Sunday, February 9, 2020

First Take: Summary of Revisions to the CCPA Regulations

On Friday afternoon, and without advanced notice, the California Department of Justice released changes to the California Consumer Privacy Act (CCPA) regulations that will affect how companies all over the world attempt to comply with the CCPA.


Before describing the changes, let's remember how we got here.  The CCPA began as a ballot initiative funded by a wealthy real estate developer.  The ballot measure was so popular that it was certain to pass in the 2018 election, so the California legislature struck a deal with the proponents to make it a statute immediately (which made it easier for the legislature to amend).  It was amended once in 2018 and several times in September 2019.

The law became effective on January 1, 2020. When the CCPA was enacted back in June 2018, it delegated certain rulemaking responsibility to the California Department of Justice, led by the Attorney General.  After fifteen long months--and painfully close to the CCPA's effective date of January 1, 2020 the Attorney General released proposed regulations on October 10, 2019.  Because the Attorney General waited so long to publish regulations, the statute says that the California Department of Justice cannot begin enforcing the law until six months following its effective date--July 1, 2020.  The Attorney General has said, however, that companies are expected to comply on January 1, 2020, and enforcement actions after July 1 might relate to activities taken between January 1, 2020 and July 1, 2020.

CCPA Opt out button image from CCPA Regs
The new, standard CCPA opt-out button
When the regulations we first released on October 10, 2020, there was a public comment period, and many interested people, companies, and groups commented on the proposal.  Many pointed out that the regulations created new burdens not found in the statute, failed to clarify many ambiguities in the statute, and introduced new ambiguities.  The Attorney General, however, said in December that there would be no major changes to the regulations, despite the voluminous comments and criticisms. 

In response to the comment letters, and to clarify certain ambiguities in the regulations, the Department of Justice revised the regulations on Friday, February 7, 2020.  Despite the Attorney General's statement, hardly a paragraph of the original regulations is left intact; all 32 pages of the revisions show significant changes.

The Changes

Many of the changes are merely clarifying edits and do not signal substantive policy changes.  While it will take time to digest and understand the effects of the changes, my quick, initial summary of the more salient changes are listed below:

  • The disclosure of the categories of sources of personal information will be more specific than the three categories originally described. Several additional examples are provided: advertising networks, internet service providers, data analytics providers, operating systems and platforms, social networks.  Businesses will need to revise their public-facing privacy policy statements and disclosures in response.
  • New provisions addressing employee data are included. The term "employment-related information" is added.  Disclosures can be hyperlinked. 
  • More specific instructions for handling household requests are included.  Companies will need to revise their procedures to address this. 
  • The definition of "personal information" is to be interpreted slightly less broadly than some have thought.  For example, even though the statutory definition includes IP addresses, all IP addresses will not be considered personal information.  A consumer's IP address is only considered personal information if it can be linked to the consumer or household. 
  • The WCAG 2.1 (not 2.0!) accessibility standards are incorporated by reference. 
  • The "notice at collection" may be oral.
  • Non-intuitive collection via a mobile device will require a "just-in-time" notice, such as a pop-up window.
  • Businesses may use personal information for additional purposes if they are not "materially different" from the purposes previously disclosed.  This gives businesses a little more flexibility to adjust to new use cases than the previous language.
  • It appears that purposes need not be disclosed for each category of personal information, as originally required.  (Many companies may not need to describe purposes in the granular detail found in privacy policy statements published on January 1.)
  • Companies that collect consumer personal information only indirectly can avoid the notice of collection if they register as data brokers with the California Attorney General. All of the implications of this change are unclear to me at this point, but this could be very significant.
  • Mobile apps can use hyperlinks to privacy policy statements. 
  • A description of the process for authorized agents to demonstrate authority is no longer required to be included in the notice of opt-out rights.
  • The privacy policy statement URL is no longer required to be included in the notice of opt-out rights. 
  • Businesses do not need to commit to never sell personal information in the future in order to avoid opt-out notices, as was perhaps implied by the initial regulatory language.
  • A simple opt-out graphic is included for use in lieu of the hyperlink text for the opt-out mechanism.
  • Businesses must disclose the value of the consumer's data, explain how the financial incentive is related to the value of the consumer's data, when giving a notice of financial incentive.  Businesses will need to revise these notices to comply with the change.  This likely means loyalty and discount program terms and conditions need to include a dollar value for consumer data.  There are also new examples relating specifically to loyalty programs.
  •  Categories of sources of information, purposes for collection, and categories of third parties are no longer required to be disclosed separately for each category of personal information.  (The complex matrices and other highly-granular disclosures that some businesses have already released in response to the proposed regulations now seem unnecessary.  Those companies may want to make more general statements going forward.)
  • The requirement to affirmatively state whether data has been sold in the prior 12 months is removed.
  • The categories of third parties to whom personal information is sold must be disclosed separately for each category of personal information.  
  • Verification processes must be disclosed generally, not specifically, in the notice at collection.
  • The right to opt-out disclosure must state whether or not the company sells personal information.
  • Online-only, direct-to-consumer businesses can limit consumer requests to email; all others must offer two or more options.  The webform is no longer mandatory if a business has a website. 
  • The requirement to accept consumer requests to know and requests to delete via an additional method based on how the business interacts with consumers is now recommended but not mandatory.  
  • Confirmation must be sent within 10 business days, not calendar days.
  • If a business cannot verify identity within 45 days of receiving a request, the business may deny the request.
  • Businesses need not search for personal information if four criteria are met (this will be rare).
  • Business may not disclose certain biometric data in response to a request to know.
  • A response to a request for categories of personal information must include additional information.
  • If identity cannot be verified, a business must ask if the consumer wishes to opt out of the sale of their personal information (for which verification is not required).
  • A business does not have to describe how it deleted the consumer's data pursuant to a deletion request, but must state whether or not it has done so.
  • The revisions say that a business may tell a consumer that it is retaining a record of a deletion request "to ensure the personal information remains deleted from the business's records."  (While re-introduction of data through automated data syncs and dumps is a legitimate concerns, I worry that such a statement could lead a consumer to think that a business has a duty to avoid collecting the consumer's data in the future, or to periodically purge the data in the future.)
  • If prohibited from fulfilling a deletion request by law, the business must now explain the legal conflict. (!)
  • Several changes to the constraints placed on service providers are present, including the ability of service providers to use personal information to improve their own services.  (This was important, especially for AI providers.)
  • It must be "easy" to opt-out and involve "minimal steps." 
  • Additional expectations are set regarding the honoring of browsers' privacy settings and the "opt out" signal.  It is still unclear how this will work in the real world.
  • An authorized agent must have written authority that is signed by the consumer, and the business can require the consumer to confirm directly to the business that the authorized agent has permisison to do so.
  • Statistical disclosure is due on July 1 of each calendar year, for businesses that meet the threshold requirements for reporting.  (I believe July 1, 2021 will be the first reporting deadline.)
  • Household requests require verification of all household members.  (This seems likely to cause most businesses to treat household requests as multiple individual requests, for practical operational purposes.)
  • Verification cannot involve a fee payable by the consumer, even if payable to a third party.  Businesses cannot require notarization for verification unless the business pays for the notarization.  (Some businesses will need to revise their verification processes.)
  • Requests must be denied unless verified in accordance with the regulations (businesses seem to have no discretion). 
  • Authorized agents must use reasonable security procedures and cannot use a consumer's data for additional purposes.
  • Businesses must establish a method to verify that a parent acting on behalf of a child under 13 is the parent (or guradian).
  • If the value of consumer data cannot be calculated or does not relate to the value of a financial incentive, the financial incentive cannot be forfeited in response to a request to delete (unless the incentive is required by federal law).  The value of consumer data can be calculated based on the value to all individuals, not just the business's consumers.  The "typical consumer" concept is removed.
Again, this is just a quick summary after an initial reading of the revisions.  As I (and others) continue to scrutinize the revisions, better understandings and additional insights are likely to emerge, so please stay tuned.

What's Next?

The revisions to the regulation trigger an additional 15 day public comment period, which ends on February 24.  Following the comment period, the Department of Justice will submit the final text to the California Office of Administrative Law, which has 30 business days to review the regulations before they will go into effect.  In other words, the earliest date that the regulations could become effective is early April.  The latest date I can imagine them becoming effective is July 1, when the Department of Justice begins bringing enforcement actions against companies for violations.

If you would like to read the revised regulations for yourself, you can find them here. The notice is here.

Thursday, January 2, 2020

Was 2019 the “Year of Privacy” in the U.S.? (Or Will It Be 2020?)

What a year it has been! As one year closes and another begins, let us take a moment to reflect on the significance of 2019. It may not be an exaggeration to say that 2019 brought some of the most important changes in privacy and data security law that most of us have seen in our professional careers.

Yet, with all the momentum toward heightened consumer data protection, there remain conspicuous absences: Congress again considered, and again failed to deliver, a comprehensive privacy and data security bill. The North Carolina General Assembly declined to meaningfully revise the State’s core privacy and cybersecurity statute (the Identity Theft Protection Act or ITPA); House Bill 904, the most recent incarnation of Representative Jason Saine’s and Attorney General Josh Stein’s bipartisan update to the ITPA, languishes in the General Assembly. The General Assembly did, however, approve some modest updates to the data security laws affecting North Carolina government entities, in HB 217/SL 2019-200, giving the State Chief Information Officer greater oversight of State agencies’ cybersecurity controls.

Other states were more successful in modernizing privacy and data security laws in 2019. Forty-three states (and Puerto Rico) considered more than 300 proposed changes to privacy and cybersecurity laws in 2019, ultimately enacting 31 statutes. Although they cannot all be described in detail in this post, most have at least one of the following aims:

  • requiring government agencies or businesses to implement training or specific types of security policies and practices;
  • creating task forces or commissions;
  • restructuring government for improved security;
  • studying the use of blockchain for cybersecurity;
  • providing for the security of utilities and critical infrastructure;
  • exempting cybersecurity operations information from public records laws;
  • addressing the security of connected devices (the Internet of Things);
  • regulating cybersecurity within the insurance industry;
  • providing funding for improved security measures; and
  • cybersecurity threats to elections.1

One state law, of course, stands out from among all others. Throughout 2019, the California Consumer Privacy Act (CCPA) dominated the headlines (as well as the thoughts, dreams and nightmares of privacy and data security lawyers). The CCPA is driving a fundamental shift in the way we think about data protection in the United States, forcing companies to carefully contemplate the personal data they collect, hold, use, and share. Though it lacks the aggressive extraterritorial reach of Europe’s General Data Protection Regulation, the CCPA will apply to many companies throughout the United States and around the world, including many North Carolina-based businesses. Though enacted in 2018, the CCPA was amended, and proposed regulations were released, in late 2019; and with a January 1, 2020 effective date, most practitioners were intensely focused on the CCPA throughout 2019.

Even as 2020 arrives, companies are still wrestling with many patent and latent ambiguities in the CCPA and its proposed regulations. In fact, many have argued that the California Attorney General’s proposed regulations added to the ambiguities rather than reducing them. The regulations are expected to become final very soon, and the Attorney General stated publicly, that the final regs are not expected to differ substantially from the proposed regs—in other words, the final regulations are unlikely to offer new answers.

Because the California Attorney General’s proposed regulations were released so late, and were not made official by the statutory effective date of January 1, the Attorney General is delaying enforcement of the regulations by six months—until July 1. However, his office intends to take action on violations of the statute that occur between January 1 and July 1, and plaintiffs could bring claims under CCPA beginning January 1. Accordingly, most companies would prefer to achieve compliance sooner rather than later. That may be easier said than done. Even companies that have been actively pursuing compliance since 2018 were forced to pivot due to the various amendments passed in September 2019 (and the failure of some amendments to pass) and the new requirements imposed by the proposed regulations released in October 2019, putting them far behind schedule. According to a survey conducted by the International Association of Privacy Professionals in April 2019, one-quarter of companies were targeting compliance by July 1 (the enforcement date), rather than January 1 (the effective date); in a subsequent survey this summer, the number had grown to one-third. My suspicion is that a majority of companies subject to the CCPA are now targeting a July 1 compliance date, in light of the many new and different requirements and uncertainties arising from the amendments and regulations.

As dramatic as 2019 has been for privacy and data security law, 2020 may be even more eventful. We can be fairly certain that plaintiffs will bring actions under CCPA and other laws; the Federal Trade Commission, state Attorneys General, and other domestic authorities will bring enforcement actions; states and municipalities will continue to enact divergent data protection laws, further complicating the domestic legal landscape; and foreign nations will continue to adopt data protection laws, largely drawing upon common principles found in the GDPR and its predecessors. On top of all of this, the creator of the CCPA, Alastair Mactaggart, is already advancing a so-called “CCPA 2.0” to tighten the requirements and strengthen enforcement. It is an exciting (and sometimes frightening) time to be a privacy and data security lawyer. I look forward to navigating these uncharted waters along with you in 2020! 

[This blog post is re-posted from the North Carolina Bar Association.]