BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          AB 2828 (Chau) - Personal information: privacy: breach
          
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          |Version:  May 27, 2016          |Policy Vote:  JUD. 7 - 0        |
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          |Urgency:  No                    |Mandate:  No                    |
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          |Hearing Date:  August 1, 2016   |Consultant:  Jolie Onodera      |
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          This bill meets the criteria for referral to the Suspense File.


          Bill  
          Summary:  AB 2828 would expand the data breach notification law  
          to include the breach of encrypted information if the encryption  
          key or security credential, as defined, has also been  
          compromised, as specified.


          Fiscal  
          Impact:  
            State agencies  :  Potential minor to moderate future increase  
            in administrative costs (General Fund) statewide across all  
            agencies for additional data breach notifications. Various  
            departments have indicated minor impacts to comply with the  
            expanded data breach standards, however, to the extent a large  
            agency does not currently have a process to respond to this  
            type of data breach, there could be potential costs to comply  
            with the bill's requirements. Staff notes to the extent many  
            agencies would issue data breach notifications in the absence  
            of this measure, this bill largely serves to codify existing  
            practices.







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           Local agencies  :  Potential future increase in non-reimbursable  
            local costs (Local Funds) for the issuance of additional data  
            breach notices to consumers.


          Background:  Existing law, the data breach notification law, requires any  
          agency, person, or business that owns or licenses computerized  
          data that includes personal information to disclose a breach of  
          the security of the system to any California resident whose  
          unencrypted personal information was, or is reasonably believed  
          to have been, acquired by an unauthorized person. The disclosure  
          must be made in the most expedient time possible and without  
          unreasonable delay, consistent with the legitimate needs of law  
          enforcement, as specified. (Civil Code §§ 1798.29(a),(c) and  
          1798.82(a), (c).)
          When the Legislature enacted SB 1386 (Peace) Chapter 915/2002  
          and created California's Data Breach Notification Law, the law  
          included a safe harbor that generally exempted the exposure of  
          encrypted personal information from the law's notification  
          provisions. The inclusion of an encryption safe harbor was meant  
          to incentivize organizations to encrypt personal information  
          under their control. However, the protections offered by  
          encryption are significantly compromised when encrypted data is  
          acquired along with an encryption key that can be used to  
          decrypt the data. 

          This bill would require agencies, persons, and businesses to  
          disclose the breach of the security of a system containing  
          encrypted personal information when the encryption key or  
          security credential that could render that personal information  
          readable or useable is also compromised in the breach.


          Proposed  
          Law:  This bill would require any agency, person, or business  
          that owns or licenses computerized data that includes personal  
          information to disclose a breach of the security of the system  
          to 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 agency, person, or business  
          that owns or licenses the encrypted information has a reasonable  
          belief that the encryption key or security credential could  








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          render that personal information readable or useable. 
          This bill would define "encryption key" and "security  
          credential" to mean the confidential key or process designed to  
          render the data useable, readable, and decipherable.




          Related  
          Legislation:  SB 1444 (Hertzberg) 2016 would require state  
          agencies that own or license computerized data that includes  
          personal information to prepare a security plan that details the  
          agency's strategy to respond to a security breach of that  
          information and its associated consequences. This bill is  
          pending hearing in the Assembly Committee on Privacy and  
          Consumer Protection. 
          AB 259 (Dababneh) 2015 would require an agency, if the agency  
          was the source of a breach and the breach compromised a person's  
          social security number, driver's license number, or California  
          identification card number, to offer the person identity theft  
          prevention and mitigation services at no cost for not less than  
          12 months. The bill was held on the Suspense File of this  
          Committee.


          Prior Legislation:  SB 570 (Jackson) Chapter 543/2015 modified  
          existing data breach notification requirements for agencies and  
          persons or businesses conducting business in California that own  
          or license computerized data that includes personal information.  
          This bill also clarified the requirements for providing  
          substitute notice of a data breach, and made other technical and  
          clarifying changes to the data breach notification law. 


          AB 964 (Chau) Chapter 522/2015 defined "encrypted" as used in  
          California's data breach notification law to mean rendered  
          unusable, unreadable, or indecipherable to an unauthorized  
          person through a security technology or methodology generally  
          accepted in the field of information security. 

          AB 1710 (Dickinson) Chapter 855/2014 amended California's data  
          breach notification law to require a person or business to offer  
          appropriate identity theft prevention and mitigation services to  
          an affected person at no cost for not less than 12 months if the  








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          person or business was the source of a data breach. This bill  
          also prohibited the sale, advertisement for sale, or offer to  
          sell an individual's social security number. 


          SB 46 (Corbett) Chapter 396/2013 revised the data elements  
          included within the definition of personal information under  
          California's data breach notification law by adding certain  
          information that would permit access to an online account and  
          imposed additional requirements on the disclosure of a breach of  
          the security of the system or data in situations where the  
          breach involves personal information that would permit access to  
          an online or email account. 

          AB 1950 (Wiggins) Chapter 877/2004 required a business that owns  
          or licenses personal information about a California resident to  
          implement and maintain reasonable security procedures and  
          practices to protect that personal information from unauthorized  
          access, destruction, use, modification, or disclosure. 

          SB 1386 (Peace) Chapter 915/2002 enacted California's data  
          breach notification law and required a state agency, or a person  
          or business that conducts business in California, that owns or  
          licenses computerized data that includes personal information to  
          disclose any breach of the security of the data to California  
          residents whose unencrypted personal information was, or is  
          reasonably believed to have been, acquired by an unauthorized  
          person. 




          Staff  
          Comments:  Various departments, including the Department of  
          Motor Vehicles, have indicated minor costs resulting from the  
          expanded application of the data breach notification law  
          required by this measure. Staff notes to the extent many  
          agencies would issue data breach notifications in the absence of  
          this measure, this bill largely serves to codify existing  
          practices. 
          The DOJ has indicated the fiscal impact of this bill on the  
          agency would be unknown, but potentially substantial. The DOJ  
          would need to determine the source of the breach and those  
          impacted, and subsequently take the necessary steps to notify.  








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          In addition, there would likely be a large volume of inquiries  
          from the public and law enforcement agencies to process. Thus,  
          the fiscal impact of this measure on the DOJ is potentially  
          significant but unquantifiable.


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