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[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1707 Introduced in House (IH)]

112th CONGRESS
  1st Session
                                H. R. 1707

  To protect consumers by requiring reasonable security policies and 
  procedures to protect data containing personal information, and to 
    provide for nationwide notice in the event of a security breach.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                              May 4, 2011

    Mr. Rush (for himself, Mr. Barton of Texas, and Ms. Schakowsky) 
 introduced the following bill; which was referred to the Committee on 
                          Energy and Commerce

_______________________________________________________________________

                                 A BILL

 
  To protect consumers by requiring reasonable security policies and 
  procedures to protect data containing personal information, and to 
    provide for nationwide notice in the event of a security breach.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Data Accountability and Trust Act''.

SEC. 2. REQUIREMENTS FOR INFORMATION SECURITY.

    (a) General Security Policies and Procedures.--
            (1) Regulations.--Not later than 1 year after the date of 
        enactment of this Act, the Commission shall promulgate 
        regulations under section 553 of title 5, United States Code, 
        to require each person engaged in interstate commerce that owns 
        or possesses data containing personal information, or contracts 
        to have any third party entity maintain such data for such 
        person, to establish and implement policies and procedures 
        regarding information security practices for the treatment and 
        protection of personal information taking into consideration--
                    (A) the size of, and the nature, scope, and 
                complexity of the activities engaged in by, such 
                person;
                    (B) the current state of the art in administrative, 
                technical, and physical safeguards for protecting such 
                information; and
                    (C) the cost of implementing such safeguards.
            (2) Requirements.--Such regulations shall require the 
        policies and procedures to include the following:
                    (A) A security policy with respect to the 
                collection, use, sale, other dissemination, and 
                maintenance of such personal information.
                    (B) The identification of an officer or other 
                individual as the point of contact with responsibility 
                for the management of information security.
                    (C) A process for identifying and assessing any 
                reasonably foreseeable vulnerabilities in the system or 
                systems maintained by such person that contains such 
                data, which shall include regular monitoring for a 
                breach of security of such system or systems.
                    (D) A process for taking preventive and corrective 
                action to mitigate against any vulnerabilities 
                identified in the process required by subparagraph (C), 
                which may include implementing any changes to security 
                practices and the architecture, installation, or 
                implementation of network or operating software.
                    (E) A process for disposing of data in electronic 
                form containing personal information by shredding, 
                permanently erasing, or otherwise modifying the 
                personal information contained in such data to make 
                such personal information permanently unreadable or 
                undecipherable.
                    (F) A standard method or methods for the 
                destruction of paper documents and other non-electronic 
                data containing personal information.
            (3) Treatment of entities governed by other law.--Any 
        person who is in compliance with any other Federal law that 
        requires such person to maintain standards and safeguards for 
        information security and protection of personal information 
        that, taken as a whole and as the Commission shall determine in 
        the rulemaking required under paragraph (1), provide 
        protections substantially similar to, or greater than, those 
        required under this subsection, shall be deemed to be in 
        compliance with this subsection.
    (b) Special Requirements for Information Brokers.--
            (1) Submission of policies to the ftc.--The regulations 
        promulgated under subsection (a) shall require each information 
        broker to submit its security policies to the Commission in 
        conjunction with a notification of a breach of security under 
        section 3 or upon request of the Commission.
            (2) Post-breach audit.--For any information broker required 
        to provide notification under section 3, the Commission may 
        conduct audits of the information security practices of such 
        information broker, or require the information broker to 
        conduct independent audits of such practices (by an independent 
        auditor who has not audited such information broker's security 
        practices during the preceding 5 years).
            (3) Accuracy of and individual access to personal 
        information.--
                    (A) Accuracy.--
                            (i) In general.--Each information broker 
                        shall establish reasonable procedures to assure 
                        the maximum possible accuracy of the personal 
                        information it collects, assembles, or 
                        maintains, and any other information it 
                        collects, assembles, or maintains that 
                        specifically identifies an individual, other 
                        than information which merely identifies an 
                        individual's name or address.
                            (ii) Limited exception for fraud 
                        databases.--The requirement in clause (i) shall 
                        not prevent the collection or maintenance of 
                        information that may be inaccurate with respect 
                        to a particular individual when that 
                        information is being collected or maintained 
                        solely--
                                    (I) for the purpose of indicating 
                                whether there may be a discrepancy or 
                                irregularity in the personal 
                                information that is associated with an 
                                individual; and
                                    (II) to help identify, or 
                                authenticate the identity of, an 
                                individual, or to protect against or 
                                investigate fraud or other unlawful 
                                conduct.
                    (B) Consumer access to information.--
                            (i) Access.--Each information broker 
                        shall--
                                    (I) provide to each individual 
                                whose personal information it 
                                maintains, at the individual's request 
                                at least 1 time per year and at no cost 
                                to the individual, and after verifying 
                                the identity of such individual, a 
                                means for the individual to review any 
                                personal information regarding such 
                                individual maintained by the 
                                information broker and any other 
                                information maintained by the 
                                information broker that specifically 
                                identifies such individual, other than 
                                information which merely identifies an 
                                individual's name or address; and
                                    (II) place a conspicuous notice on 
                                its Internet website (if the 
                                information broker maintains such a 
                                website) instructing individuals how to 
                                request access to the information 
                                required to be provided under subclause 
                                (I), and, as applicable, how to express 
                                a preference with respect to the use of 
                                personal information for marketing 
                                purposes under clause (iii).
                            (ii) Disputed information.--Whenever an 
                        individual whose information the information 
                        broker maintains makes a written request 
                        disputing the accuracy of any such information, 
                        the information broker, after verifying the 
                        identity of the individual making such request 
                        and unless there are reasonable grounds to 
                        believe such request is frivolous or 
                        irrelevant, shall--
                                    (I) correct any inaccuracy; or
                                    (II)(aa) in the case of information 
                                that is public record information, 
                                inform the individual of the source of 
                                the information, and, if reasonably 
                                available, where a request for 
                                correction may be directed and, if the 
                                individual provides proof that the 
                                public record has been corrected or 
                                that the information broker was 
                                reporting the information incorrectly, 
                                correct the inaccuracy in the 
                                information broker's records; or
                                    (bb) in the case of information 
                                that is non-public information, note 
                                the information that is disputed, 
                                including the individual's statement 
                                disputing such information, and take 
                                reasonable steps to independently 
                                verify such information under the 
                                procedures outlined in subparagraph (A) 
                                if such information can be 
                                independently verified.
                            (iii) Alternative procedure for certain 
                        marketing information.--In accordance with 
                        regulations issued under clause (v), an 
                        information broker that maintains any 
                        information described in clause (i) which is 
                        used, shared, or sold by such information 
                        broker for marketing purposes, may, in lieu of 
                        complying with the access and dispute 
                        requirements set forth in clauses (i) and (ii), 
                        provide each individual whose information it 
                        maintains with a reasonable means of expressing 
                        a preference not to have his or her information 
                        used for such purposes. If the individual 
                        expresses such a preference, the information 
                        broker may not use, share, or sell the 
                        individual's information for marketing 
                        purposes.
                            (iv) Limitations.--An information broker 
                        may limit the access to information required 
                        under clause (i)(I) and is not required to 
                        provide notice to individuals as required under 
                        clause (i)(II) in the following circumstances:
                                    (I) If access of the individual to 
                                the information is limited by law or 
                                legally recognized privilege.
                                    (II) If the information is used for 
                                a legitimate governmental or fraud 
                                prevention purpose that would be 
                                compromised by such access.
                                    (III) If the information consists 
                                of a published media record, unless 
                                that record has been included in a 
                                report about an individual shared with 
                                a third party.
                            (v) Rulemaking.--Not later than 1 year 
                        after the date of the enactment of this Act, 
                        the Commission shall promulgate regulations 
                        under section 553 of title 5, United States 
                        Code, to carry out this paragraph and to 
                        facilitate the purposes of this Act. In 
                        addition, the Commission shall issue 
                        regulations, as necessary, under section 553 of 
                        title 5, United States Code, on the scope of 
                        the application of the limitations in clause 
                        (iv), including any additional circumstances in 
                        which an information broker may limit access to 
                        information under such clause that the 
                        Commission determines to be appropriate.
                    (C) FCRA regulated persons.--Any information broker 
                who is engaged in activities subject to the Fair Credit 
                Reporting Act and who is in compliance with sections 
                609, 610, and 611 of such Act (15 U.S.C. 1681g; 1681h; 
                1681i) with respect to information subject to such Act, 
                shall be deemed to be in compliance with this paragraph 
                with respect to such information.
            (4) Requirement of audit log of accessed and transmitted 
        information.--Not later than 1 year after the date of the 
        enactment of this Act, the Commission shall promulgate 
        regulations under section 553 of title 5, United States Code, 
        to require information brokers to establish measures which 
        facilitate the auditing or retracing of any internal or 
        external access to, or transmissions of, any data containing 
        personal information collected, assembled, or maintained by 
        such information broker.
            (5) Prohibition on pretexting by information brokers.--
                    (A) Prohibition on obtaining personal information 
                by false pretenses.--It shall be unlawful for an 
                information broker to obtain or attempt to obtain, or 
                cause to be disclosed or attempt to cause to be 
                disclosed to any person, personal information or any 
                other information relating to any person by--
                            (i) making a false, fictitious, or 
                        fraudulent statement or representation to any 
                        person; or
                            (ii) providing any document or other 
                        information to any person that the information 
                        broker knows or should know to be forged, 
                        counterfeit, lost, stolen, or fraudulently 
                        obtained, or to contain a false, fictitious, or 
                        fraudulent statement or representation.
                    (B) Prohibition on solicitation to obtain personal 
                information under false pretenses.--It shall be 
                unlawful for an information broker to request a person 
                to obtain personal information or any other information 
                relating to any other person, if the information broker 
                knew or should have known that the person to whom such 
                a request is made will obtain or attempt to obtain such 
                information in the manner described in subparagraph 
                (A).
    (c) Exemption for Certain Service Providers.--Nothing in this 
section shall apply to a service provider for any electronic 
communication by a third party that is transmitted, routed, or stored 
in intermediate or transient storage by such service provider.

SEC. 3. NOTIFICATION OF INFORMATION SECURITY BREACH.

    (a) Nationwide Notification.--Any person engaged in interstate 
commerce that owns or possesses data in electronic form containing 
personal information shall, following the discovery of a breach of 
security of the system maintained by such person that contains such 
data--
            (1) notify each individual who is a citizen or resident of 
        the United States whose personal information was acquired or 
        accessed as a result of such a breach of security; and
            (2) notify the Commission.
    (b) Special Notification Requirements.--
            (1) Third party agents.--In the event of a breach of 
        security by any third party entity that has been contracted to 
        maintain or process data in electronic form containing personal 
        information on behalf of any other person who owns or possesses 
        such data, such third party entity shall be required to notify 
        such person of the breach of security. Upon receiving such 
        notification from such third party, such person shall provide 
        the notification required under subsection (a).
            (2) Service providers.--If a service provider becomes aware 
        of a breach of security of data in electronic form containing 
        personal information that is owned or possessed by another 
        person 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, 
        such service provider shall be required to notify of such a 
        breach of security only the person who initiated such 
        connection, transmission, routing, or storage if such person 
        can be reasonably identified. Upon receiving such notification 
        from a service provider, such person shall provide the 
        notification required under subsection (a).
            (3) Coordination of notification with credit reporting 
        agencies.--If a person is required to provide notification to 
        more than 5,000 individuals under subsection (a)(1), the person 
        shall also notify the major credit reporting agencies that 
        compile and maintain files on consumers on a nationwide basis, 
        of the timing and distribution of the notices. Such notice 
        shall be given to the 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.
    (c) Timeliness of Notification.--
            (1) In general.--Unless subject to a delay authorized under 
        paragraph (2), a notification required under subsection (a) 
        shall be made not later than 60 days following the discovery of 
        a breach of security, unless the person providing notice can 
        show that providing notice within such a time frame is not 
        feasible due to extraordinary circumstances necessary to 
        prevent further breach or unauthorized disclosures, and 
        reasonably restore the integrity of the data system, in which 
        case such notification shall be made as promptly as possible.
            (2) Delay of notification authorized for law enforcement or 
        national security purposes.--
                    (A) Law enforcement.--If a Federal, State, or local 
                law enforcement agency determines that the notification 
                required under this section would impede a civil or 
                criminal investigation, such notification shall be 
                delayed upon the written request of the law enforcement 
                agency for 30 days or such lesser period of time which 
                the law enforcement agency determines is reasonably 
                necessary and requests in writing. A law enforcement 
                agency may, by a subsequent written request, revoke 
                such delay or extend the period of time set forth in 
                the original request made under this paragraph if 
                further delay is necessary.
                    (B) National security.--If a Federal national 
                security agency or homeland security agency determines 
                that the notification required under this section would 
                threaten national or homeland security, such 
                notification may be delayed for a period of time which 
                the national security agency or homeland security 
                agency determines is reasonably necessary and requests 
                in writing. A Federal national security agency or 
                homeland security agency may revoke such delay or 
                extend the period of time set forth in the original 
                request made under this paragraph by a subsequent 
                written request if further delay is necessary.
    (d) Method and Content of Notification.--
            (1) Direct notification.--
                    (A) Method of notification.--A person required to 
                provide notification to individuals under subsection 
                (a)(1) shall be in compliance with such requirement if 
                the person provides conspicuous and clearly identified 
                notification by one of the following methods (provided 
                the selected method can reasonably be expected to reach 
                the intended individual):
                            (i) Written notification.
                            (ii) Notification by email or other 
                        electronic means, if--
                                    (I) the person's primary method of 
                                communication with the individual is by 
                                email or such other electronic means; 
                                or
                                    (II) the individual has consented 
                                to receive such notification and the 
                                notification is provided in a manner 
                                that 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).
                    (B) Content of notification.--Regardless of the 
                method by which notification is provided to an 
                individual under subparagraph (A), such notification 
                shall include--
                            (i) a description of the personal 
                        information that was acquired or accessed by an 
                        unauthorized person;
                            (ii) a telephone number that the individual 
                        may use, at no cost to such individual, to 
                        contact the person to inquire about the breach 
                        of security or the information the person 
                        maintained about that individual;
                            (iii) notice that the individual is 
                        entitled to receive, at no cost to such 
                        individual, consumer credit reports on a 
                        quarterly basis for a period of 2 years, or 
                        credit monitoring or other service that enables 
                        consumers to detect the misuse of their 
                        personal information for a period of 2 years, 
                        and instructions to the individual on 
                        requesting such reports or service from the 
                        person, except when the only information which 
                        has been the subject of the security breach is 
                        the individual's first name or initial and last 
                        name, or address, or phone number, in 
                        combination with a credit or debit card number, 
                        and any required security code;
                            (iv) the toll-free contact telephone 
                        numbers and addresses for the major credit 
                        reporting agencies; and
                            (v) a toll-free telephone number and 
                        Internet website address for the Commission 
                        whereby the individual may obtain information 
                        regarding identity theft.
            (2) Substitute notification.--
                    (A) Circumstances giving rise to substitute 
                notification.--A person required to provide 
                notification to individuals under subsection (a)(1) may 
                provide substitute notification in lieu of the direct 
                notification required by paragraph (1) if the person 
                owns or possesses data in electronic form containing 
                personal information of fewer than 1,000 individuals 
                and such direct notification is not feasible due to--
                            (i) excessive cost to the person required 
                        to provide such notification relative to the 
                        resources of such person, as determined in 
                        accordance with the regulations issued by the 
                        Commission under paragraph (3)(A); or
                            (ii) lack of sufficient contact information 
                        for the individual required to be notified.
                    (B) Form of substitute notification.--Such 
                substitute notification shall include--
                            (i) email notification to the extent that 
                        the person has email addresses of individuals 
                        to whom it is required to provide notification 
                        under subsection (a)(1);
                            (ii) a conspicuous notice on the Internet 
                        website of the person (if such person maintains 
                        such a website); and
                            (iii) notification in print and to 
                        broadcast media, including major media in 
                        metropolitan and rural areas where the 
                        individuals whose personal information was 
                        acquired reside.
                    (C) Content of substitute notice.--Each form of 
                substitute notice under this paragraph shall include--
                            (i) notice that individuals whose personal 
                        information is included in the breach of 
                        security are entitled to receive, at no cost to 
                        the individuals, consumer credit reports on a 
                        quarterly basis for a period of 2 years, or 
                        credit monitoring or other service that enables 
                        consumers to detect the misuse of their 
                        personal information for a period of 2 years, 
                        and instructions on requesting such reports or 
                        service from the person, except when the only 
                        information which has been the subject of the 
                        security breach is the individual's first name 
                        or initial and last name, or address, or phone 
                        number, in combination with a credit or debit 
                        card number, and any required security code; 
                        and
                            (ii) a telephone number by which an 
                        individual can, at no cost to such individual, 
                        learn whether that individual's personal 
                        information is included in the breach of 
                        security.
            (3) Regulations and guidance.--
                    (A) Regulations.--Not later than 1 year after the 
                date of enactment of this Act, the Commission shall, by 
                regulation under section 553 of title 5, United States 
                Code, establish criteria for determining circumstances 
                under which substitute notification may be provided 
                under paragraph (2), including criteria for determining 
                if notification under paragraph (1) is not feasible due 
                to excessive costs to the person required to provided 
                such notification relative to the resources of such 
                person. Such regulations may also identify other 
                circumstances where substitute notification would be 
                appropriate for any person, including circumstances 
                under which the cost of providing notification exceeds 
                the benefits to consumers.
                    (B) Guidance.--In addition, the Commission shall 
                provide and publish general guidance with respect to 
                compliance with this subsection. Such guidance shall 
                include--
                            (i) a description of written or email 
                        notification that complies with the 
                        requirements of paragraph (1); and
                            (ii) guidance on the content of substitute 
                        notification under paragraph (2), including the 
                        extent of notification to print and broadcast 
                        media that complies with the requirements of 
                        such paragraph.
    (e) Other Obligations Following Breach.--
            (1) In general.--A person required to provide notification 
        under subsection (a) shall, upon request of an individual whose 
        personal information was included in the breach of security, 
        provide or arrange for the provision of, to each such 
        individual and at no cost to such individual--
                    (A) consumer credit reports from at least one of 
                the major credit reporting agencies beginning not later 
                than 60 days following the individual's request and 
                continuing on a quarterly basis for a period of 2 years 
                thereafter; or
                    (B) a credit monitoring or other service that 
                enables consumers to detect the misuse of their 
                personal information, beginning not later than 60 days 
                following the individual's request and continuing for a 
                period of 2 years.
            (2) Limitation.--This subsection shall not apply if the 
        only personal information which has been the subject of the 
        security breach is the individual's first name or initial and 
        last name, or address, or phone number, in combination with a 
        credit or debit card number, and any required security code.
            (3) Rulemaking.--As part of the Commission's rulemaking 
        described in subsection (d)(3), the Commission shall determine 
        the circumstances under which a person required to provide 
        notification under subsection (a)(1) shall provide or arrange 
        for the provision of free consumer credit reports or credit 
        monitoring or other service to affected individuals.
    (f) Exemption.--
            (1) General exemption.--A person shall be exempt from the 
        requirements under this section if, following a breach of 
        security, such person determines that there is no reasonable 
        risk of identity theft, fraud, or other unlawful conduct.
            (2) Presumption.--
                    (A) In general.--If the data in electronic form 
                containing personal information is rendered unusable, 
                unreadable, or indecipherable through encryption or 
                other security technology or methodology (if the method 
                of encryption or such other technology or methodology 
                is generally accepted by experts in the information 
                security field), there shall be a presumption that no 
                reasonable risk of identity theft, fraud, or other 
                unlawful conduct exists following a breach of security 
                of such data. Any such presumption may be rebutted by 
                facts demonstrating that the encryption or other 
                security technologies or methodologies in a specific 
                case, have been or are reasonably likely to be 
                compromised.
                    (B) Methodologies or technologies.--Not later than 
                1 year after the date of the enactment of this Act and 
                biannually thereafter, the Commission shall issue rules 
                (pursuant to section 553 of title 5, United States 
                Code) or guidance to identify security methodologies or 
                technologies which render data in electronic form 
                unusable, unreadable, or indecipherable, that shall, if 
                applied to such data, establish a presumption that no 
                reasonable risk of identity theft, fraud, or other 
                unlawful conduct exists following a breach of security 
                of such data. Any such presumption may be rebutted by 
                facts demonstrating that any such methodology or 
                technology in a specific case has been or is reasonably 
                likely to be compromised. In issuing such rules or 
                guidance, the Commission shall consult with relevant 
                industries, consumer organizations, and data security 
                and identity theft prevention experts and established 
                standards setting bodies.
            (3) FTC guidance.--Not later than 1 year after the date of 
        the enactment of this Act the Commission shall issue guidance 
        regarding the application of the exemption in paragraph (1).
    (g) Website Notice of Federal Trade Commission.--If the Commission, 
upon receiving notification of any breach of security that is reported 
to the Commission under subsection (a)(2), finds that notification of 
such a breach of security via the Commission's Internet website would 
be in the public interest or for the protection of consumers, the 
Commission shall place such a notice in a clear and conspicuous 
location on its Internet website.
    (h) FTC Study on Notification in Languages in Addition to 
English.--Not later than 1 year after the date of enactment of this 
Act, the Commission shall conduct a study on the practicality and cost 
effectiveness of requiring the notification required by subsection 
(d)(1) to be provided in a language in addition to English to 
individuals known to speak only such other language.
    (i) General Rulemaking Authority.--The Commission may promulgate 
regulations necessary under section 553 of title 5, United States Code, 
to effectively enforce the requirements of this section.
    (j) Treatment of Persons Governed by Other Law.--A person who is in 
compliance with any other Federal law that requires such person to 
provide notification to individuals following a breach of security, and 
that, taken as a whole, provides protections substantially similar to, 
or greater than, those required under this section, as the Commission 
shall determine by rule (under section 553 of title 5, United States 
Code), shall be deemed to be in compliance with this section.

SEC. 4. APPLICATION AND ENFORCEMENT.

    (a) General Application.--The requirements of sections 2 and 3 
shall only apply to those persons, partnerships, or corporations over 
which the Commission has authority pursuant to section 5(a)(2) of the 
Federal Trade Commission Act (15 U.S.C. 45(a)(2)).
    (b) Enforcement by the Federal Trade Commission.--
            (1) Unfair or deceptive acts or practices.--A violation of 
        section 2 or 3 shall be treated as an unfair and deceptive act 
        or practice in violation of a regulation under section 
        18(a)(1)(B) of the Federal Trade Commission Act (15 U.S.C. 
        57a(a)(1)(B)) regarding unfair or deceptive acts or practices.
            (2) Powers of commission.--The Commission shall enforce 
        this Act in the same manner, by the same means, and with the 
        same jurisdiction, powers, and duties as though all applicable 
        terms and provisions of the Federal Trade Commission Act (15 
        U.S.C. 41 et seq.) were incorporated into and made a part of 
        this Act. Any person who violates such regulations shall be 
        subject to the penalties and entitled to the privileges and 
        immunities provided in that Act.
            (3) Limitation.--In promulgating rules under this Act, the 
        Commission shall not require the deployment or use of any 
        specific products or technologies, including any specific 
        computer software or hardware.
    (c) Enforcement by State Attorneys General.--
            (1) Civil action.--In any case in which the attorney 
        general of a State, or an official or agency of a State, has 
        reason to believe that an interest of the residents of that 
        State has been or is threatened or adversely affected by any 
        person who violates section 2 or 3 of this Act, the attorney 
        general, official, or agency of the State, as parens patriae, 
        may bring a civil action on behalf of the residents of the 
        State in a district court of the United States of appropriate 
        jurisdiction--
                    (A) to enjoin further violation of such section by 
                the defendant;
                    (B) to compel compliance with such section; or
                    (C) to obtain civil penalties in the amount 
                determined under paragraph (2).
            (2) Civil penalties.--
                    (A) Calculation.--
                            (i) Treatment of violations of section 2.--
                        For purposes of paragraph (1)(C) with regard to 
                        a violation of section 2, the amount determined 
                        under this paragraph is the amount calculated 
                        by multiplying the number of days that a person 
                        is not in compliance with such section by an 
                        amount not greater than $11,000.
                            (ii) Treatment of violations of section 
                        3.--For purposes of paragraph (1)(C) with 
                        regard to a violation of section 3, the amount 
                        determined under this paragraph is the amount 
                        calculated by multiplying the number of 
                        violations of such section by an amount not 
                        greater than $11,000. Each failure to send 
                        notification as required under section 3 to a 
                        resident of the State shall be treated as a 
                        separate violation.
                    (B) Adjustment for inflation.--Beginning on the 
                date that the Consumer Price Index is first published 
                by the Bureau of Labor Statistics that is after 1 year 
                after the date of enactment of this Act, and each year 
                thereafter, the amounts specified in clauses (i) and 
                (ii) of subparagraph (A) shall be increased by the 
                percentage increase in the Consumer Price Index 
                published on that date from the Consumer Price Index 
                published the previous year.
                    (C) Maximum total liability.--Notwithstanding the 
                number of actions which may be brought against a person 
                under this subsection, the maximum civil penalty for 
                which any person may be liable under this subsection 
                shall not exceed--
                            (i) $5,000,000 for each violation of 
                        section 2; and
                            (ii) $5,000,000 for all violations of 
                        section 3 resulting from a single breach of 
                        security.
            (3) Intervention by the ftc.--
                    (A) Notice and intervention.--The State shall 
                provide prior written notice of any action under 
                paragraph (1) to the Commission and provide the 
                Commission with a copy of its complaint, except in any 
                case in which such prior notice is not feasible, in 
                which case the State shall serve such notice 
                immediately upon instituting such action. The 
                Commission shall have the right--
                            (i) to intervene in the action;
                            (ii) upon so intervening, to be heard on 
                        all matters arising therein; and
                            (iii) to file petitions for appeal.
                    (B) Limitation on state action while federal action 
                is pending.--If the Commission has instituted a civil 
                action for violation of this Act, no State attorney 
                general, or official or agency of a State, may bring an 
                action under this subsection during the pendency of 
                that action against any defendant named in the 
                complaint of the Commission for any violation of this 
                Act alleged in the complaint.
            (4) Construction.--For purposes of bringing any civil 
        action under paragraph (1), nothing in this Act 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 or affirmations; or
                    (C) compel the attendance of witnesses or the 
                production of documentary and other evidence.
    (d) Affirmative Defense for a Violation of Section 3.--
            (1) In general.--It shall be an affirmative defense to an 
        enforcement action brought under subsection (b), or a civil 
        action brought under subsection (c), based on a violation of 
        section 3, that all of the personal information contained in 
        the data in electronic form that was acquired or accessed as a 
        result of a breach of security of the defendant is public 
        record information that is lawfully made available to the 
        general public from Federal, State, or local government records 
        and was acquired by the defendant from such records.
            (2) No effect on other requirements.--Nothing in this 
        subsection shall be construed to exempt any person from the 
        requirement to notify the Commission of a breach of security as 
        required under section 3(a).

SEC. 5. DEFINITIONS.

    In this Act, the following definitions apply:
            (1) Breach of security.--The term ``breach of security'' 
        means unauthorized access to or acquisition of data in 
        electronic form containing personal information.
            (2) Commission.--The term ``Commission'' means the Federal 
        Trade Commission.
            (3) Data in electronic form.--The term ``data in electronic 
        form'' means any data stored electronically or digitally on any 
        computer system or other database and includes recordable tapes 
        and other mass storage devices.
            (4) Encryption.--The term ``encryption'' means the 
        protection of data in electronic form in storage or in transit 
        using an encryption technology that has been adopted by an 
        established standards setting body which renders such data 
        indecipherable in the absence of associated cryptographic keys 
        necessary to enable decryption of such data. Such encryption 
        must include appropriate management and safeguards of such keys 
        to protect the integrity of the encryption.
            (5) Identity theft.--The term ``identity theft'' means the 
        unauthorized use of another person's personal information for 
        the purpose of engaging in commercial transactions under the 
        name of such other person.
            (6) Information broker.--The term ``information broker''--
                    (A) means a commercial entity whose business is to 
                collect, assemble, or maintain personal information 
                concerning individuals who are not current or former 
                customers of such entity in order to sell such 
                information or provide access to such information to 
                any nonaffiliated third party in exchange for 
                consideration, whether such collection, assembly, or 
                maintenance of personal information is performed by the 
                information broker directly, or by contract or 
                subcontract with any other entity; and
                    (B) does not include a commercial entity to the 
                extent that such entity processes information collected 
                by and received from a nonaffiliated third party 
                concerning individuals who are current or former 
                customers or employees of such third party to enable 
                such third party to (1) provide benefits for its 
                employees or (2) directly transact business with its 
                customers.
            (7) Personal information.--
                    (A) Definition.--The term ``personal information'' 
                means an individual's first name or initial and last 
                name, or address, or phone number, in combination with 
                any 1 or more of the following data elements for that 
                individual:
                            (i) Social Security number.
                            (ii) Driver's license number, passport 
                        number, military identification number, or 
                        other similar number issued on a government 
                        document used to verify identity.
                            (iii) Financial account number, or credit 
                        or debit card number, and any required security 
                        code, access code, or password that is 
                        necessary to permit access to an individual's 
                        financial account.
                    (B) Modified definition by rulemaking.--The 
                Commission may, by rule promulgated under section 553 
                of title 5, United States Code, modify the definition 
                of ``personal information'' under subparagraph (A)--
                            (i) for the purpose of section 2 to the 
                        extent that such modification will not 
                        unreasonably impede interstate commerce, and 
                        will accomplish the purposes of this Act; or
                            (ii) for the purpose of section 3, to the 
                        extent that such modification is necessary to 
                        accommodate changes in technology or practices, 
                        will not unreasonably impede interstate 
                        commerce, and will accomplish the purposes of 
                        this Act.
            (8) Public record information.--The term ``public record 
        information'' means information about an individual which has 
        been obtained originally from records of a Federal, State, or 
        local government entity that are available for public 
        inspection.
            (9) Non-public information.--The term ``non-public 
        information'' means information about an individual that is of 
        a private nature and neither available to the general public 
        nor obtained from a public record.
            (10) Service provider.--The term ``service provider'' means 
        an entity that provides to a user transmission, routing, 
        intermediate and transient storage, or connections to its 
        system or network, for electronic communications, between or 
        among points specified by such user of material of the user's 
        choosing, without modification to the content of the material 
        as sent or received. Any such 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.

SEC. 6. EFFECT ON OTHER LAWS.

    (a) Preemption of State Information Security Laws.--This Act 
supersedes any provision of a statute, regulation, or rule of a State 
or political subdivision of a State, with respect to those entities 
covered by the regulations issued pursuant to this Act, that 
expressly--
            (1) requires information security practices and treatment 
        of data containing personal information similar to any of those 
        required under section 2; and
            (2) requires notification to individuals of a breach of 
        security resulting in unauthorized access to or acquisition of 
        data in electronic form containing personal information.
    (b) Additional Preemption.--
            (1) In general.--No person other than a person specified in 
        section 4(c) may bring a civil action under the laws of any 
        State if such action is premised in whole or in part upon the 
        defendant violating any provision of this Act.
            (2) Protection of consumer protection laws.--This 
        subsection shall not be construed to limit the enforcement of 
        any State consumer protection law by an attorney general of a 
        State.
    (c) Protection of Certain State Laws.--This Act shall not be 
construed to preempt the applicability of--
            (1) State trespass, contract, or tort law; or
            (2) other State laws to the extent that those laws relate 
        to acts of fraud.
    (d) Preservation of FTC Authority.--Nothing in this Act may be 
construed in any way to limit or affect the Commission's authority 
under any other provision of law.

SEC. 7. EFFECTIVE DATE.

    This Act shall take effect 1 year after the date of enactment of 
this Act.

SEC. 8. AUTHORIZATION OF APPROPRIATIONS.

    There is authorized to be appropriated to the Commission $1,000,000 
for each of fiscal years 2011 through 2016 to carry out this Act.
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