What Is A Data Processing Agreement (DPA)?

In this post, we’ll break down what a data processing agreement (DPA) is and why it’s crucial for protecting data privacy and keeping your business GDPR-compliant.

In a time when data powers nearly every business decision, companies are constantly collecting customer information—whether it’s for improving services, running targeted marketing campaigns, or enhancing the overall experience. But with all that data comes a serious responsibility to manage it securely and comply with privacy regulations.

If your business gathers personal data and works with external services to manage or process it, having a Data Processing Agreement (DPA) in place is critical for staying compliant with global privacy laws and avoiding hefty penalties.

At its core, a DPA is a formal agreement between a business that collects data and the service providers that handle or process it on their behalf. It sets clear guidelines on how that data should be managed and protected.

In this post, we’ll walk you through what a DPA is, what it typically includes, and why your business needs one—especially with the rise of stricter privacy regulations worldwide.

A Data Processing Agreement (DPA) is a legally binding contract between a business (the data controller) and an external service provider (the data processor) that handles personal data on the business’s behalf. Its primary purpose is to ensure that personal data is processed securely and complies with data protection laws, such as the General Data Protection Regulation (GDPR).

Think of it as a set of rules and responsibilities that both parties agree on to protect sensitive data like customer names, email addresses, payment details, or other personal information. The DPA defines how this data can be used, who can access it, how long it can be stored, and what measures should be in place to protect it.

A Data Processing Agreement (DPA) is more than just a formality—it’s a critical safeguard for your business. Here’s why it matters:

1. Legal Compliance

Many privacy regulations, such as the General Data Protection Regulation (GDPR), California Privacy Rights Act (CPRA), and Brazil’s LGPD, mandate that companies must have a DPA when they share personal data with third-party processors.

A DPA ensures your business aligns with these laws by clearly defining how personal data should be processed, protected, and stored. It also proves to regulators that your business takes data privacy seriously.

2. Minimizing Business Risk

Data breaches can damage a company’s reputation and customer trust. With a DPA, you set clear security standards for how your data processors handle sensitive information, reducing the risk of mishandling or unauthorized access. It also defines how incidents, like data breaches, should be reported and managed.

Imagine outsourcing data to a third-party service without proper security measures in place—one breach could put your business at financial and legal risk. A DPA helps mitigate this by holding everyone accountable.

3. Transparency and Accountability

A DPA provides a transparent framework for your business relationship with third-party processors. It outlines key responsibilities for both parties, such as:

• What types of data are being processed
• How the data is protected
• How long the data is retained
• What happens to the data after the business relationship ends

This clarity makes it easier to track how your customer data is handled, ensuring it doesn’t end up in the wrong hands.

4. Builds Customer Trust

Consumers are now concerned about privacy and sharing their sensitive personal information. They want to know their personal information is in safe hands. Strong data protection measures backed by a DPA demonstrate your commitment to safeguarding their data. This can set your business apart and foster long-term customer trust.

5. Control Over Sub-Processors

Many service providers rely on sub-processors—third parties they work with to manage your data. A well-structured DPA requires transparency in the use of sub-processors, ensuring they meet the same data protection standards as your primary processor. This level of control reduces your exposure to unnecessary risks.

A solid Data Processing Agreement (DPA) isn’t just about compliance—it’s about clearly defining the responsibilities and safeguards around handling personal data. Here are the essential elements that make up a DPA:

1. Parties Involved

A Data Processing Agreement (DPA) must clearly define the parties involved. The Data Controller is the business or organization that collects and owns the personal data—typically, that’s you. The Data Processor is the external service provider that handles or processes the data on behalf of the controller, such as cloud storage providers, marketing platforms, or payment gateways.

2. Purpose and Scope of Data Processing

This section defines why the processor handles the data and how it will be used. It typically includes:

• The purpose of the data processing (e.g., for marketing, payment processing, etc.)
• Types of personal data being processed (e.g., names, email addresses, financial information)
• Categories of data subjects (e.g., customers, employees, website visitors)

It ensures that data is only processed for the specific purpose agreed upon.

3. Duration of Processing

Specifies how long the processor is allowed to handle the personal data. It could be until the contract ends or until the specific purpose for the processing is fulfilled. This section also outlines the process for data deletion after the contract terminates.

4. Data Security Measures

One of the most critical parts of a DPA, this section details the security standards and measures the processor must implement to protect the data. This includes:

• Encryption standards
• Access controls
• Breach response procedures
• Physical security measures for data storage

These measures ensure that personal data is protected from unauthorized access, breaches, or accidental loss.

5. Sub-Processing Agreements

If the data processor plans to use sub-processors (e.g., subcontracting another service), this section ensures transparency and control. It requires the processor to:

• Get approval from the controller before hiring sub-processors
• Ensure that sub-processors comply with the same data protection obligations outlined in the DPA

This helps maintain consistent standards across all third-party services involved.

6. Data Breach Notification

In the event of a data breach, the processor is required to notify the controller within a specified timeframe (e.g., 24 or 72 hours). This section outlines:

• The breach notification procedure
• What information must be included in the notification
• Steps the processor must take to minimize the damage

7. Data Subject Rights

This section addresses how the processor should assist the controller in responding to requests from individuals (data subjects) regarding their rights under data protection laws.

These rights include:

• Access to personal data
• Correction or deletion of data
• Restriction of processing
• Data portability

Processors must have processes in place to help the controller fulfill these requests.

8. Audit and Compliance Monitoring

The controller has the right to audit the processor to ensure compliance with the DPA and applicable laws. This section may define how often audits can happen and what documentation or access the processor must provide.

9. Liability and Indemnity

This section defines who is responsible for damages or legal penalties in case of non-compliance or data breaches. It ensures that both parties understand their liability and can take appropriate steps to minimize risks.

10. Jurisdiction and Governing Law

Since data protection laws vary across regions, the DPA must specify which jurisdiction’s laws apply (e.g., GDPR for businesses in the EU). This ensures legal clarity in case of disputes.

Several data protection laws worldwide mandate the use of Data Processing Agreements (DPAs) to ensure personal data is handled securely and transparently. Here are some of the most significant ones:

1. General Data Protection Regulation (GDPR) – European Union

Key Requirement: Article 28 of the GDPR mandates that a DPA must exist between data controllers and processors to ensure compliance with the regulation’s data protection principles. Requires DPAs to specify how personal data is processed, including the security measures used and the processor’s obligations.

2. California Privacy Rights Act (CPRA) – United States

Key Requirement: The CPRA requires contracts between businesses and service providers to define how personal information is processed, especially to prevent unauthorized use or disclosure.

• Focuses on protecting the personal data of California residents.
• Businesses must establish agreements with service providers to clarify that data is processed only for specific purposes.
• Non-compliance can lead to fines of $2,500 per unintentional violation and $7,500 per intentional violation.

3. Lei Geral de Proteção de Dados (LGPD) – Brazil

Key Requirement: Article 39 of LGPD specifies that data processing must be carried out under strict contractual agreements between controllers and processors.

• Applies to businesses handling the personal data of individuals in Brazil.
• Requires transparency and accountability in how data is processed.
• Non-compliance can result in fines of up to 2% of annual revenue, capped at 50 million BRL (approx. $10 million USD).

4. Personal Data Protection Act (PDPA) – Singapore

Key Requirement: The PDPA requires businesses to ensure that data intermediaries (processors) comply with protection and retention standards.

• Applies to all private sector organizations that process personal data in Singapore.
• Non-compliance can result in fines of up to SGD 1 million or more, depending on the severity of the breach.

Why Understanding These Laws Matters

Data privacy regulations are becoming stricter and more widespread across the globe. If your business collects or processes personal data—especially if you operate internationally—you need to be familiar with these laws to stay compliant. Having a DPA in place helps protect your business from hefty fines and legal risks while also safeguarding your customers’ trust.

A Data Processing Agreement (DPA) is not just a legal requirement—it’s an essential tool for safeguarding personal data and ensuring your business operates within the boundaries of data protection laws. With privacy regulations tightening worldwide, businesses must take proactive steps to protect their customers’ information.

A well-structured DPA clarifies roles, enforces security standards, and minimizes risk, helping you build trust with your customers while staying compliant.

We hope this article has helped you learn about data processing agreements. If you have any doubts, drop them in the comments section.