrative, technical, or physical safeguards identified by the Federal Trade Commission in a rulemaking process pursuant to section 553 of title 5, United States Code, for the protection of sensitive personally identifiable information:

(1)

Scope

A business entity shall implement a comprehensive personal data privacy and security program that includes administrative, technical, and physical safeguards appropriate to the size and complexity of the business entity and the nature and scope of its activities.

(2)

Design

The personal data privacy and security program shall be designed to—

(A)

ensure the privacy, security, and confidentiality of sensitive personally identifying information;

(B)

protect against any anticipated vulnerabilities to the privacy, security, or integrity of sensitive personally identifying information; and

(C)

protect against unauthorized access to use of sensitive personally identifying information that could create a significant risk of harm or fraud to any individual.

(3)

Risk assessment

A business entity shall—

(A)

identify reasonably foreseeable internal and external vulnerabilities that could result in unauthorized access, disclosure, use, or alteration of sensitive personally identifiable information or systems containing sensitive personally identifiable information;

(B)

assess the likelihood of and potential damage from unauthorized access, disclosure, use, or alteration of sensitive personally identifiable information;

(C)

assess the sufficiency of its policies, technologies, and safeguards in place to control and minimize risks from unauthorized access, disclosure, use, or alteration of sensitive personally identifiable information; and

(D)

assess the vulnerability of sensitive personally identifiable information during destruction and disposal of such information, including through the disposal or retirement of hardware.

(4)

Risk management and control

Each business entity shall—

(A)

design its personal data privacy and security program to control the risks identified under paragraph (3);

(B)

adopt measures commensurate with the sensitivity of the data as well as the size, complexity, and scope of the activities of the business entity that—

(i)

control access to systems and facilities containing sensitive personally identifiable information, including controls to authenticate and permit access only to authorized individuals;

(ii)

detect, record, and preserve information relevant to actual and attempted fraudulent, unlawful, or unauthorized access, disclosure, use, or alteration of sensitive personally identifiable information, including by employees and other individuals otherwise authorized to have access;

(iii)

protect sensitive personally identifiable information during use, transmission, storage, and disposal by encryption, redaction, or access controls that are widely accepted as an effective industry practice or industry standard, or other reasonable means (including as directed for disposal of records under section 628 of the Fair Credit Reporting Act ( 15 U.S.C. 1681w ) and the implementing regulations of such Act as set forth in section 682 of title 16, Code of Federal Regulations);

(iv)

ensure that sensitive personally identifiable information is properly destroyed and disposed of, including during the destruction of computers, diskettes, and other electronic media that contain sensitive personally identifiable information;

(v)

trace access to records containing sensitive personally identifiable information so that the business entity can determine who accessed or acquired such sensitive personally identifiable information pertaining to specific individuals; and

(vi)

ensure that no third party or customer of the business entity is authorized to access or acquire sensitive personally identifiable information without the business entity first performing sufficient due diligence to ascertain, with reasonable certainty, that such information is being sought for a valid legal purpose; and

(C)

establish a plan and procedures for minimizing the amount of sensitive personally identifiable information maintained by such business entity, which shall provide for the retention of sensitive personally identifiable information only as reasonably needed for the business purposes of such business entity or as necessary to comply with any legal obligation.

(b)

Training

Each business entity subject to this subtitle shall take steps to ensure employee training and supervision for implementation of the data security program of the business entity.

(c)

Vulnerability testing

(1)

In general

Each business entity subject to this subtitle shall take steps to ensure regular testing of key controls, systems, and procedures of the personal data privacy and security program to detect, prevent, and respond to attacks or intrusions, or other system failures.

(2)

Frequency

The frequency and nature of the tests required under paragraph (1) shall be determined by the risk assessment of the business entity under subsection (a)(3).

(d)

Relationship to certain providers of services

In the event a business entity subject to this subtitle engages a person or entity not subject to this subtitle (other than a service provider) to receive sensitive personally identifiable information in performing services or functions (other than the services or functions provided by a service provider) on behalf of and under the instruction of such business entity, such business entity shall—

(1)

exercise appropriate due diligence in selecting the person or entity for responsibilities related to sensitive personally identifiable information, and take reasonable steps to select and retain a person or entity that is capable of maintaining appropriate safeguards for the security, privacy, and integrity of the sensitive personally identifiable information at issue; and

(2)

require the person or entity by contract to implement and maintain appropriate measures designed to meet the objectives and requirements governing entities subject to section 201, this section, and subtitle B.

(e)

Periodic Assessment and Personal Data Privacy and Security Modernization

Each business entity subject to this subtitle shall on a regular basis monitor, evaluate, and adjust, as appropriate its data privacy and security program in light of any relevant changes in—

(1)

technology;

(2)

the sensitivity of personally identifiable information;

(3)

internal or external threats to personally identifiable information; and

(4)

the changing business arrangements of the business entity, such as—

(A)

mergers and acquisitions;

(B)

alliances and joint ventures;

(C)

outsourcing arrangements;

(D)

bankruptcy; and

(E)

changes to sensitive personally identifiable information systems.

(f)

Implementation Timeline

Not later than 1 year after the date of enactment of this Act, a business entity subject to the provisions of this subtitle shall implement a data privacy and security program pursuant to this subtitle.

203.

Enforcement

(a)

Civil Penalties

(1)

In general

Any business entity that violates the provisions of section 201 or 202 shall be subject to civil penalties of not more than $5,000 per violation per day while such a violation exists, with a maximum of $500,000 per violation.

(2)

Intentional or willful violation

A business entity that intentionally or willfully violates the provisions of section 201 or 202 shall be subject to additional penalties in the amount of $5,000 per violation per day while such a violation exists, with a maximum of an additional $500,000 per violation.

(3)

Penalty limits

(A)

In general

Notwithstanding any other provision of law, the total sum of civil penalties assessed against a business entity for all violations of the provisions of this subtitle resulting from the same or related acts or omissions shall not exceed $500,000, unless such conduct is found to be willful or intentional.

(B)

Determinations

The determination of whether a violation of a provision of this subtitle has occurred, and if so, the amount of the penalty to be imposed, if any, shall be made by the court sitting as the finder of fact. The determination of whether a violation of a provision of this subtitle was willful or intentional, and if so, the amount of the additional penalty to be imposed, if any, shall be made by the court sitting as the finder of fact.

(C)

Additional penalty limit

If a court determines under subparagraph (B) that a violation of a provision of this subtitle was willful or intentional and imposes an additional penalty, the court may not impose an additional penalty in an amount that exceeds $500,000.

(4)

Equitable relief

A business entity engaged in interstate commerce that violates this section may be enjoined from further violations by a United States district court.

(5)

Other rights and remedies

The rights and remedies available under this section are cumulative and shall not affect any other rights and remedies available under law.

(b)

Federal Trade Commission Authority

Any business entity shall have the provisions of this subtitle enforced against it by the Federal Trade Commission.

(c)

State Enforcement

(1)

Civil actions

In any case in which the attorney general of a State or any State or local law enforcement agency authorized by the State attorney general or by State statute to prosecute violations of consumer protection law, has reason to believe that an interest of the residents of that State has been or is threatened or adversely affected by the acts or practices of a business entity that violate this subtitle, the State may bring a civil action on behalf of the residents of that State in a district court of the United States of appropriate jurisdiction to—

(A)

enjoin that act or practice;

(B)

enforce compliance with this subtitle; or

(C)

obtain civil penalties of not more than $5,000 per violation per day while such violations persist, up to a maximum of $500,000 per violation.

(2)

Penalty limits

(A)

In general

Notwithstanding any other provision of law, the total sum of civil penalties assessed against a business entity for all violations of the provisions of this subtitle resulting from the same or related acts or omissions shall not exceed $500,000, unless such conduct is found to be willful or intentional.

(B)

Determinations

The determination of whether a violation of a provision of this subtitle has occurred, and if so, the amount of the penalty to be imposed, if any, shall be made by the court sitting as the finder of fact. The determination of whether a violation of a provision of this subtitle was willful or intentional, and if so, the amount of the additional penalty to be imposed, if any, shall be made by the court sitting as the finder of fact.

(C)

Additional penalty limit

If a court determines under subparagraph (B) that a violation of a provision of this subtitle was willful or intentional and imposes an additional penalty, the court may not impose an additional penalty in an amount that exceeds $500,000.

(3)

Notice

(A)

In general

Before filing an action under this subsection, the attorney general of the State involved shall provide to the Federal Trade Commission

(i)

a written notice of that action; and

(ii)

a copy of the complaint for that action.

(B)

Exception

Subparagraph (A) shall not apply with respect to the filing of an action by an attorney general of a State under this subsection, if the attorney general of a State determines that it is not feasible to provide the notice described in this subparagraph before the filing of the action.

(C)

Notification when practicable

In an action described under subparagraph (B), the attorney general of a State shall provide the written notice and the copy of the complaint to the Federal Trade Commission as soon after the filing of the complaint as practicable.

(4)

Federal trade commission authority

Upon receiving notice under paragraph (2), the Federal Trade Commission shall have the right to—

(A)

move to stay the action, pending the final disposition of a pending Federal proceeding or action as described in paragraph (4);

(B)

intervene in an action brought under paragraph (1); and

(C)

file petitions for appeal.

(5)

Pending proceedings

If the Federal Trade Commission initiates a Federal civil action for a violation of this subtitle, or any regulations thereunder, no attorney general of a State may bring an action for a violation of this subtitle that resulted from the same or related acts or omissions against a defendant named in the Federal civil action initiated by the Federal Trade Commission.

(6)

Rule of construction

For purposes of bringing any civil action under paragraph (1) nothing in this subtitle shall be construed to prevent an attorney general of a State from exercising the powers conferred on the attorney general by the laws of that State to—

(A)

conduct investigations;

(B)

administer oaths and affirmations; or

(C)

compel the attendance of witnesses or the production of documentary and other evidence.

(7)

Venue; service of process

(A)

Venue

Any action brought under this subsection may be brought in the district court of the United States that meets applicable requirements relating to venue under section 1391 of title 28, United States Code.

(B)

Service of process

In an action brought under this subsection, process may be served in any district in which the defendant—

(i)

is an inhabitant; or

(ii)

may be found.

(d)

No Private Cause of Action

Nothing in this subtitle establishes a private cause of action against a business entity for violation of any provision of this subtitle.

204.

Relation to other laws

(a)

In General

No State may require any business entity subject to this subtitle to comply with any requirements with respect to administrative, technical, and physical safeguards for the protection of personal information.

(b)

Limitations

Nothing in this subtitle shall be construed to modify, limit, or supersede the operation of the Gramm-Leach-Bliley Act ( 15 U.S.C. 6801 et seq.) or its implementing regulations, including those adopted or enforced by States.

B

Security Breach Notification

211.

Notice to individuals

(a)

In General

Except as provided in section 212, any agency, or business entity engaged in interstate commerce, other than a service provider, that uses, accesses, transmits, stores, disposes of or collects sensitive personally identifiable information shall, following the discovery of a security breach of such information, notify any resident of the United States whose sensitive personally identifiable information has been, or is reasonably believed to have been, accessed, or acquired.

(b)

Obligation of Owner or Licensee

(1)

Notice to owner or licensee

Any agency, or business entity engaged in interstate commerce, that uses, accesses, transmits, stores, disposes of, or collects sensitive personally identifiable information that the agency or business entity does not own or license shall notify the owner or licensee of the information following the discovery of a security breach involving such information.

(2)

Notice by owner, licensee, or other designated third party

Nothing in this subtitle shall prevent or abrogate an agreement between an agency or business entity required to give notice under this section and a designated third party, including an owner or licensee of the sensitive personally identifiable information subject to the security breach, to provide the notifications required under subsection (a).

(3)

Business entity relieved from giving notice

A business entity obligated to give notice under subsection (a) shall be relieved of such obligation if an owner or licensee of the sensitive personally identifiable information subject to the security breach, or other designated third party, provides such notification.

(4)

Service providers

If a service provider becomes aware of a security breach of data in electronic form containing sensitive personal information that is owned or possessed by another business entity that connects to or uses a system or network provided by the service provider for the purpose of transmitting, routing, or providing intermediate or transient storage of such data, the service provider shall be required to notify the business entity who initiated such connection, transmission, routing, or storage of the security breach if the business entity can be reasonably identified. Upon receiving such notification from a service provider, the business entity shall be required to provide the notification required under subsection (a).

(c)

Timeliness of Notification

(1)

In general

All notifications required under this section shall be made without unreasonable delay following the discovery by the agency or business entity of a security breach.

(2)

Reasonable delay

(A)

In general

Reasonable delay under this subsection may include any time necessary to determine the scope of the security breach, prevent further disclosures, conduct the risk assessment described in section 202(a)(3), and restore the reasonable integrity of the data system and provide notice to law enforcement when required.

(B)

Extension

(i)

In general

Except as provided in subsection (d), delay of notification shall not exceed 60 days following the discovery of the security breach, unless the business entity or agency requests an extension of time and the Federal Trade Commission determines in writing that additional time is reasonably necessary to determine the scope of the security breach, prevent further disclosures, conduct the risk assessment, restore the reasonable integrity of the data system, or to provide notice to the designated entity.

(ii)

Approval of request

If the Federal Trade Commission approves the request for delay, the agency or business entity may delay the time period for notification for additional periods of up to 30 days.

(3)

Burden of production

The agency, business entity, owner, or licensee required to provide notice under this subtitle shall, upon the request of the Attorney General or the Federal Trade Commission provide records or other evidence of the notifications required under this subtitle, including to the extent applicable, the reasons for any delay of notification.

(d)

Delay of notification authorized for law enforcement or national security purposes

(1)

In general

If the United States Secret Service or the Federal Bureau of Investigation determines that the notification required under this section would impede a criminal investigation, or national security activity, such notification shall be delayed upon written notice from the United States Secret Service or the Federal Bureau of Investigation to the agency or business entity that experienced the breach. The notification from the United States Secret Service or the Federal Bureau of Investigation shall specify in writing the period of delay requested for law enforcement or national security purposes.

(2)

Extended delay of notification

If the notification required under subsection (a) is delayed pursuant to paragraph (1), an agency or business entity shall give notice 30 days after the day such law enforcement or national security delay was invoked unless a Federal law enforcement or intelligence agency provides written notification that further delay is necessary.

(3)

Law enforcement immunity

No non-constitutional cause of action shall lie in any court against any agency for acts relating to the delay of notification for law enforcement or national security purposes under this subtitle.

(e)

Limitations

Notwithstanding any other obligation under this subtitle, this subtitle does not apply to the following:

(1)

Financial institutions

Financial institutions—

(A)

subject to the data security requirements and standards under section 501(b) of the Gramm-Leach-Bliley Act ( 15 U.S.C. 6801(b) ); and

(B)

subject to the jurisdiction of an agency or authority described in section 505(a) of the Gramm-Leach-Bliley Act ( 15 U.S.C. 6805(a) ).

(2)

HIPAA regulated entities

(A)

Covered entities

Covered entities subject to the Health Insurance Portability and Accountability Act of 1996 ( 42 U.S.C. 1301 et seq.), including the data security requirements and implementing regulations of that Act.

(B)

Business entities

A business entity shall be deemed in compliance with this Act if the business entity—

(i)
(I)

is acting as a covered entity and as a business associate, as those terms are defined under the Health Insurance Portability and Accountability Act of 1996 ( 42 U.S.C. 1301 et seq.) and is in compliance with the requirements imposed under that Act and implementing regulations promulgated under that Act; and

(II)

is subject to, and currently in compliance, with the data breach notification, privacy and data security requirements under the Health Information Technology for Economic and Clinical Health (HITECH) Act, ( 42 U.S.C. 17932 ) and implementing regulations promulgated thereunder; or

(ii)

is acting as a vendor of personal health records and third party service provider, subject to the Health Information Technology for Economic and Clinical Health (HITECH) Act (42 U.S.C. 17937), including the data breach notification requirements and implementing regulations of that Act.

212.

Exemptions

(a)

Exemption for National Security and Law Enforcement

(1)

In general

Section 211 shall not apply to an agency or business entity if—

(A)

the United States Secret Service or the Federal Bureau of Investigation determines that notification of the security breach could be expected to reveal sensitive sources and methods or similarly impede the ability of the Government to conduct law enforcement investigations; or

(B)

the Federal Bureau of Investigation determines that notification of the security breach could be expected to cause damage to the national security.

(2)

Immunity

No non-constitutional cause of action shall lie in any court against any Federal agency for acts relating to the exemption from notification for law enforcement or national security purposes under this title.

(b)

Safe Harbor

(1)

In general

An agency or business entity shall be exempt from the notice requirements under section 211, if—

(A)

a risk assessment conducted by the agency or business entity concludes that, based upon the information available, there is no significant risk that a security breach has resulted in, or will result in, identity theft, economic loss or harm, or physical harm to the individuals whose sensitive personally identifiable information was subject to the security breach;

(B)

without unreasonable delay, but not later than 45 days after the discovery of a security breach, unless extended by the Federal Trade Commission, the agency or business entity notifies the Federal Trade Commission, in writing, of—

(i)

the results of the risk assessment; and

(ii)

its decision to invoke the risk assessment exemption; and

(C)

the Federal Trade Commission does not indicate, in writing, within 10 business days from receipt of the decision, that notice should be given.

(2)

Rebuttable presumptions

For purposes of paragraph (1)

(A)

the encryption of sensitive personally identifiable information described in paragraph (1)(A)(i) shall establish a rebuttable presumption that no significant risk exists; and

(B)

the rendering of sensitive personally identifiable information described in paragraph (1)(A)(ii) unusable, unreadable, or indecipherable through data security technology or methodology that is generally accepted by experts in the field of information security, such as redaction or access controls shall establish a rebuttable presumption that no significant risk exists.

(3)

Violation

It shall be a violation of this section to—

(A)

fail to conduct the risk assessment in a reasonable manner, or according to standards generally accepted by experts in the field of information security; or

(B)

submit the results of a risk assessment that contains fraudulent or deliberately misleading information.

(c)

Financial fraud prevention exemption

(1)

In general

A business entity will be exempt from the notice requirement under section 211 if the business entity utilizes or participates in a security program that—

(A)

effectively blocks the use of the sensitive personally identifiable information to initiate unauthorized financial transactions before they are charged to the account of the individual; and

(B)

provides for notice to affected individuals after a security breach that has resulted in fraud or unauthorized transactions.

(2)

Limitation

The exemption in paragraph (1) does not apply if the information subject to the security breach includes an individual's first and last name, or any other type of sensitive personally identifiable information as defined in section 3, unless that information is only a credit card number or credit card security code.

213.

Methods of notice

An agency or business entity shall be in compliance with section 211 if it provides the following:

(1)

Individual notice

Notice to individuals by one of the following means:

(A)

Written notification to the last known home mailing address of the individual in the records of the agency or business entity.

(B)

Telephone notice to the individual personally.

(C)

E-mail notice, if the individual has consented to receive such notice and the notice is consistent with the provisions permitting electronic transmission of notices under section 101 of the Electronic Signatures in Global and National Commerce Act (15 U.S.C. 7001).

(2)

Media notice

Notice to major media outlets serving a State or jurisdiction, if the number of residents of such State whose sensitive personally identifiable information was, or is reasonably believed to have been, accessed or acquired by an unauthorized person exceeds 5,000.

214.

Content of notification

(a)

In General

Regardless of the method by which notice is provided to individuals under section 213, such notice shall include, to the extent possible—

(1)

a description of the categories of sensitive personally identifiable information that was, or is reasonably believed to have been, accessed or acquired by an unauthorized person;

(2)

a toll-free number—

(A)

that the individual may use to contact the agency or business entity, or the agent of the agency or business entity; and

(B)

from which the individual may learn what types of sensitive personally identifiable information the agency or business entity maintained about that individual; and

(3)

the toll-free contact telephone numbers and addresses for the major credit reporting agencies.

(b)

Additional content

Notwithstanding section 219, a State may require that a notice under subsection (a) shall also include information regarding victim protection assistance provided for by that State.

(c)

Direct Business Relationship

Regardless of whether a business entity, agency, or a designated third party provides the notice required pursuant to section 211(b), such notice shall include the name of the business entity or agency that has a direct relationship with the individual being notified.

215.

Coordination of notification with credit reporting agencies

If an agency or business entity is required to provide notification to more than 5,000 individuals under section 211(a), the agency or business entity shall also notify all consumer reporting agencies that compile and maintain files on consumers on a nationwide basis (as defined in section 603(p) of the Fair Credit Reporting Act ( 15 U.S.C. 1681a(p) )) of the timing and distribution of the notices. Such notice shall be given to the consumer credit reporting agencies without unreasonable delay and, if it will not delay notice to the affected individuals, prior to the distribution of notices to the affected individuals.

216.

Notice to law enforcement

(a)

Designation of government entity To receive notice

(1)

In general

Not later than 60 days after the date of enactment of this Act, the Secretary of Homeland Security shall designate a Federal Government entity to receive the notices required under section 212 and this section, and any other reports and information about information security incidents, threats, and vulnerabilities.

(2)

Responsibilities of the designated entity

The designated entity shall—

(A)

be responsible for promptly providing the information that it receives to the United States Secret Service and the Federal Bureau of Investigation, and to the Federal Trade Commission for civil law enforcement purposes; and

(B)

provide the information described in subparagraph (A) as appropriate to other Federal agencies for law enforcement, national security, or data security purposes.

(b)

Notice

Any business entity or agency shall notify the designated entity of the fact that a security breach has occurred if—

(1)

the number of individuals whose sensitive personally identifying information was, or is reasonably believed to have been accessed or acquired by an unauthorized person exceeds 5,000;

(2)

the security breach involves a database, networked or integrated databases, or other data system containing the sensitive personally identifiable information of more than 500,000 individuals nationwide;

(3)

the security breach involves databases owned by the Federal Government; or

(4)

the security breach involves primarily sensitive personally identifiable information of individuals known to the agency or business entity to be employees and contractors of the Federal Government involved in national security or law enforcement.

(c)

FTC rulemaking and review of thresholds

(1)

Reports

Not later than 1 year after the date of the enactment of this Act, the Federal Trade Commission, in consultation with the Attorney General of the United States and the Secretary of Homeland Security, shall promulgate regulations under section 553 of title 5, United States Code, regarding the reports required under subsection (a).

(2)

Thresholds for notice

The Federal Trade Commission, in consultation with the Attorney General and the Secretary of Homeland Security, after notice and the opportunity for public comment, and in a manner consistent with this section, shall promulgate regulations, as necessary, under section 553 of title 5, United States Code, to adjust the thresholds for notice to law enforcement and national security authorities under subsection (a) and to facilitate the purposes of this section.

(d)

Timing

The notice required under subsection (a) shall be provided as promptly as possible, but such notice must be provided either 72 hours before notice is provided to an individual pursuant to section 211, or not later than 10 days after the business entity or agency discovers the security breach or discovers that the nature of the security breach requires notice to law enforcement under this section, whichever occurs first.

217.

Enforcement

(a)

In general

The Attorney General and the Federal Trade Commission may enforce civil violations of section 211.

(b)

Civil actions by the Attorney General of the United States

(1)

In general

The Attorney General may bring a civil action in the appropriate United States district court against any business entity that engages in conduct constituting a violation of this subtitle and, upon proof of such conduct by a preponderance of the evidence, such business entity shall be subject to a civil penalty of not more than $11,000 per day per security breach.

(2)

Penalty limitation

Notwithstanding any other provision of law, the total amount of the civil penalty assessed against a business entity for conduct involving the same or related acts or omissions that results in a violation of this subtitle may not exceed $1,000,000.

(3)

Determinations

The determination of whether a violation of a provision of this subtitle has occurred, and if so, the amount of the penalty to be imposed, if any, shall be made by the court sitting as the finder of fact. The determination of whether a violation of a provision of this subtitle was willful or intentional, and if so, the amount of the additional penalty to be imposed, if any, shall be made by the court sitting as the finder of fact.

(4)

Additional penalty limit

If a court determines under paragraph (3) that a violation of a provision of this subtitle was willful or intentional and imposes an additional penalty, the court may not impose an additional penalty in an amount that exceeds $1,000,000.

(c)

Injunctive actions by the Attorney General

(1)

In general

If it appears that a business entity has engaged, or is engaged, in any act or practice constituting a violation of this subtitle, the Attorney General may petition an appropriate district court of the United States for an order—

(A)

enjoining such act or practice; or

(B)

enforcing compliance with this subtitle.

(2)

Issuance of order

A court may issue an order under paragraph (1), if the court finds that the conduct in question constitutes a violation of this subtitle.

(d)

Civil actions by the Federal Trade Commission

(1)

In general

Compliance with the requirements imposed under this subtitle may be enforced under the Federal Trade Commission Act (15 U.S.C. 41 et seq.) by the Federal Trade Commission with respect to business entities subject to this Act. All of the functions and powers of the Federal Trade Commission under the Federal Trade Commission Act are available to the Commission to enforce compliance by any person with the requirements imposed under this title.

(2)

Penalty limitation

(A)

In general

Notwithstanding any other provision of law, the total sum of civil penalties assessed against a business entity for all violations of the provisions of this subtitle resulting from the same or related acts or omissions may not exceed $1,000,000, unless such conduct is found to be willful or intentional.

(B)

Determinations

The determination of whether a violation of a provision of this subtitle has occurred, and if so, the amount of the penalty to be imposed, if any, shall be made by the court sitting as the finder of fact. The determination of whether a violation of a provision of this subtitle was willful or intentional, and if so, the amount of the additional penalty to be imposed, if any, shall be made by the court sitting as the finder of fact.

(C)

Additional penalty limit

If a court determines under subparagraph (B) that a violation of a provision of this subtitle was willful or intentional and imposes an additional penalty, the court may not impose an additional penalty in an amount that exceeds $1,000,000.

(3)

Unfair or deceptive acts or practices

For the purpose of the exercise by the Federal Trade Commission of its functions and powers under the Federal Trade Commission Act, a violation of any requirement or prohibition imposed under this title shall constitute an unfair or deceptive act or practice in commerce in violation of a regulation under section 18(a)(1)(B) of the Federal Trade Commission Act ( 15 U.S.C. 57a(a)(I)(B) ) regarding unfair or deceptive acts or practices and shall be subject to enforcement by the Federal Trade Commission under that Act with respect to any business entity, irrespective of whether that business entity is engaged in commerce or meets any other jurisdictional tests in the Federal Trade Commission Act.

(e)

Coordination of enforcement

(1)

In general

Before opening an investigation, the Federal Trade Commission shall consult with the Attorney General.

(2)

Limitation

The Federal Trade Commission may initiate investigations under this subsection unless the Attorney General determines that such an investigation would impede an ongoing criminal investigation or national security activity.

(3)

Coordination agreement

(A)

In general

In order to avoid conflicts and promote consistency regarding the enforcement and litigation of matters under this Act, not later than 180 days after the enactment of this Act, the Attorney General and the Federal Trade Commission shall enter into an agreement for coordination regarding the enforcement of this Act.

(B)

Requirement

The coordination agreement entered into under subparagraph (A) shall include provisions to ensure that parallel investigations and proceedings under this section are conducted in a matter that avoids conflicts and does not impede the ability of the Attorney General to prosecute violations of Federal criminal laws.

(4)

Coordination with the FCC

If an enforcement action under this Act relates to customer proprietary network information, the Federal Trade Commission shall coordinate the enforcement action with the Federal Communications Commission.

(f)

Rulemaking

The Federal Trade Commission may, in consultation with the Attorney General, issue such other regulations as it determines to be necessary to carry out this subtitle. All regulations promulgated under this Act shall be issued in accordance with section 553 of title 5, United States Code. Where regulations relate to customer proprietary network information, the promulgation of such regulations will be coordinated with the Federal Communications Commission.

(g)

Other rights and remedies

The rights and remedies available under this subtitle are cumulative and shall not affect any other rights and remedies available under law.

(h)

Fraud alert

Section 605A(b)(1) of the Fair Credit Reporting Act (15 U.S.C. 1681c–1(b)(1)) is amended by inserting , or evidence that the consumer has received notice that the consumer's financial information has or may have been compromised, after identity theft report.

218.

Enforcement by State attorneys general

(a)

In general

(1)

Civil actions

In any case in which the attorney general of a State or any State or local law enforcement agency authorized by the State attorney general or by State statute to prosecute violations of consumer protection law, has reason to believe that an interest of the residents of that State has been or is threatened or adversely affected by the engagement of a business entity in a practice that is prohibited under this subtitle, the State or the State or local law enforcement agency on behalf of the residents of the agency's jurisdiction, may bring a civil action on behalf of the residents of the State or jurisdiction in a district court of the United States of appropriate jurisdiction to—

(A)

enjoin that practice;

(B)

enforce compliance with this subtitle; or

(C)

civil penalties of not more than $11,000 per day per security breach up to a maximum of $1,000,000 per violation, unless such conduct is found to be willful or intentional.

(2)

Penalty limitation

(A)

In general

Notwithstanding any other provision of law, the total sum of civil penalties assessed against a business entity for all violations of the provisions of this subtitle resulting from the same or related acts or omissions may not exceed $1,000,000, unless such conduct is found to be willful or intentional.

(B)

Determinations

The determination of whether a violation of a provision of this subtitle has occurred, and if so, the amount of the penalty to be imposed, if any, shall be made by the court sitting as the finder of fact. The determination of whether a violation of a provision of this subtitle was willful or intentional, and if so, the amount of the additional penalty to be imposed, if any, shall be made by the court sitting as the finder of fact.

(C)

Additional penalty limit

If a court determines under subparagraph (B) that a violation of a provision of this subtitle was willful or intentional and imposes an additional penalty, the court may not impose an additional penalty in an amount that exceeds $1,000,000.

(3)

Notice

(A)

In general

Before filing an action under paragraph (1), the attorney general of the State involved shall provide to the Attorney General of the United States

(i)

written notice of the action; and

(ii)

a copy of the complaint for the action.

(B)

Exemption

(i)

In general

Subparagraph (A) shall not apply with respect to the filing of an action by an attorney general of a State under this subtitle, if the State attorney general determines that it is not feasible to provide the notice described in such subparagraph before the filing of the action.

(ii)

Notification

In an action described in clause (i), the attorney general of a State shall provide notice and a copy of the complaint to the Attorney General at the time the State attorney general files the action.

(b)

Federal proceedings

Upon receiving notice under subsection (a)(2), the Attorney General shall have the right to—

(1)

move to stay the action, pending the final disposition of a pending Federal proceeding or action;

(2)

initiate an action in the appropriate United States district court under section 217 and move to consolidate all pending actions, including State actions, in such court;

(3)

intervene in an action brought under subsection (a)(2); and

(4)

file petitions for appeal.

(c)

Pending proceedings

If the Attorney General or the Federal Trade Commission initiate a criminal proceeding or civil action for a violation of a provision of this subtitle, or any regulations thereunder, no attorney general of a State may bring an action for a violation of a provision of this subtitle against a defendant named in the Federal criminal proceeding or civil action.

(d)

Construction

For purposes of bringing any civil action under subsection (a), nothing in this subtitle regarding notification shall be construed to prevent an attorney general of a State from exercising the powers conferred on such attorney general by the laws of that State to—

(1)

conduct investigations;

(2)

administer oaths or affirmations; or

(3)

compel the attendance of witnesses or the production of documentary and other evidence.

(e)

Venue; service of process

(1)

Venue

Any action brought under subsection (a) may be brought in—

(A)

the district court of the United States that meets applicable requirements relating to venue under section 1391 of title 28, United States Code; or

(B)

another court of competent jurisdiction.

(2)

Service of process

In an action brought under subsection (a), process may be served in any district in which the defendant—

(A)

is an inhabitant; or

(B)

may be found.

(f)

No private cause of action

Nothing in this subtitle establishes a private cause of action against a business entity for violation of any provision of this subtitle.

219.

Effect on Federal and State law

For any entity, or agency that is subject to this subtitle, the provisions of this subtitle shall supersede any other provision of Federal law, or any provisions of the law of any State, relating to notification of a security breach, except as provided in section 214(b). Nothing in this subtitle shall be construed to modify, limit, or supersede the operation of the Gramm-Leach-Bliley Act (15 U.S.C. 6801 et seq.) or its implementing regulations, including those regulations adopted or enforced by States, the Health Insurance Portability and Accountability Act of 1996 ( 42 U.S.C. 1301 et seq.) or its implementing regulations, or the Health Information Technology for Economic and Clinical Health Act ( 42 U.S.C. 17937 ) or its implementing regulations.

220.

Reporting on exemptions

(a)

FTC report

Not later than 18 months after the date of enactment of this Act, and upon request by Congress thereafter, the Federal Trade Commission shall submit a report to Congress on the number and nature of the security breaches described in the notices filed by those business entities invoking the risk assessment exemption under section 212(b) and their response to such notices.

(b)

Law enforcement report

(1)

In general

Not later than 18 months after the date of enactment of this Act, and upon the request by Congress thereafter, the United States Secret Service and Federal Bureau of Investigation shall submit a report to Congress on the number and nature of security breaches subject to the national security and law enforcement exemptions under section 212(a).

(2)

Requirement

The report required under paragraph (1) shall not include the contents of any risk assessment provided to the United States Secret Service and the Federal Bureau of Investigation under this subtitle.

221.

Effective date

This subtitle shall take effect on the expiration of the date which is 90 days after the date of enactment of this Act.

III

Compliance with statutory Pay-As-You-Go Act

301.

Budget compliance

The budgetary effects of this Act, for the purpose of complying with the Statutory Pay-As-You-Go Act of 2010, shall be determined by reference to the latest statement titled Budgetary Effects of PAYGO Legislation for this Act, submitted for printing in the Congressional Record by the Chairman of the Senate Budget Committee, provided that such statement has been submitted prior to the vote on passage.