If you handle consumer financial data, you need to be aware of the U.S. Federal Trade Commission‘s (FTC) revised Safeguards Rule cybersecurity regulation. The rule applies to a wide range of businesses, including those that may not consider themselves to be financial institutions. The FTC has classified many companies as “non-banking financial institutions” subject to the rule, which requires them to implement specific measures to protect customer data.
Compliance with the revised Safeguards Rule is mandatory, and the deadline for implementation is fast approaching. Financial institutions covered by the rule must comply with certain provisions by June 9, 2023. While the FTC has extended the deadline for some changes to the rule, businesses should still take immediate steps to ensure they are in compliance by the deadline.
Understanding the FTC Safeguards Rule
The FTC Safeguards Rule is a set of regulations that require covered financial institutions to develop, implement, and maintain an information security program designed to protect customer information. The rule was first introduced in 2002 and has been revised multiple times to keep up with evolving technology and security threats. The most recent revision was announced in October 2021, with a deadline for compliance set for June 2023.
What is the FTC Safeguards Rule?
The FTC Safeguards Rule is a set of regulations that require covered financial institutions to develop, implement, and maintain an information security program designed to protect customer information. The rule applies to non-bank financial institutions, such as mortgage lenders and brokers, and requires them to take steps to protect sensitive customer information from unauthorized access, use, or disclosure.
Who is affected by the FTC Safeguards Rule?
The FTC Safeguards Rule applies to non-bank financial institutions, such as mortgage lenders and brokers, that collect, maintain, or use personal information from consumers. The rule also applies to service providers that have access to this information. Covered financial institutions must comply with the Safeguards Rule regardless of size, location, or type of business.
What are the requirements of the FTC Safeguards Rule?
Among other things, the revised Safeguards Rule requires:
- Planning and action to address “reasonably foreseeable internal and external risks” — in other words, protection against data breaches, data leakage, phishing, and ransomware.
- Implementation of multi-factor authentication.
In addition to these requirements, covered financial institutions must also:
- Designate one or more employees to coordinate the information security program.
- Identify and assess the risks to customer information in each relevant area of the company’s operation and evaluate the effectiveness of the current safeguards for controlling these risks.
- Implement safeguards to control the risks identified through risk assessment and regularly test or monitor the effectiveness of the safeguards’ key controls, systems, and procedures.
- Select service providers that are capable of maintaining appropriate safeguards, make sure the contract requires them to maintain safeguards, and oversee their handling of customer information.
- Evaluate and adjust the program in light of relevant circumstances, including changes in the firm’s business or operations, or the results of security testing and monitoring.
Overall, the FTC Safeguards Rule is designed to ensure that covered financial institutions take reasonable steps to protect sensitive customer information from unauthorized access, use, or disclosure. Failure to comply with the Safeguards Rule can result in significant penalties and reputational damage for covered financial institutions.
Steps to Protect Your Customer’s Data
Conduct a Risk Assessment
Before you can protect your customer’s data, you need to know what data you have, where it’s stored, and who has access to it. Conducting a risk assessment will help you identify vulnerabilities and potential threats to your customer’s data. This will allow you to develop a comprehensive plan to protect that data.
Among other things, the revised Safeguards Rule requires planning and action to address “reasonably foreseeable internal and external risks” — in other words, protection against data breaches, data leakage, phishing, and ransomware.
Implement a Written Information Security Program
Developing a Written Information Security Program (WISP) is a key element of protecting your customer’s data. A WISP is a comprehensive plan that outlines how you will protect customer data. It should include policies and procedures for data access, storage, and disposal, as well as guidelines for responding to security incidents.
The revised Safeguards Rule also requires implementation of multi-factor authentication. This means that you need to use more than one method of authentication to access sensitive data. For example, you might require a password and a fingerprint scan to access customer data.
Train Your Employees
Your employees are your first line of defense against data breaches. It’s important to train them on how to handle customer data securely. This includes training on how to identify and respond to security incidents, as well as how to use multi-factor authentication.
Monitor Your Systems and Respond to Incidents
Monitoring your systems is critical to detecting and responding to security incidents. You should have systems in place to monitor for unusual activity and respond quickly to potential threats. This includes having a plan in place for notifying customers in the event of a data breach.
Remember, protecting your customer’s data is an ongoing process. You should regularly review and update your security measures to ensure that you are keeping up with the latest threats and vulnerabilities.
Meeting the June 2023 FTC Safeguards Rule Deadline
Preparing for the Deadline
The new June 9, 2023, deadline for compliance with the revised FTC Safeguards Rule is approaching quickly. Among other things, the revised Safeguards Rule requires planning and action to address “reasonably foreseeable internal and external risks” — in other words, protection against data breaches, data leakage, phishing, and ransomware. It also requires the implementation of multi-factor authentication. To prepare for the deadline, businesses should consider the following steps:
- Conduct a comprehensive risk assessment to identify potential vulnerabilities and risks to customer data.
- Develop and implement a comprehensive data security program that addresses the risks identified in the risk assessment.
- Implement multi-factor authentication to protect against unauthorized access to customer data.
- Train employees on data security best practices and how to identify and respond to potential security incidents.
- Regularly review and update the data security program to ensure it remains effective and up-to-date.
What Happens if You Don’t Comply?
Businesses that fail to comply with the revised Safeguards Rule by the June 9, 2023, deadline may be subject to enforcement actions by the FTC, including fines and penalties. In addition, failing to comply with the Safeguards Rule can also damage a business’s reputation and erode customer trust.
How to Report a Data Breach
In the event of a data breach, businesses should take immediate action to contain the breach, notify affected customers, and report the breach to the appropriate authorities. The revised Safeguards Rule requires businesses to have a written incident response plan in place that outlines the steps to be taken in the event of a data breach. Businesses should also consider the following steps:
- Notify affected customers as soon as possible and provide them with information on how to protect themselves from identity theft and fraud.
- Report the breach to the appropriate authorities, such as the FTC, state attorneys general, and credit reporting agencies.
- Cooperate with law enforcement and regulatory agencies in their investigation of the breach.
- Conduct a thorough investigation of the breach to identify the cause and take steps to prevent future breaches.
Conclusion
Protecting your customer’s data is not only a legal obligation but also a moral responsibility. The revised Safeguards Rule is a step in the right direction, and businesses must take it seriously. The deadline for compliance with the revised Safeguards Rule has been extended to June 9, 2023. This extension provides businesses with an additional six months to assess their data security measures and implement necessary changes.
Among other things, the revised Safeguards Rule requires businesses to plan and take action to address “reasonably foreseeable internal and external risks.” This includes protection against data breaches, data leakage, phishing, and ransomware. Businesses must implement multi-factor authentication to ensure that only authorized personnel have access to sensitive data.
It is crucial for businesses to understand the importance of data security and take appropriate measures to protect their customers’ data. Failure to comply with the revised Safeguards Rule can result in significant financial penalties and damage to the business’s reputation. Therefore, businesses must prioritize data security and comply with the revised Safeguards Rule by the June 9, 2023 deadline.
