BILL ANALYSIS Ó AB 2828 Page 1 ASSEMBLY THIRD READING AB 2828 (Chau) As Amended May 27, 2016 Majority vote ------------------------------------------------------------------ |Committee |Votes|Ayes |Noes | | | | | | | | | | | | | | | | |----------------+-----+----------------------+--------------------| |Privacy |10-0 |Chau, Wilk, Baker, | | | | |Calderon, Cooper, | | | | |Dababneh, Gatto, | | | | |Gordon, Low, Olsen | | | | | | | |----------------+-----+----------------------+--------------------| |Appropriations |20-0 |Gonzalez, Bigelow, | | | | |Bloom, Bonilla, | | | | |Bonta, Calderon, | | | | |Chang, Daly, Eggman, | | | | |Gallagher, Eduardo | | | | |Garcia, Roger | | | | |Hernández, Holden, | | | | |Jones, Obernolte, | | | | |Quirk, Santiago, | | | | |Wagner, Weber, Wood | | | | | | | | | | | | ------------------------------------------------------------------ AB 2828 Page 2 SUMMARY: Expands data breach notification law, which currently requires consumer notice for compromised unencrypted personal information, to include encrypted information if the encryption keys have also been compromised. Specifically, this bill: 1)Requires a public agency, person, or business that owns or licenses computerized data that includes personal information to notify any California resident whose encrypted personal information was, or is reasonably believed to have been, acquired by an unauthorized person, and the encryption key or security credential was, or is reasonably believed to have been, acquired by an unauthorized person and the person, business, or agency that owns or licenses the encrypted information has a reasonable belief that the encryption key or security credential could render that personal information readable or useable. 2)Defines "encryption key" and "security credential" to mean the confidential key or process designed to render the data useable, readable, and decipherable. FISCAL EFFECT: According to the Assembly Appropriations Committee, "Requiring notification of encrypted personal information, when an encryption key or security credential is obtained by an unauthorized person, will likely increase to some extent the number of notifications required of state agencies. While the cost of these notifications is unknown, it is possible these costs could exceed $150,000 for one or more agencies in a fiscal year. The most recent amendments reduce the likelihood that a state agency would experience such high costs, however." COMMENTS: 1)Purpose of this bill. This bill is intended to better inform AB 2828 Page 3 likely data breach victims by requiring businesses and government agencies to provide a notice of breach in cases where both encrypted Personally Identifiable Information (PII) and the encryption keys or security credentials that can unlock the encrypted PII are believed to have been compromised. Current law only requires notice if unencrypted data is breached. This measure is author-sponsored. 2)Recent data breaches in California. According to a February 2016 report by Attorney General Kamala Harris, the number of data breaches between 2012 and 2015 grew from 131 breach incidents in 2012 to 178 incidents in 2015. Even more dramatic is the number of records breached during the same time period, which rose from 2.6 million in 2012 to 24 million records containing sensitive personal information in 2015 ("California Data Breach Report 2012-2015," California Department of Justice, February 2016). In February 2015, criminals accessed personal information, including names, addresses, birthdates, and Social Security numbers of more than 80 million United States patients covered by Anthem, one of the country's largest health insurance and health plan providers. The incident was the single biggest theft of health care data in U.S. history. Anthem's data was not encrypted, which is what triggered a breach notice to the 80 million victims under current state and federal laws. During 2012-2014, the following California public agencies reported breaches: California State University, Department of Corrections and Rehabilitation, Department of Public Health, Department of State Hospitals, Correctional Health Care Services, Department of Social Services, Department of Justice, Department of Child Support Services, Employment Development Department, and the Department of Motor Vehicles. 3)Requiring notice of encrypted data. State law currently requires notice of a security breach only if the data is unencrypted under the premise that: 1) the law provides an AB 2828 Page 4 incentive to government and business to encrypt sensitive data; and 2) the law triggers notice only when there is a reasonable possibility of fraud or identity theft, so that victims can take steps to protect themselves before criminals use the data. This bill requires notice of breach in cases where the data is in fact encrypted, but notice is only required if the key or security credential that can unlock the data is also reasonably believed to have been compromised. Interestingly, the hacked data in the 2015 Anthem breach was unencrypted, but even if Anthem had encrypted the data, it still would have been easily accessible. The Anthem hackers also gained access to at least five sets of employee security credentials, which could have unlocked the encryption - meaning that the data would likely have been lost anyway. 4)California's Data Breach Notification Law. California law requires businesses as well as state and local agencies that experience a breach of unencrypted personal information to send a notice of the breach to the people affected by the breach. The breach notice must include basic information about what happened, what information was breached, what the business or agency is doing in response to the breach, and what the person affected by the breach can do to protect themselves from fraud and identity theft. Under current law, a business or agency that experiences a breach can avoid mailing the breach notice to each and every affected customer if doing so would cost more than $250,000. The Data Breach Notification Law has two distinct parts: one part that applies to state and local agencies, which is located in the Information Practices Act of 1977 (Civil Code 1798.29), and one part that applies to businesses (Civil Code 1798.82). This bill would change both laws, so that both the public sector and the private sector would have a duty to provide notice of breach to affected customers if both the encrypted AB 2828 Page 5 data and the encryption key that unlocks it are compromised. Analysis Prepared by: Jennie Bretschneider / P. & C.P. / (916) 319-2200 FN: 0003327