Customers stay despite breaches in data privacy

SAN FRANCISCO — Week after week, thieves break into corporate computer systems to steal customer lists, email addresses and credit card numbers. Large data breaches get overshadowed by even larger ones.

Yet people are turning over personal information to online retailers, social networks and other services in growing numbers. The point at which people lose trust in the websites they deal with appears further away than ever before, if it exists at all, as shopping, socializing and gaming online becomes deeply embedded in modern life.

People have come to accept that sharing information is the price of a meaningful, connected life online — even if they don't like it.

"We are clearly schizophrenic about this technology," said Jim Dempsey, an expert on Internet privacy at the Center for Democracy & Technology. "We love it, we use it, we expect it to work, and we've woven it into our daily lives, professionally, socially and personally. But we really don't trust it, and we do get upset when our data is lost or stolen."

Companies collecting the personal details have little incentive to offer the best privacy protections. So far, people haven't demanded that companies do better by walking away from their gadgets, online retailers or social networks.

"I know I take the risk," said Lance Locurto, 44. "It's more convenient."

The South Florida banker said he buys almost everything online, despite the fact that hackers got into both his iTunes and Amazon accounts in the past few months.

Jim Pachetti, 47, a laid-off carpenter looking at an iPhone at an Apple store outside Buffalo, N.Y., said he's resigned to the fact that breaches happen.

"I've accepted the fact that all my information is out there and someone has it, and that's just the way it is," he said.

James McCartney, an identity theft expert, said his smartphone has become an integral part of his life and business, despite the security concerns.

"The velocity of business precludes me from going without it," he said. "It's the rules of the game. It's not something I can change."

It may take government regulation to force companies to do better.

The Federal Trade Commission is urging Web browser makers to build "Do Not Track" tools to let consumers stop advertisers from studying their online activity in order to target pitches. The Commerce Department has called on Congress to adopt ground rules for companies that collect consumer data online for marketing. Several lawmakers have introduced privacy bills.

"For many companies, it's easier and cheaper to deal with the repercussions of a data breach that's already occurred, rather than taking steps to prevent it," said Ioana Rusu, regulatory counsel for Consumers Union, publisher of Consumer Reports. "Companies need to be held accountable so they protect your data up front."

Information that distinguishes one faceless Internet surfer from another is so valuable that companies have been hurt when they limit what they collect.

Yahoo Inc., for example, will soon keep logs on people's searches for 18 months, the same amount of time as Google Inc. That's a reversal of its vow in late 2008 to strip out personally identifiable details after 90 days. In making an industry-leading privacy pledge, Yahoo said it became less competitive in offering personalized services enabled by long-term tracking.

Companies also face lawsuits and penalties by promising more than they can deliver. If companies are vague, their biggest risk is bad publicity when a hacking attack or a technical error exposes customers' information.

"The lack of meaningful liability for breaches reduces the incentive for making sure that they don't happen," said Susan Grant, director of consumer protection for the Consumer Federation of America.