By Hayden Delaney, Senior Associate
A Bill introduced into Parliament late last month has set in motion one of the most significant reforms in privacy law since the Privacy Act 1988, and will see new privacy principles applying to both private sector organisations and government agencies.
The Privacy Amendment (Enhancing Privacy Protection) Bill 2012 introduces 13 Australian Privacy Principles (APPs), which every organisation and government agency must comply with if the Bill is passed. This will have a significant impact on all those organisations who store personal information about their customers and contacts, and in particular, those who engage in direct marketing or have cloud computing arrangements.
Here, senior associate Hayden Delaney and solicitor Michele Davis outline the 13 principles proposed by the Bill, and how they change Australia's current privacy laws.
If the Bill is passed:
- there will be strict rules governing how and when you can use personal information for direct marketing;
- the ability for organisations to disclose personal information overseas without the consent of the individual will be significantly reduced; and
- once personal information is disclosed overseas, action undertaken by an overseas third party can be considered a breach by the Australian organisation that disclosed the personal information to that third party.
Those who contravene the APPs will be liable for penalties of up to $220,000 for individuals or up to $1.1 million for corporations.
Australian Privacy Principles
The Australian Privacy Principles introduced by the Privacy Amendment (Enhancing Privacy Protection) Bill 2012 replace the National Privacy Principles and the Information Privacy Principles under the Privacy Act. The APPs will apply to both private sector organisations and government agencies. Under the current Privacy Act, the Information Privacy Principles apply to government agencies, whereas the National Privacy Principles only apply to private sector organisations.
The APPs are similar, in the broadest sense, to the National Privacy Principles, and will continue to deal with the collection, storage, security, use, disclosure, access and correction of personal information. However, the APPs have been structured to address each of these elements methodically to reflect the order in which the personal information is expected to be collected and then used and disposed of by the organisation using the personal information.
The APPs have been grouped into five sets of principles:
- APP1 and APP2 require organisations to consider the privacy of personal information, and ensure that they manage personal information in an open and transparent way.
- APP3, APP4 and APP5 address the collection of personal information, including unsolicited personal information.
- APP6, APP7, APP8 and APP9 deal with personal information and government related identifiers, including principles about the use and disclosure (including cross-border disclosure) of personal information and identifiers.
- APP10 and APP11 are concerned with the integrity, quality and security of personal information.
- APP12 and APP13 deal with requests for access to, and correction of, personal information.
Although there are similarities between the APPs and the National Privacy Principles, the Bill introduces new privacy principles for direct marketing, and alters those provisions concerning the disclosure of personal information outside of Australia (now called 'cross-border disclosure').
Under the current National Privacy Principles, direct marketing is considered in NPP2 as a 'secondary purpose', and is allowable provided that it is related to the primary purpose, the individual hasn't requested not to receive direct marketing communications, and that in each communication, the individual is informed that they can opt out of receiving the direct marketing. Under the proposed laws, APP7 is now a specific, standalone and extensive principle, reinforcing the Bill's objective to provide individuals with greater control over the use of their personal information.
From the outset, APP7 states that an organisation must not use or disclose personal information for the purposes of direct marketing, and then goes on to provide exceptions to this prohibition. The exceptions consider:
- whether the individual provided the information and would reasonably expect direct marketing to occur; or
- whether the individual or another party provided the information and consented to the direct marketing, or if it's impractical to obtain that consent.
In both exceptions, the direct marketing must provide a means by which the individual can opt out of receiving the communication. The individual must also not have previously made such a request to the organisation. Further, in the second exception, the direct marketing must include a prominent statement or otherwise draw attention to the fact that that the individual can opt out of receiving such communication.
The remaining two exceptions concern direct marketing as a result of receiving sensitive information, and the ability to undertake direct marketing if the organisation is contracted as a service provider for a Commonwealth contract. Express consent of the individual is required when direct marketing occurs on the basis of receiving sensitive information.
To 'transfer' or to 'disclose' information overseas?
The Bill has reduced the ability for organisations to disclose personal information overseas without the consent of the individual. APP8 includes a positive obligation on the organisation to take reasonable steps, before disclosing personal information, to ensure that the overseas recipient of the information does not breach the APPs.
Another notable difference between APP8 and the current NPP9 (transborder data flow) is the adoption of new terminology. The term 'transfer', in relation to personal information, has been replaced with the word 'disclosure'. This potentially widens the type of transactions that can be considered to be covered by this principle, as 'disclosure' to a third party outside of Australia can happen without the personal information actually being physically 'transferred' to that party. Notwithstanding the change of terminology, if the movement of personal information is considered 'internal use' by the organisation, then the information is not 'disclosed' unless the organisation sends the information to a related body corporate located outside Australia, or a subcontractor. The Government has stated that it is not intended for APP8 to apply when personal information is routed through servers that are located outside of Australia, but if such information is accessed by or disclosed to third parties, then APP8 will apply. The change in terminology may have an effect on organisations that use cloud computing as a method of storing data, including personal information, outside of Australia.
Further, the drafting of APP8 does not include several of the exceptions from the current NPP9 that can be relied on to transfer personal information outside of Australia, often without the knowledge of the individual who provides the information. For example, NPP9(a) allows the organisation providing the personal information of individuals (often without express consent) to transfer the information to a recipient in a foreign country if the parties have contractually agreed that the recipient of the information is bound by the principles under the NPP. While this exception is not expressly stated in APP8, the Government has mentioned that if an entity enters into a contractual relationship with the overseas recipient, this will now be considered as taking 'such steps as are reasonable in the circumstances' (APP8.1). The remaining exceptions provided for in NPP9(c)(d)(e) and (f) are not included in APP8.
In short, unless the individual is made aware of the countries to which his or her personal information is likely to be disclosed and consents to such disclosure, then the disclosure is prohibited from taking place. This is a major departure from the current treatment of overseas disclosure of personal information and, if enacted as currently drafted, will require organisations to modify the way in which they obtain consent for cross-border disclosure from individuals in the future.
APP8 also provides that in certain circumstances, an act done, or a practice engaged in, by the overseas third party can be taken to be a breach by the organisation that disclosed the personal information to the third party.
Greater powers and functions of the Australian Privacy Commissioner
The Bill introduces substantial financial penalties for organisations who engage in serious or repeated breaches of privacy (either breaching the APPs or a registered APP code). In such circumstances, the Australian Privacy Commissioner may apply to the Federal Court or the Federal Magistrates Court for an order for the organisation to pay the Commonwealth a penalty of up to $220,000 for individuals or up to $1.1 million for corporations.
In addition to financial penalties, the Commissioner will also receive additional powers to conduct audits and investigations, resolve complaints, and ensure that organisations are complying with the APPs and the Privacy Act (once amended).
Changes to credit reporting
The Bill also addresses the substantial developments that have occurred in relation to the credit reporting system since the original provisions were first enacted in 1990. The amendments to the credit reporting system are expected to work in conjunction with the improved privacy protections provided in the Bill.
The Bill introduces the concept of 'positive information' with regards to credit reporting. Not only will credit reports contain information about the negative history of the account holder, but banks and financial institutions will also be able to see what types of accounts are held by the account holder, current credit limits, and information about repayment history. This 'positive information' is expected to help financial institutions gain a balanced picture of the account holder's credit history.
The time has come... but only for stage one
The Bill introduces 197 of 295 recommendations from the Australian Law Reform Commission's 2008 report, For Your Information: Australian Privacy Law and Practice. The Government has stated that this is the first stage response to the Commission's recommendations, with the other 98 recommendations to be considered during stage two. Given that the Bill has taken four years to come to fruition since the Commission's report was released in 2008, one can only hope that stage two, which will implement some of the more controversial elements of the report, will follow in less time.
What is expected of stage two?
One of the more controversial aspects of the Commission's report is the suggested obligation on organisations to notify the Information Commissioner in instances of data breaches. This obligation is anticipated to appear in stage two. The current NPP4 (data security) and the new APP11 (security of personal information) are concerned with the security of personal information, but, for the most part, the new principle (as currently drafted) has not been amended or expanded on from the base line created by NPP4. This is expected to change in stage two.
We believe that the Government should strongly consider implementing compulsory data breach laws. In the United States, and elsewhere, such laws have undoubtedly helped ensure that organisations take positive steps to implement best practice security measures, such as encryption. In the United States, organisations are expressly exempt from having to publicly disclose data breaches where the relevant data is encrypted. The introduction of these laws had the added benefit of spurring on the data security industry as organisations rapidly implemented encryption technology in order to obtain the benefit of the exemption to disclose laws. We would urge the Government to consider similar laws in Australia.
Where to from here?
The Bill is expected to be enacted by Parliament as legislation in the early months of 2013. Although the amendments to the Privacy Act will not take place for a period of nine months after proclamation, due to the transition period, those organisations that will be subject to the Australian Privacy Principles should begin reviewing their privacy policies to ensure that they address the extended principles contained within the Bill, particularly in relation to direct marketing, cross-border disclosure and additional details required within privacy policies.
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