Proposed National Data Privacy Standard Draws Concern from Small Business Owners

WASHINGTON — In mid-May, just days after the conclusion of National Small Business Week, entrepreneurs from across the country converged on Capitol Hill to voice significant concerns over proposed federal data privacy legislation. They argued that while the goal of protecting consumer data is laudable, overly restrictive rules could cripple the digital marketing strategies that are vital for their survival and growth. At the heart of the debate are several legislative proposals, including the SECURE Data Act, introduced by House Republicans in April, and the bipartisan American Privacy Rights Act. Both aim to create a single, national standard for how businesses collect, store, and use consumer data, replacing the current and increasingly complex patchwork of state-level laws. For many small business owners, this legislative push represents a potential existential threat. Natania Julius, who co-owns the Wisconsin-based online company JNJ Gifts and More with her mother, was among those in Washington to share her perspective. Her business, which curates corporate gifts, has operated entirely online since its founding in 2022. “We have to post ads on social medias and use digital marketing, [search engine optimization], for them to come see us,” Julius said. “That is like the biggest thing for how we get our clients today and how we keep our shop running.” Her concerns were echoed by advocacy groups. “A lot of people don’t know that we have a free, widely available internet because of advertising,” said Brendan Thomas of Internet for Growth, a trade group. Thomas warned of “unintended consequences from bills that go too far and restrict information that would have been very common for marketing and advertising purposes.” The push for a federal law comes as businesses struggle to navigate regulations in 16 different states, with more on the horizon. According to the International Association of Privacy Professionals, 80% of U.S. states are projected to have their own consumer privacy laws by the end of 2025. This fragmented landscape forces companies to divert significant resources toward compliance. One estimate cited by the House Energy and Commerce Committee suggests that without a national standard, U.S. small businesses could face compliance costs of $20 billion to $23 billion annually. The existing state laws vary widely in their requirements. California’s Consumer Privacy Act (CCPA) was a landmark, but since then, states like Colorado, Utah, Texas, and Minnesota have enacted their own versions. Upcoming laws in states like Maryland, effective October 2025, will broaden the definition of sensitive data to include genetic information and sexual orientation. A proposed bill in Maine, LD 1822, is considered one of the strictest in the nation, focusing heavily on data minimization and requiring explicit consent for data use. For small businesses, the definition of “personal data” is often broader than they assume, encompassing not just names and emails but also device identifiers like IP addresses, location data, website cookies, and user purchase history. The financial stakes of mishandling this information are immense. According to recent industry data, the average cost of non-compliance for a business is nearly $15 million, almost three times the cost of proactive compliance. Furthermore, a single data breach can cost a company an average of $4.88 million, not including the long-lasting reputational damage and loss of customer trust. Proponents of the federal legislation argue that a unified standard is precisely what small businesses need. The American Privacy Rights Act, for example, was drafted with specific exemptions intended to protect smaller enterprises. The bill would not apply to businesses with annual revenue of $40 million or less, those that do not sell customer data, and those that handle the data of fewer than 200,000 people. According to the bill’s sponsors, the legislation is “focused on the business of data, not Main Street business,” aiming to strike a balance between consumer protection and economic innovation. In our experience, while a single national data privacy standard is a welcome goal, the devil is always in the details for small and mid-sized businesses. The proposed exemptions in the American Privacy Rights Act are a step in the right direction, but many thriving e-commerce and tech-enabled companies could easily exceed the 200,000-customer threshold without having the compliance infrastructure of a large corporation. We've seen that adapting to these regulations is not a simple legal checklist; it requires a fundamental shift in how data flows through a company. This involves mapping data, changing software configurations, and training staff, which amounts to a significant operational undertaking. This is where business process reengineering becomes critical, ensuring that compliance is built into daily workflows, not just bolted on as an afterthought. For companies trying to navigate these changes without disrupting their core operations, expert guidance is essential. C&S Finance Group LLC helps clients design and implement these necessary operational adjustments at csfinancegroup.com. As the proposed bills make their way through congressional committees, small business owners like Natania Julius remain hopeful that their message was heard. The legislative process is expected to be lengthy, and the final language of any national privacy law will be closely watched by entrepreneurs who depend on the digital economy to compete and grow.