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SB-0309, As Passed House, December 14, 2006

HOUSE SUBSTITUTE FOR

SENATE BILL NO. 309

A bill to amend 2004 PA 452, entitled

"Identity theft protection act,"

by amending the title and section 3 (MCL 445.63) and by adding

sections 12, 12a, and 12b.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

TITLE

An act to prohibit certain acts and practices concerning

identity theft; to require notification of a security breach of a

database that contains certain personal information; to provide for

the powers and duties of certain state and local governmental

officers and entities; to prescribe penalties and provide remedies;

and to repeal acts and parts of acts.

Sec. 3. As used in this act:

(a) "Agency" means a department, board, commission, office,

agency, authority, or other unit of state government of this state.

Senate Bill No. 309 (H-3) as amended December 13, 2006

The term includes an institution of higher education of this state. [The

term does not include a circuit, probate, district, or municipal court.]

(b) "Breach of the security of a database" or "security

breach" means the unauthorized access and acquisition of data that

compromises the security or confidentiality of personal information

maintained by a person or agency as part of a database of personal

information regarding multiple individuals. These terms do not

include unauthorized access to data by an employee or other

individual if the access meets all of the following:

(i) The employee or other individual acted in good faith in

accessing the data.

(ii) The access was related to the activities of the agency or

person.

(iii) The employee or other individual did not misuse any

personal information or disclose any personal information to an

unauthorized person.

or spouse, paid or provided pursuant to state or federal law under

a court order or judgment. Support includes, but is not limited to,

any of the following:

(i) Expenses for day-to-day care.

(ii) Medical, dental, or other health care.

(iii) Child care expenses.

(iv) Educational expenses.

(v) Expenses in connection with pregnancy or confinement under

the paternity act, 1956 PA 205, MCL 722.711 to 722.730.

(vi) Repayment of genetic testing expenses, under the paternity

act, 1956 PA 205, MCL 722.711 to 722.730.

(vii) A surcharge as provided by section 3a of the support and

parenting time enforcement act, 1982 PA 295, MCL 552.603a.

(d) ~~(b)~~ "Credit card" means that term as defined in section

157m of the Michigan penal code, 1931 PA 328, MCL 750.157m.

(e) "Data" means computerized personal information.

(f) ~~(c)~~ "Depository institution" means a state or nationally

chartered bank or a state or federally chartered savings and loan

association, savings bank, or credit union.

(g) "Encrypted" means transformation of data through the use

of an algorithmic process into a form in which there is a low

probability of assigning meaning without use of a confidential

process or key, or securing information by another method that

renders the data elements unreadable or unusable.

(h) ~~(d)~~ "Financial institution" means a depository

institution, an affiliate of a depository institution, a licensee

under the consumer financial services act, 1988 PA 161, MCL

487.2051 to 487.2072, 1984 PA 379, MCL 493.101 to 493.114, the

motor vehicle sales finance act, 1950 (Ex Sess) PA 27, MCL 492.101

to 492.141, the secondary mortgage loan act, 1981 PA 125, MCL

493.51 to 493.81, the mortgage brokers, lenders, and servicers

licensing act, 1987 PA 173, MCL 445.1651 to 445.1684, or the

regulatory loan act, 1939 PA 21, MCL 493.1 to 493.24, a seller

under the home improvement finance act, 1965 PA 332, MCL 445.1101

to 445.1431, or the retail installment sales act, 1966 PA 224, MCL

445.851 to 445.873, or a person subject to subtitle A of title V of

the Gramm-Leach-Bliley act, 15 USC 6801 to 6809.

(i) ~~(e)~~ "Financial transaction device" means that term as

defined in section 157m of the Michigan penal code, 1931 PA 328,

MCL 750.157m.

(j) ~~(f)~~ "Identity theft" means engaging in an act or conduct

prohibited in section 5(1).

(k) ~~(g)~~ "Law enforcement agency" means that term as defined

in section 2804 of the public health code, 1978 PA 368, MCL

333.2804.

(l) ~~(h)~~ "Local registrar" means that term as defined in

section 2804 of the public health code, 1978 PA 368, MCL 333.2804.

(m) ~~(i)~~ "Medical records or information" includes, but is

not limited to, medical and mental health histories, reports,

summaries, diagnoses and prognoses, treatment and medication

information, notes, entries, and x-rays and other imaging records.

(n) ~~(j)~~ "Person" means an individual, partnership,

corporation, limited liability company, association, or other legal

entity.

(o) ~~(k)~~ "Personal identifying information" means a name,

number, or other information that is used for the purpose of

identifying a specific person or providing access to a person's

financial accounts, including, but not limited to, a person's name,

address, telephone number, driver license or state personal

identification card number, social security number, place of

employment, employee identification number, employer or taxpayer

identification number, government passport number, health insurance

identification number, mother's maiden name, demand deposit account

number, savings account number, financial transaction device

account number or the person's account password, stock or other

House Bill No. 309 (H-3) as amended December 13, 2006

security certificate or account number, credit card number, vital

record, or medical records or information.

(p) "Personal information" means the first name or first

initial and last name linked to 1 or more of the following data

elements of a resident of this state:

(i) Social security number.

(ii) Driver license number or state personal identification

card number.

(iii) Demand deposit or other financial account number, or

credit card or debit card number, in combination with any required

security code, access code, or password that would permit access to

any of the resident's financial accounts.

(q) "Public utility" means that term as defined in section 1

of 1972 PA 299, MCL 460.111.

(r) "Redact" means to alter or truncate data so that no more

than [ ] 4 sequential digits of a driver license number, state

personal identification card number, or account number, or no more

than 5 sequential digits of a social security number, are

accessible as part of personal information.

(s) (l) "State registrar" means that term as defined in

section 2805 of the public health code, 1978 PA 368, MCL 333.2805.

(t) ~~(m)~~ "Trade or commerce" means that term as defined in

section 2 of the Michigan consumer protection act, 1971 PA 331, MCL

445.902.

(u) ~~(n)~~ "Vital record" means that term as defined in section

2805 of the public health code, 1978 PA 368, MCL 333.2805.

Sec. 12. (1) Unless the person or agency determines that the

security breach has not or is not likely to cause substantial loss

or injury to, or result in identity theft with respect to, 1 or

more residents of this state, a person or agency that owns or

licenses data that are included in a database that discovers a

security breach, or receives notice of a security breach under

subsection (2), shall provide a notice of the security breach to

each resident of this state who meets 1 or more of the following:

(a) That resident's unencrypted and unredacted personal

information was accessed and acquired by an unauthorized person.

(b) That resident's personal information was accessed and

acquired in encrypted form by a person with unauthorized access to

the encryption key.

(2) Unless the person or agency determines that the security

breach has not or is not likely to cause substantial loss or injury

to, or result in identity theft with respect to, 1 or more

residents of this state, a person or agency that maintains a

database that includes data that the person or agency does not own

or license that discovers a breach of the security of the database

shall provide a notice to the owner or licensor of the information

of the security breach.

(3) In determining whether a security breach is not likely to

cause substantial loss or injury to, or result in identity theft

with respect to, 1 or more residents of this state under subsection

(1) or (2), a person or agency shall act with the care an

ordinarily prudent person or agency in like position would exercise

under similar circumstances.

(4) A person or agency shall provide any notice required under

this section without unreasonable delay. A person or agency may

delay providing notice without violating this subsection if either

of the following is met:

(a) A delay is necessary in order for the person or agency to

take any measures necessary to determine the scope of the security

breach and restore the reasonable integrity of the database.

However, the agency or person shall provide the notice required

under this subsection without unreasonable delay after the person

or agency completes the measures necessary to determine the scope

of the security breach and restore the reasonable integrity of the

database.

(b) A law enforcement agency determines and advises the agency

or person that providing a notice will impede a criminal or civil

investigation or jeopardize homeland or national security. However,

the agency or person shall provide the notice required under this

section without unreasonable delay after the law enforcement agency

determines that providing the notice will no longer impede the

investigation or jeopardize homeland or national security.

(5) Except as provided in subsection (11), an agency or person

shall provide any notice required under this section by providing 1

or more of the following to the recipient:

(a) Written notice sent to the recipient at the recipient's

postal address in the records of the agency or person.

(b) Written notice sent electronically to the recipient if any

of the following are met:

(i) The recipient has expressly consented to receive electronic

notice.

(ii) The person or agency has an existing business relationship

with the recipient that includes periodic electronic mail

communications and based on those communications the person or

agency reasonably believes that it has the recipient's current

electronic mail address.

(iii) The person or agency conducts its business primarily

through internet account transactions or on the internet.

notice given by telephone by an individual who represents the

person or agency if all of the following are met:

(i) The notice is not given in whole or in part by use of a

recorded message.

(ii) The recipient has expressly consented to receive notice by

telephone, or if the recipient has not expressly consented to

receive notice by telephone, the person or agency also provides

notice under subdivision (a) or (b) if the notice by telephone does

not result in a live conversation between the individual

representing the person or agency and the recipient within 3

business days after the initial attempt to provide telephonic

notice.

(d) Substitute notice, if the person or agency demonstrates

that the cost of providing notice under subdivision (a), (b), or

provide notice to more than 500,000 residents of this state. A

person or agency provides substitute notice under this subdivision

by doing all of the following:

(i) If the person or agency has electronic mail addresses for

any of the residents of this state who are entitled to receive the

notice, providing electronic notice to those residents.

(ii) If the person or agency maintains a website, conspicuously

posting the notice on that website.

(iii) Notifying major statewide media. A notification under this

subparagraph shall include a telephone number or a website address

that a person may use to obtain additional assistance and

information.

(6) A notice under this section shall meet all of the

following:

(a) For a notice provided under subsection (5)(a) or (b), be

written in a clear and conspicuous manner and contain the content

required under subdivisions (c) to (g).

(b) For a notice provided under subsection (5)(c), clearly

communicate the content required under subdivisions (c) to (g) to

the recipient of the telephone call.

(d) Describe the type of personal information that is the

subject of the unauthorized access or use.

(e) If applicable, generally describe what the agency or

person providing the notice has done to protect data from further

security breaches.

(f) Include a telephone number where a notice recipient may

obtain assistance or additional information.

(g) Remind notice recipients of the need to remain vigilant

for incidents of fraud and identity theft.

(7) A person or agency may provide any notice required under

this section pursuant to an agreement between that person or agency

and another person or agency, if the notice provided pursuant to

the agreement does not conflict with any provision of this section.

(8) Except as provided in this subsection, after a person or

agency provides a notice under this section, the person or agency

shall notify each consumer reporting agency that compiles and

maintains files on consumers on a nationwide basis, as defined in

15 USC 1681a(p), of the security breach without unreasonable delay.

A notification under this subsection shall include the number of

notices that the person or agency provided to residents of this

state and the timing of those notices. This subsection does not

apply if either of the following is met:

(a) The person or agency is required under this section to

provide notice of a security breach to 1,000 or fewer residents of

this state.

(b) The person or agency is subject to title V of the Gramm-

Leach-Bliley act, 15 USC 6801 to 6809.

(9) A financial institution that is subject to, and has

notification procedures in place that are subject to examination by

the financial institution's appropriate regulator for compliance

with, the interagency guidance on response programs for

unauthorized access to customer information and customer notice

prescribed by the board of governors of the federal reserve system

and the other federal bank and thrift regulatory agencies, or

similar guidance prescribed and adopted by the national credit

union administration, and its affiliates, is considered to be in

compliance with this section.

(10) A person or agency that is subject to and complies with

the health insurance portability and accountability act of 1996,

Public Law 104-191, and with regulations promulgated under that

act, 45 CFR parts 160 and 164, for the prevention of unauthorized

access to customer information and customer notice is considered to

be in compliance with this section.

(11) A public utility that sends monthly billing or account

statements to the postal address of its customers may provide

notice of a security breach to its customers in the manner

described in subsection (5), or alternatively by providing all of

the following:

(a) As applicable, notice as described in subsection (5)(b).

(b) Notification to the media reasonably calculated to inform

the customers of the public utility of the security breach.

on the website of the public utility.

(d) Written notice sent in conjunction with the monthly

billing or account statement to the customer at the customer's

postal address in the records of the public utility.

(12) A person that provides notice of a security breach in the

manner described in this section when a security breach has not

occurred, with the intent to defraud, is guilty of a misdemeanor

punishable by imprisonment for not more than 30 days or a fine of

not more than $250.00 for each violation, or both.

(13) Subject to subsection (14), a person that knowingly fails

to provide any notice of a security breach required under this

section may be ordered to pay a civil fine of not more than $250.00

for each failure to provide notice. The attorney general or a

prosecuting attorney may bring an action to recover a civil fine

under this section.

(14) The aggregate liability of a person for civil fines under

subsection (13) for multiple violations of subsection (13) that

arise from the same security breach shall not exceed $750,000.00.

(15) Subsections (12) and (13) do not affect the availability

of any civil remedy for a violation of state or federal law.

(16) This section applies to the discovery or notification of

a breach of the security of a database that occurs on or after the

effective date of the amendatory act that added this section.

(17) This section does not apply to the access or acquisition

by a person or agency of federal, state, or local government

records or documents lawfully made available to the general public.

(18) This section deals with subject matter that is of

statewide concern, and any charter, ordinance, resolution,

regulation, rule, or other action by a municipal corporation or

other political subdivision of this state to regulate, directly or

indirectly, any matter expressly set forth in this section is

preempted.

Sec. 12a. (1) Subject to subsection (3), a person or agency

that maintains a database that includes personal information

regarding multiple individuals shall destroy any data that contain

personal information concerning an individual when that data is

removed from the database and the person or agency is not retaining

the data elsewhere for another purpose not prohibited by state or

federal law. This subsection does not prohibit a person or agency

from retaining data that contain personal information for purposes

of an investigation, audit, or internal review.

(2) A person who knowingly violates this section is guilty of

a misdemeanor punishable by a fine of not more than $250.00 for

each violation. This subsection does not affect the availability of

any civil remedy for a violation of state or federal law.

(3) A person or agency is considered to be in compliance with

this section if the person or agency is subject to federal law

concerning the disposal of records containing personal identifying

information and the person or agency is in compliance with that

federal law.

(4) As used in this section, "destroy" means to destroy or

arrange for the destruction of data by shredding, erasing, or

otherwise modifying the data so that they cannot be read,

deciphered, or reconstructed through generally available means.

Sec. 12b. (1) A person shall not distribute an advertisement

or make any other solicitation that misrepresents to the recipient

that a security breach has occurred that may affect the recipient.

(2) A person shall not distribute an advertisement or make any

other solicitation that is substantially similar to a notice

required under section 12(5) or by federal law, if the form of that

notice is prescribed by state or federal law, rule, or regulation.

(3) A person who knowingly or intentionally violates this

section is guilty of a misdemeanor punishable by imprisonment for

not more than 30 days or a fine of not more than $1,000.00 for each

violation, or both. This subsection does not affect the

availability of any civil remedy for a violation of this section or