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U.S. Regulators Lift the Curtain on Data Practices with Assessment, Reporting and Audit Requirements
California enacted the California Consumer Privacy Act (CCPA) in 2018, which was the first of its kind in the U.S. and drew inspiration from Europe's General Data Protection Regulation (GDPR). Following California's lead, other states, including Colorado, implemented their own laws and regulations. California further strengthened its legislation in 2020 through a ballot initiative known as the California Privacy Rights Act (CPRA).
Unlike the GDPR, the first generation CCPA was light on affirmative due diligence requirements and many companies designed data privacy and protection programs that were little more than window dressing (e.g., privacy policies and a consumer rights request process). In the second generation of state consumer privacy laws and regulations, as well as in recent laws pertaining to the privacy of minors (such as in California and Connecticut), numerous states require affirmative due diligence and a structured approach for conducting and documenting risk assessments and associated remediation. The assessment documentation must be available for review by regulators, and the CPRA requires risk assessments to be filed with the state, a requirement that is currently under consideration in a condensed form with certification by the executive officer. This means that companies subject to the applicable state privacy laws need to develop or refine their data inventory and assessment practices as a top priority in 2024 to be prepared for the coming enforcement of these requirements.
How Did We Get Here?
Companies subject to the consumer privacy regimes in California (CCPA), Colorado (CPA), Connecticut (CTPA), and Virginia (VCDPA) are now required to conduct and document data protection assessments prior to engaging in certain types of data processing. At least eight additional state laws that go into effect in 2024 and 2025 have similar requirements. Most notably, assessments are required if the processing is deemed "high risk," which specifically includes, without limitation, processing for targeted advertising, profiling/automated decision making (ADM), processing of sensitive personal data and sale of personal data. Since these requirements are inspired by the GDPR, companies should consider guidance from the European Data Protection Board (EDPB) on what might be considered high-risk processing, and how to analyze risk. So far, only Colorado has promulgated regulations or issued guidance regarding what needs to be in assessments and how they should be conducted and documented, but California is currently developing its own rulemaking that it has stated seeks to be compatible with Colorado and reflect EDPB guidance.
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