---
kind: "section"
citation: "38 U.S.C. § 5725"
title: "38"
title_heading: "Veterans’ Benefits"
number: "5725"
heading: "Contracts for data processing or maintenance"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/38/5725"
units:
  - "Part IV — General Administrative Provisions"
  - "Chapter 57 — Records and Investigations"
  - "Subchapter III — Information Security"
---

# §5725. Contracts for data processing or maintenance

- (a) **Contract Requirements.—** If the [Secretary](/usc/38/101.md?p=1) enters into a contract for the performance of any [Department](/usc/38/101.md?p=1) function that requires access to [sensitive personal information](/usc/38/5727.md?p=19), the [Secretary](/usc/38/101.md?p=1) shall require as a condition of the contract that—
  - (1) the contractor shall not, directly or through an affiliate of the contractor, disclose such information to any other person unless the disclosure is lawful and is expressly permitted under the contract;
  - (2) the contractor, or any subcontractor for a subcontract of the contract, shall promptly notify the [Secretary](/usc/38/101.md?p=1) of any [data breach](/usc/38/5727.md?p=4) that occurs with respect to such information.
- (b) **Liquidated Damages.—** Each contract subject to the requirements of [subsection (a)](#a) shall provide for liquidated damages to be paid by the contractor to the [Secretary](/usc/38/101.md?p=1) in the event of a [data breach](/usc/38/5727.md?p=4) with respect to any [sensitive personal information](/usc/38/5727.md?p=19) processed or maintained by the contractor or any subcontractor under that contract.
- (c) **Provision of Credit Protection Services.—** Any amount collected by the [Secretary](/usc/38/101.md?p=1) under [subsection (b)](#b) shall be deposited in or credited to the [Department](/usc/38/101.md?p=1) account from which the contractor was paid and shall remain available for obligation without fiscal year limitation exclusively for the purpose of providing credit protection services pursuant to [section 5724(b) of this title](/usc/38/5724.md?p=b).

## Source credit

(Added Pub. L. 109–461, title IX, § 902(a), Dec. 22, 2006, 120 Stat. 3456.)