What is the FTC Safeguard Rule?

This blog is 610 words, a 4-minute read.

The Federal Trade Commission (FTC) created the Safeguard Rule to help businesses protect customer information. But what exactly is the FTC Safeguard Rule, and what does it mean for your business? Let's break it down.

What is the FTC Safeguard Rule?

The FTC Safeguard Rule is a set of guidelines that require certain businesses to create and maintain a plan to protect customer information. This rule was first introduced in 2003 and has been updated over the years to keep up with new technology and security threats.

Who Needs to Follow the Rule?

The rule applies to many types of financial businesses, like mortgage lenders, payday lenders, finance companies, and tax preparation firms. If your business deals with financial activities, you need to follow the Safeguard Rule.

What Do You Need to Do?

Here are the main tasks your business needs to do to comply with the Safeguard Rule:

1. Create a Security Plan: Write down how your business will protect customer information. This plan should cover administrative, technical, and physical safeguards.
2. Appoint a Security Officer: Choose someone to be in charge of your information security program.
3. Assess Risks: Regularly check for risks to customer information and see how well your current safeguards are working.
4. Implement Safeguards: Based on your risk assessment, put in place the necessary safeguards like encryption and access controls.
5. Monitor and Test: Continuously monitor and test your safeguards to make sure they are effective.
6. Train Employees: Make sure your employees understand the importance of protecting customer information and know the specific safeguards in place.
7. Oversee Service Providers: Ensure that any service providers who handle customer information also have adequate safeguards.

Updates

In 2021, the FTC revised the Safeguard Rule to offer businesses clearer and more practical guidance while maintaining the original rule's flexibility.

The updated rule emphasized:

• Creating, implementing, and sustaining a security system to safeguard customer information.
  • This involves administrative, technical, and physical measures to ensure the security, confidentiality, and integrity of customer data. Institutions are required to restrict access to consumer data and employ encryption to secure it, preventing unauthorized access and protecting sensitive information both during transmission and when stored.
• Utilizing encryption to secure data.
  • Adopting multi-factor authentication (MFA) to enhance security.
  • Consistently identifying and addressing system vulnerabilities.
  • Clarifying information-sharing practices, particularly the administrative, technical, and physical measures used to manage customers' secure information.
• Ensuring the rule remains current with technological advancements by incorporating public feedback and conducting workshops to gather input on proposed changes.
  • These updates were crafted to enhance consumer protection against breaches and cyberattacks that could lead to identity theft and financial losses. By integrating feedback from various stakeholders, the FTC aimed to establish a more effective and practical set of guidelines for businesses.

In October 2023, the FTC introduced new provisions for reporting data breaches and security incidents, allowing businesses six months to adapt to these changes, which took effect in May 2024.

These revisions included:

• Mandating non-banking financial institutions under its jurisdiction to report data breaches affecting 500 or more individuals.
• Establishing a "notification event" requirement, which obliges entities to notify the FTC as soon as possible, and no later than 30 days after discovering an event involving the unauthorized acquisition of unencrypted customer information.

Why It Matters

Following the FTC Safeguard Rule protects your customers information and earns their trust. By having strong security measures, you can prevent data breaches and build a good reputation for your business.

Fact checked by: