House representatives last week introduced legislation that would safeguard sensitive consumer information, fight identity theft and create a uniform standard for notifying consumers of data breaches.
The Financial Data Protection Act of 2005 would: mandate a national standard for the protection of sensitive consumer information; require institutions to notify consumers that their information has been compromised and could be used by identity thieves; and require institutions to provide consumers with a free six-month nationwide credit monitoring service upon notification of a breach.
Financial data protection has become a hot-button issue in the wake of consumer data breaches at major data companies ChoicePoint and LexisNexis, as well as major lending institutions. With more and more sensitive information becoming part of the everyday exchange of records among businesses, consumers are increasingly concerned about companies’ data security policies and post-breach procedures.
The bill was introduced by Rep. Steven C. LaTourette (Ohio), Rep. Darlene Hooley (Ore.), Rep. Michael N. Castle (Del.), Domestic and International Monetary Policy Subcommittee Chairman Deborah Pryce (Ohio), and Rep. Dennis Moore (Kan.)
“This legislation is right for consumers, and right for the countless businesses that so often deal with sensitive financial data. We established a nationwide credit granting system with the Fair Credit Reporting Act and the FACT Act, and while that system has benefited countless consumers, it has also spawned databases and records that for too long have been able to exist without the security safeguards necessary to protect the information,” Rep. LaTourette said.
Rep. Castle said, “We know of 50 database security breaches that have occurred since January 2005 that, taken together, could impact over 51 million Americans.”
Identity theft victims spend on average 90 hours of their own time and $1,700 in out of pocket expenses resolving the problem. In some cases, victims have to change their Social Security numbers or phone numbers in order to free themselves of the effects of identity theft.
The Federal Trade Commission estimates that 10 million Americans fall victim to identity theft each year, costing consumers and businesses more than $55 billion per year. Identity theft is the most frequent complaint to the FTC from all 50 states with the number of complaints having grown for the fourth consecutive year.
The Financial Services Committee has held three hearings so far this Congress on the issue of personal data security. A full Committee hearing was held on May 4, a Financial Institutions and Consumer Credit Subcommittee hearing was held on May 18, and an Oversight and Investigations Subcommittee hearing was held on July 21.
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