The Impact of Consumer Data Privacy Regulations on Small to Medium-Sized Businesses

7 minute read. Learn how consumer data privacy regulations can impact your small to medium-sized business.

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Consumer data allows businesses to deliver more unique, personalized customer experiences. By providing valuable insights, data can help business owners make better, more informed decisions about how to cater to customers and their needs. But with this power, comes responsibility: Owners and managers of small to medium-sized businesses (SMB) are responsible for ensuring the privacy and security of customer data.

To protect consumer privacy, California introduced legislation, the California Consumer Privacy Act (CCPA), that defines how companies can gather, use, store, and manage customer data. Starting on January 1, 2023, California will extend the CCPA with the California Privacy Rights Act (CPRA). The CPRA defines the rights that consumers, employees, and business contacts, also known as data subjects, have to review, access, delete, manage, and update their data.

Regardless of where your business is located, if your customers reside in California and you meet the criteria below, then the CPRA applies to your business:

1. The regulation defines a business as a for-profit legal entity doing business in California that collects consumers’ personal information.
2. Earned $25 million annual gross revenue in the preceding calendar year.
3. Annually buys or sells, or shares the personal information of 100,000 or more consumers or households, or
4. Derives 50 percent or more of its annual revenues from selling or sharing consumers’ personal information.

With limited budgets and resources available to implement all the necessary requirements, small and medium-sized businesses may be challenged to comply with this privacy regulation. If you fail to comply with CPRA regulations, you may face expensive financial penalties and possible damage to your reputation.

Compliance Challenges

CPRA requires companies to:

1. Minimize the retention of California residents' personal data.
2. Restrict the collection and use of sensitive personal information.
3. Provide consumers greater transparency on profiling.
4. Assess high-risk third-party data processors.

The state of California has estimated that compliance with CCPA would cost businesses $100,000 with an additional $127 needed to meet CPRA regulations. Gartner estimates that it costs a company an average of $1,400 to address a single consumer data access request. As part of GDPR compliance (the European privacy law), EU companies receive between 30 to 240 requests per month.

Large businesses, with more sizable budgets, legal teams, and security teams, are better positioned to implement compliance programs. But SMBs may have a more difficult time pulling together the budget and resources needed for compliance, while working to drive revenue and remain competitive in their markets. If an SMB fails to comply, the consequences could put them out of business.

California may penalize companies for unauthorized data access–through breach, exfiltration, theft, or disclosure–if the access is the result of the business' negligence to implement and maintain reasonable security procedures and practices. The law allows for penalties of $100 to $750 per consumer per incident, or actual damages, whichever is greater.

With CPRA in effect starting January 1, 2023, SMBs should review the sensitive personal information they collect, how they use it, and where they store it. Under CPRA, personal information includes race, ethnicity, sexual orientation, and health data. Even if a small business is exempt from privacy regulations, it should still prepare to secure its users’ data and privacy, as it may need to meet those qualifications in the future.

Satisfying the California Privacy Rights Act

To cost-effectively ensure they are complying with CPRA, businesses will have to manage and track consumers’ requests to opt-out, review, access, delete, and obtain their data.

Business owners and leaders need a system for tracking consumer requests to opt-out, review, access, delete, and obtain their data. Without an accurate system for tracking the status of each request, business owners risk costly penalties and damage to their reputations.

To strengthen and enhance customer loyalty, PrivacyCare offers a system that features:

1. Customizable data-subject-request (DSR) forms that consumers can use to initiate their data request.
2. Consumer authentication.
3. A flexible record-keeping system that can support any DSR process, helping businesses comply with multi-state data privacy laws.
4. A database of the DSRs and their status.
5. A cost-effective solution that avoids unnecessary upgrades involving data analytics, data management, and data security functions.
6. A SaaS platform that eliminates the need for businesses to purchase and manage hardware or software.
7. Up-to-date with latest changes to data privacy laws across the U.S.

For help with your consumer data privacy compliance challenges, start with PrivacyCare for free.

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