Much Ado About Notification
Full Title of Reference
Much Ado About Notification: Does the Rush to Pass State-Level Data Security Regulations Benefit Consumers?
Full Citation
Thomas M. Lenard and Paul H. Rubin, Much Ado About Notification: Does the Rush to Pass State-Level Data Security Regulations Benefit Consumers?, Regulation, Vol. 29, No. 1 (2006). Web
Categorization
- Issues: Information Sharing/Disclosure
- Approaches: Regulation/Liability
Key Words
Credit Card Fraud, Disclosure Policy, Identity Fraud/Theft
Synopsis
Data security breaches have received considerable public attention of late, and have prompted several states to mandate that firms whose data may have been compromised to notify their customers of the security breaches. This study, based on a [| previous article] by both authors, finds that the costs of a notification requirement are likely to be substantially higher than the benefits. Even for consumers whose data have been compromised, the probability of being a victim of fraud is so low - only 2 percent - that little action is justified. Overall, the authors estimate that the expected benefits of mandatory notification are very small - less than $10 per compromised individual.
Additional Notes and Highlights
Outline:
The Costs of Security Breaches
Market Responses
Improved Security
Notification
Benefits of Notification
Reduced Benefits
Consumer Response
Costs of Notification
Direct Costs
Costs of Consumers' Actions
Information Costs
Are the Benefits Greater Than the Costs?
Federal Preemption
Federalism's Benefits
Inconsistencies
Effect of Inconsistencies
Conclusion