How to Stay Compliant with the FTC’s Updated Safeguards Rule

What Business Leaders Need to Know About the FTC’s Updated Safeguards Rule

On December 1, 2020, the Federal Trade Commission (FTC) amended its Safeguards Rule, which was initially developed to ensure financial institutions protect consumers’ private data. The updated rule provides “more concrete guidance for businesses” and expands the definition of financial institutions to include a broader range of business types.

As such, many companies may find themselves impacted by the rule and need to understand how it applies to their operations. In this blog post, we’ll explore what business leaders need to know about the FTC’s updated Safeguards Rule.

What is the Safeguards Rule?

The FTC Safeguards Rule was developed initially with the passage of the Gramm, Leach, Bliley Act in 2003 in order to ensure that financial institutions protect consumers’ private data. It establishes a framework for how businesses must handle consumer information, such as passwords and social security numbers. Businesses must also implement reasonable measures designed to protect personal information from unauthorized access or use.

Under the amended rule, companies are required to take steps such as appointing an employee responsible for creating written policies and procedures related to consumer data protection, training employees who handle personal information on proper security procedures and maintaining records of all security incidents that occur.

In addition, businesses must also inform customers if their personal information has been compromised in any way by sending out emails or notices with details about what happened and what steps customers can take in response.

What is the goal of the FTC Safeguards Rule?

The goal of the FTC Safeguards Rule is to protect consumer data while setting a guideline for financial institutions and other businesses to follow. The rule requires organizations to create a comprehensive security plan that greatly reduces the risk of potential cybersecurity threats.

The plan should include training security personnel, adopting written procedures and policies, identifying sensitive information from clients, and establishing physical safeguards.

Organizations must identify vulnerabilities in their systems before any potential damage can be done to consumers’ information. Businesses must have adequate monitoring practices in place, along with regular audits and tests.

A company’s compliance is important. Failure to comply with the FTC Safeguards Rule could result in an investigation by the FTC or other relevant regulatory agencies, with subsequent civil penalties for non-compliance.

Overall, the new rule gives organizations an incentive and responsibility to take proactive steps toward protecting consumer data from cyber threats. This means developing a comprehensive security program. Businesses are encouraged to remain up-to-date on all the changes in order to remain compliant and protect consumer interests at all times.

Who Does the New FTC Safeguards Rule Impact?

The FTC Safeguards Rule makes it mandatory for businesses to be transparent in their actions when handling consumers’ data while also protecting consumers from potential security risks online. Businesses must be proactive in following the newest regulations to remain compliant and avoid penalties set forth by the FTC. The FTC cites several examples of business types that the new rule will impact:

Banks and credit unions
Mortgage lenders and brokers
Debt collection agencies
Auto finance companies
Money services businesses
Check cashers and payday lenders
Nonbank installment lenders
Online lenders
Student loan servicers and
Tax return preparers.

In addition to covered financial institutions, other businesses that collect or store sensitive customer information – such as payment card numbers – will also be affected by the new rule. This includes businesses providing services such as web hosting, data storage, software development, support services through call centers and IT departments, eCommerce stores, etc.

Companies should consider their products or services and how they relate to customer data. If they are collecting or storing any sensitive information from customers – whether it is personal or financial in nature – then they may be subject to this new regulation.

How Can Companies Ensure Compliance with the FTC Safeguards Rule?

Businesses should consider taking steps such as identifying potential risks associated with their data systems and developing written policies and procedures specific to their organization that will help them remain compliant with the new regulations. They should also train security personnel and employees on these policies and have a system to monitor compliance over time.

Additionally, they should regularly review logs of all security incidents that occur so they can quickly identify any potential problems or breaches before they become significant issues. Finally, they should keep up with industry best practices like implement multi factor authentication in order to stay ahead of any changes or updates made to the rule in the future.

What happens if Financial Institutions violate the FTC Safeguards Rule?

The Rule requires financial institutions to develop, implement, and maintain safeguards to protect access sensitive customer information. Under the revised Rule, financial institutions must provide customers with notice of their right to opt out of having their information shared with nonaffiliated third parties.

Financial institutions must understand the exact requirements of the Safeguards Rule to ensure their compliance, upgrading security systems and develop a robust information security program. This includes protecting customer data with reasonable safeguards, having a secure system in place to dispose of such information, and having an effective security program that meets FTC standards. Additionally, they must keep all systems up-to-date and monitor them regularly for potential threats or vulnerabilities. Furthermore, all institutions should provide employees with training on how to effectively handle consumer data.

It is important for financial institutions to review their policies and procedures regularly to stay up-to-date with the Safeguards Rule requirements. Failing to adhere to these standards can result in hefty fines from the FTC ranging from $1,000-$16,000 per day depending on how serious the violation was, as well as its duration. It is critical for these banks, credit unions, investment firms, insurance providers, and other similar businesses to take adequate measures now in order to prevent any violations of this rule and avoid costly penalties later on.

More FTC updated Safeguards Rule FAQs

Who decides if there is a violation? The FTC decides if there is a violation.
How will they decide this? The FTC will assess each situation on a case by case basis to determine if there is a violation of the Safeguards Rule. They may ask for additional information from the financial institution and examine their policies and procedures for compliance. If they find that the institution is not in compliance, they may impose fines or other sanctions.
Is a data breach a requirement for a violation or will the FTC send out auditors? No, a data breach is not a requirement for a violation of the Safeguards Rule, but can be a factor in determining if there is a violation. The FTC may also send out auditors to evaluate financial institutions’ compliance with the rule. Auditing typically consists of reviewing the institution’s policies and procedures to ensure they meet the minimum requirements outlined in the rule.

What do Business Leaders Need to do?

The revised rule requires businesses that are subject to it to implement several data security principles aimed at protecting customers’ sensitive information from theft or misuse. These principles include developing secure systems for collecting customer data, implementing comprehensive information security programs for employees who have access to this data, periodically assessing risks associated with customer data management processes, and training employees on best practices for handling customer data securely.

Businesses must also provide customers with notices about their data security practices so that customers can make informed decisions about whether or not they want their information stored with them. To ensure compliance with the new requirements set forth in the amended Safeguards Rule, business leaders should assess their current internal processes related to customer data protection and review all applicable documents (e.g., privacy policies).

Develop a comprehensive information security program

Businesses should develop a plan for implementing additional measures necessary for compliance with all aspects of the revised rule. Periodic monitoring is also essential for staying up-to-date on changing regulations related to customer data protection and any developments within the industry that could affect the approach toward safeguarding data.

If your business is covered by the revised Safety Rule from the FTC, it is essential that you develop, implement, and maintain a comprehensive cybersecurity program. The program should:

Ensure the security and confidentiality of customer data
Protect against anticipated threats or hazards to the integrity or security of private data
Protect against unauthorized access to that information which could harm customers.

The nine core elements of the program include:

Designating a Qualified Individual to implement and supervise the program
Conducting a cybersecurity risk assessment to identify internal and external risks and threats to customer data
Designing and implementing safeguards to control identified risks (including encrypting customer data, using multi-factor authentication, and securely disposing of customer information)
Routinely monitoring and testing the effectiveness of safeguards
Educating staff with cybersecurity awareness training and follow-up sessions when necessary
Monitoring service providers’ compliance with appropriate safeguards
Keeping the security systems up-to-date
Developing a written incident response plan (with seven elements outlined in Section 314.4(h) of the Safeguards Rule)
Having your Qualified Individual report back to the Board of Directors with an annual written report on compliance with the program.

Many organizations lack clarity about whether they’re affected by the FTC’s updated Safeguards Rule and what steps they need to take in order to ensure compliance if they are covered under its scope.

Business leaders should assess their internal processes related to customer data protection against all applicable documents (e.g., privacy policies) and develop a plan for implementing additional measures necessary for compliance with all aspects of the revised rule in order to stay compliant with this critical legislation designed to protect consumers’ private date from theft or misuse in an increasingly digital world.

Final Thoughts on the Federal trade commission Safeguards Rule Changes

It’s clear that the update to the FTC’s Safeguards Rule will have an impact on a wide range of businesses. The amendment expands the definition of covered financial institutions, meaning many more organizations may now be subject to the rule than previously.

Businesses must ensure they comply with data security principles laid out by the rule or face consequences – but many still lack clarity about their responsibility and what they should do. That’s why it is so crucial for businesses to have professional advice and support at this time, before the compliance deadline – and NCX Group Experts can provide just that.

Reach out now and schedule a meeting with an NCX Group Expert to ensure your business isn’t caught off guard by the changes brought in by this updated rule. Don’t wait until the compliance deadline date of June 9th, when compliance becomes mandatory – act now for the best outcome for your company!

Schedule a meeting here: https://calendly.com/ncxgroup