Data privacy regulations aren’t known for being light reading.
That doesn’t make it easy for businesses to become compliant. When one law refers to data subjects, another to residents, another to consumers, and another to customers, where should you begin?
Fortunately, if you focus on customer data privacy protection, you’ll be in a good position to become compliant for data privacy protections for non-customers. It makes sense to start your data privacy compliance journey with customer data privacy protection.
For the sake of clarity, let’s quickly discuss the difference between a customer and a consumer.
How Does a Customer Differ From a Consumer?
In general, a customer is the person who buys your goods or services, but they may or may not be the end user. A consumer is the one who uses them. So, a parent buying a toy for their child is the customer, but the kid who gets the toy and plays with it is the consumer.
Of course, if you buy a coffee for yourself and drink it, you’re both the customer and the consumer.
However, certain laws have slightly different definitions for these terms. They consider a customer to be someone who has a long-term transactional relationship with a business. Meanwhile, a consumer is someone who interacts with the business without having an ongoing business relationship.
For example, the Financial Modernization Act of 1999—also known as the Gramm-Leach-Bliley Act (GLBA)—says anyone who has an account with a bank is a customer. However, if you use the bank’s ATM to withdraw money as a one-time activity, you’re a consumer.
As you can see, there is a difference between the two terms, albeit a minor one. But, for the purpose of this article, we’ll use both terms interchangeably.
Customer Data Privacy Laws and Regulations
What Is Customer Data Privacy?
Customer data privacy is the right of individuals to protect their personal information from unauthorized access or misuse. It includes the regulations and practices that govern how your business can collect, store, process, and share your customers’ personal information.
It’s very easy to confuse data privacy and data security with data protection. However, protection is an overarching concept, while privacy and security are separate tenets of data protection. Privacy focuses on the individual’s right to determine what information they want to share and with whom. Security is the act of protecting said information. Data that is both private and secure can be considered protected.
The level of security you need to protect consumer data depends on how sensitive it is. Personally identifiable information (PII), sensitive personal information, financial data, and behavioral data require more protection than other information that can’t be directly linked to the individual or would not be as harmful to them if it were exposed.
The Importance of Consumer Data Privacy
Ninety-four percent of businesses say their customers expect them to keep their data private, or they wouldn’t buy from them.
Consumers are becoming more aware of their rights and more protective of their personal information. They know your business is responsible for protecting their information and privacy. If you fail at this, you risk affecting your brand image, which means your customers will take their trust—and money—to your competitors.
What’s more, you may even have legal and financial consequences. For example, the California Consumer Privacy Act (CCPA) can impose civil penalties of up to $7,500 per intentional violation. If you think that’s not a lot, remember that violations are counted based on the number of individuals affected. Collecting data from your website in a non-compliant fashion, for example, could result in thousands, or tens of thousands, of violations.
Unintentional violations carry a smaller civil penalty—up to $2,500. However, consumers also have the right to sue a business if their personal information was subject to “unauthorized access, exfiltration, theft, or disclosure” due to a failure to maintain reasonable security measures.. They can seek statutory damages between $100 and $750 or actual damages, whichever is greater.
Customer data privacy is also a concern because sensitive data exposure can lead to bigger incidents. Bad actors can use the smallest entry point to get more information about the data subject. Even something as seemingly harmless as an email can be used by hackers. They may use it to get into an e-commerce account, for example. This account might have financial information that could lead to more significant repercussions.
Here are some consequences of not maintaining customer data privacy.
Targeted Advertising and Privacy Violations
Most businesses use personal information gathered from consumers to give them a more personalized experience. However, in certain cases, this personalization can become invasive or discriminatory.
For example, Facebook recently had to agree to stop targeted advertising for a UK-based woman after she filed a lawsuit against its parent company, Meta, and won.
The lawsuit was spurred on when the litigant began receiving pregnancy and baby-related ads as soon as she found out she was pregnant. The user found it “unnerving” that Facebook knew about her pregnancy even before her family, and called such ads “predatory” and “invasive.”
This wasn’t the first time Facebook had faced legal action for the way it used targeted ads.
In 2019, the Department of Housing and Urban Development sued the social media giant for discriminatory advertising. The lawsuit was based on the fact that the platform allowed advertisers to control who could see housing ads based on characteristics such as race, religion, and national origin.
Facebook isn’t the only platform that’s been caught in privacy violations. Google and YouTube were fined $170 million in 2019 for collecting children’s data without parental permission. Twitter (now known as X) was handed a $150 million penalty in 2022 for selling data ostensibly collected for account security for targeted advertising. And Amazon was issued a fine of $886.6 million for violating the GDPR in 2021.
In terms of regulatory penalties, non-compliant targeted advertising is one of the more common violations.
Data Breaches, Identity Theft, and Financial Fraud
Data privacy and data security work hand in hand. If you don’t adequately secure the consumer information you’ve collected, you are at risk of a data breach.
It doesn’t even have to be a cybersecurity incident. One exposed email, a software vulnerability, or an employee falling for a phishing scam can let attackers access sensitive business information. Such a breach can lead to data exposure, which can result in identity theft or financial fraud for your customers.
For example, the Equifax data breach in 2017 remains one of the biggest incidents, where the personal information of 147 million Americans was exposed, putting them at risk of identity theft.
Identity theft is when someone uses a person’s information to pretend to be them without their permission. It can range from using a stolen photo and name to catfish someone on social media to using their details to take out loans or apply for government benefits.
Facebook has seen its fair share of identity scams. Scammers create fake profiles using stolen photographs and personal information of people to befriend their victims and then ask them for money.
Where identity theft involves impersonating someone by using their information, financial fraud involves using stolen data for monetary gain. For example, if a consumer’s bank login details are exposed, the bad actor might gain access to their bank account and withdraw money. Or, they can use stolen credit card information to buy expensive items online.
Ryan M. Tichy was sentenced to 90 months in federal prison for doing just that. This gentleman from Seattle fraudulently acquired personal information of several people and used it “to create false identification documents, open credit accounts, obtain loans, takeover existing credit accounts, and make purchases.”
If identity theft or fraud can be traced back to your organization—such as through a data breach—and it's shown that you failed to implement reasonable security measures, your business may face legal consequences.
Affected individuals could pursue claims based on negligence, breach of contract, or violations of data privacy laws. In addition to regulatory penalties, the financial and reputational damage from such claims can be severe, especially if the breach involved sensitive data such as Social Security numbers, bank credentials, or payment card details.
If your organization doesn’t adequately maintain customer privacy, you can be penalized, regardless of whether there was a security incident or data breach. Even failure to communicate how you use customer data or not getting consent is a violation. Lack of compliance can result in legal and financial consequences.
Consumer Data Privacy Concerns
While the risks we mentioned above do matter to customers, they also have some other data privacy concerns:
Excessive and Unauthorized Data Collection
Most people are wary of giving too much information to businesses, especially when it’s not needed. The main cause of this concern is the fear that you’re selling their information to third parties without their consent.
However, if you’re following data privacy best practices, like getting explicit consent and data minimization, they’ll be more likely to trust you with their data.
Lack of Transparency and Informed Consent
A very important part of customer data privacy is getting informed consent. This requires you to be clear about why you’re collecting personal information and how you’ll use it.
You also need to tell the data subject if you’ll be sharing this information with other businesses and get their consent for this. And you need to be clear about how long you’ll retain the information and how you’ll dispose of it.
If a company doesn’t adequately convey these details to its customers, it’s in violation of data privacy laws. More importantly, its customers won’t have peace of mind knowing exactly how their data will be used and processed.
Unwanted Data Sharing and Tracking
As we mentioned before, informing customers about selling or sharing their data is an essential part of privacy. One of the biggest concerns they have is that their data is being sold to or shared with advertising companies, who then track them across the internet.
Most people don’t see this as a way of getting more relevant content or ads; they see it as an invasion of privacy. By giving them control over who gets access to their data, you can alleviate these concerns.
Indefinite Data Retention
This might not seem like a major issue. If a customer has allowed you to save their information, does it matter if you save it forever?
As a matter of fact, it does.
Data privacy regulations are very clear about this. Plus, keeping customer information for an indefinite period is a bad idea for multiple reasons:
- The more information you store, the more you risk in case of a breach. This is especially true for old or outdated data. It’s likely hidden away in a forgotten database, which you may or may not have adequately secured, making it an easier target.
- It takes away the data subject’s control over their information. They should be able to correct or delete their personal details as they see fit.
Weak Data Security
If you collect customer information, you’re responsible for keeping it safe from unauthorized access. People will not want to share their personal data with a business that can’t adequately protect it.
We aren’t just talking about keeping it safe from hackers; customer data privacy regulations include your employees who don’t need to view this information. There are certain details that marketing might need to know and others that the sales team requires. Their data access should be limited to what they need.
Best Practices for Customer Data Privacy
With customer concerns in mind, creating a comprehensive data privacy strategy becomes easier. Here’s what we recommend.
Support Transparency Through a Strong Customer Privacy Policy
It’s important to communicate with your customers and tell them why you’re collecting specific data. You should also inform them about how you’ll process it, whether you’re sharing it with partners and third parties, and how long you’ll hold on to it. Privacy notices and policies are an excellant way to do that.
This creates a better customer experience and helps you comply with laws that protect customer privacy. When they have the complete picture, customers are in a better position to give consent or opt out of processes that they’re not comfortable with.
Design a privacy policy before you start collecting customer information. If you’re an established business that’s already storing and processing customer data, it’s not too late to reassess and re-evaluate.
Being clear about your needs from consumers will simplify your collection process and help them understand how you use their data. This clarity will set their minds at ease and put you in a better position to secure their privacy.
Train Employees on Customer Data Privacy
Every person in your organization is responsible for maintaining the privacy rights of your customers. However, you can’t assume your employees are aware of their roles and responsibilities in consumer data protection.
Instead, invest in training your team so they understand the importance of security and privacy. They should also be educated about cybersecurity best practices and access control. Help them understand when a privacy impact assessment (PIA) might be required and how to adhere to privacy-by-design principles. Ultimately, data protection can’t happen in a vacuum–you need your colleagues to understand how to protect consumers’ data privacy rights..
Collect Only the Data You Need
Data minimization is one of the core principles of privacy. Limit your data collection to only the specific information you require and no more. For example, if you require a customer’s age, get their month and year of birth rather than their full birthdate. Don’t store their address unless you need it to ship products to them. Reconsider whether a given system needs to collect any amount of data at all.
This way, you aren’t spending money on an unnecessarily large database. Additionally, what you don’t have can’t be stolen from you. Not storing customer information you don’t need lowers your liability. And it reduces risks for your customers, too–if any data of theirs does fall into the wrong hands, it can be repurposed for targeted spear phishing attacks, for example.
Follow Cybersecurity Best Practices
Cybercriminals often exploit vulnerabilities in unpatched applications, operating systems, and security tools. If your business doesn’t keep software up to date, you’re risking potential attacks.
To prevent this, enable automatic updates for critical systems, including customer databases, customer relationship management (CRM) platforms, and cloud storage. Regularly audit all software in use and decommission any outdated or unsupported tools that could pose a risk.
While you are expected to have appropriate security measures for protecting customer data, it’s not always foolproof. Encryption adds an extra layer of security. Even if an unauthorized person gains access to your systems, the data will be unreadable. This protects the privacy of your customers even if your security and access management measures are compromised.
Manage Data Access
As mentioned earlier, not everyone needs access to all customer data. Role-based access control (RBAC) and following the principle of least privilege (PoLP) allows you to authorize only those employees who need the information to fulfill their roles. Finally, multi-factor authentication (MFA) makes it difficult for threat actors to get into your customer database, even if they do manage to steal login details.
Regularly Monitor and Audit Who Accesses Data
Data privacy isn’t just about securing information—it’s about keeping track of who is accessing it and why. Regular audits help ensure that only authorized personnel are handling customer data and that access is aligned with business needs.
Plus, audits also support regulatory compliance. Many privacy laws, including the GDPR and CCPA, require businesses to demonstrate accountability in data handling. By reviewing access logs and conducting routine security assessments, you minimize the risk of unauthorized access, insider threats, and accidental data exposure.
Ensure Third-Party Vendors Follow Privacy Standards
Your business is only as secure as the partners and third-party vendors you work with. If they handle customer data on your behalf, their privacy practices must align with yours.
Limit the amount of data shared with vendors to the minimum necessary for their services. If a marketing platform only needs customer email addresses, don’t provide additional sensitive data like payment details or addresses. Be sure to include a data processing addendum to your contract with them to ensure they’re following your standards of data protection.
Give Customers Control Over Their Data
Customers today expect more than just security; they expect control over their information. Most data privacy laws, including the GDPR and CCPA, grant customers the right to access, modify, or delete their personal data.
Make it easy for customers to:
- View and edit their data: Offer a self-service portal where customers can review and update their personal information.
- Opt out of data collection and sharing: Provide clear, accessible settings that let customers control how their data is used.
- Request data deletion: Allow customers to submit requests for data erasure and ensure compliance with legal timeframes for deletion.
Broadly, these rights are known as data subject rights, or data subject access requests (DSARs). Check out our blog What Is a DSAR? A Complete Guide to Data Subject Access Requests to learn more about DSARs and rights requests.
By giving customers greater control over their data, businesses build trust and demonstrate a commitment to privacy and transparency.
Ensure Compliance with Data Privacy Laws
The data privacy of your customers is protected by several laws. Regulations like GDPR, CCPA, HIPAA, and PCI DSS establish strict guidelines for how businesses handle customer data.
To stay compliant:
Understand which laws apply: If you serve customers in multiple regions, make sure you comply with all relevant privacy regulations.
Appoint a Data Protection Officer (DPO): If required by GDPR or other laws, designate a responsible person to oversee compliance efforts. Even if you aren’t subject to the GDPR, it’s a good idea to name somebody to be your designated privacy officer.
Maintain compliance documentation: Keep records of privacy policies, data processing activities, and security measures to prove compliance in case of an audit.
Non-compliance can lead to hefty fines, legal action, and reputational damage. Proactively ensuring your business meets privacy law requirements not only protects your customers—it protects your company, too.
Make Protecting Customer Data Privacy a Sustainable Practice
You can’t protect your customers’ data privacy if doing so distracts you from the rest of your duties.
Carrying out assessments, identifying data flows, managing vendor relationships, adhering to data minimization principles–these things can’t be done with the snap of your fingers.
But that doesn’t mean they aren’t worth doing, or that there aren’t methods to make customer data privacy protection a sustainable practice.
Data privacy software solutions can help lighten the load.
Osano’s platform is designed to simplify customer data privacy protection. Gather consent, map data flows, conduct assessments, evaluate vendor privacy practices, and empower customers to submit subject rights requests–all in one place.
