Congress wants VTech details on child data it collects

By Jim Finkle

WASHINGTON (Reuters) - U.S. lawmakers on Wednesday asked VTech Holdings Ltd for details about the data it collects on children who use its digital toys, as well as how it protects such sensitive information, following a cyber attack on the company that exposed data on 6.4 million children.

In a letter, two leaders of a congressional group focused on privacy asked the digital toymaker for specific information on what data it collects on children aged 12 and younger, how it uses the information, and whether it shares or sells such data.

"This breach raises several questions about what information VTech collects on children, how that data is protects, and how VTech complies with the Children's Online Privacy Protection Act," Democratic Senator Edward Markey and Republican Representative Joe Barton said in the letter, referring to a 1998 law aimed at enabling parents to control their children's information.

Their request follows VTech's recent announcement that hackers had breached databases for its Learning Lodge app store and Kid Connect messaging system. On Tuesday, VTech said data on 6.4 million children had been exposed on top of the 4.9 million adults' data announced last week.

The incident raises questions about the Hong Kong-based company's adherence to the law and the steps it had taken to protect children's personal information, according to Markey and Barton, co-founders of the Bi-Partisan Congressional Privacy Caucus.

The company has admitted that it was at fault.

"Regretfully, our database was not as secure as it should have been," VTech wrote on its website, adding that the majority of those hacked – nearly half of both the parent and child profiles – were in the United States.

Security experts and one equity analyst said the company could face government inquiries and private lawsuits from customers worldwide.

"Ninety percent of VTech's revenue comes from developed markets where consumer protection policies are more stringent," said Warren Lau, an analyst for Maybank KimEng Securities. "It comes at an unfortunate time as well, a few weeks away from Christmas."

VTech shares have fallen 2.73 percent since it first revealed the hack on Nov. 27, while the Hang Seng index was down 0.38 percent during the same period.

On Wednesday, Markey and Barton asked VTech for details on how it collects data for each of its products and what type of information was collected as well as how the company plans to alert affected customers and prevent future breaches.

The lawmakers requested the VTech's answers by Jan 8.

(Reporting by Jim Finkle; additional reporting by Linda Stern; Writing by Susan Heavey; Editing by Doina Chiacu and Richard Chang)