The Federal Trade Commission updated its “Standards for Safeguarding Customer Information” (“Safeguards Rule”) and extended the compliance deadline to June 9, 2023. Some entities still may be wondering – “Do these regulations apply to my business?” and “What do I have to do?”
Back in 2021, we provided a high-level summary of the Safeguards Rule, and reiterate some of the requirements here. It is important to note that even if your entity or business is not a “financial institution,” the Safeguards Rule lays out a framework to safeguard personal information that you might use as a guide. Business that are not in “heavily regulated” industries often wonder – where do we get started, what are best practices. The Safeguards Rule may be a place to look.
Who is Subject to the Safeguards Rule?
The Safeguards Rule applies to “financial institutions” subject to the FTC’s jurisdiction and that aren’t subject to the enforcement authority of another regulator under section 505 of the Gramm-Leach-Bliley Act. If that seems as clear as mud, it is. But the regulations and FTC guidance provide some helpful examples. There might be some entities on the list that you would expect and some you might not have expected. We list some of the examples below:
- mortgage lenders and brokers
- payday lenders
- finance companies
- account servicers
- check cashing companies
- wire transferors
- collection agencies
- tax preparation firms
- non-federally insured credit unions
- investment advisors that aren’t required to register with the SEC
- a retailer that extends credit by issuing its own credit card directly to consumers
- an automobile dealership that, as a usual part of its business, leases automobiles on a nonoperating basis for longer than 90 days
- a personal property or real estate appraiser
- a career counselor that specializes in providing career counseling services to individuals currently employed by or recently displaced from a financial organization, individuals who are seeking employment with a financial organization, or individuals who are currently employed by or seeking placement with the finance, accounting or audit departments of any company is a financial institution
- a business that prints and sells checks for consumers
- a business that regularly wires money to and from consumers
- a business that operates a travel agency in connection with financial services
- a business that provides real estate settlement
Among the categories of entities excluded from having to comply with the Safeguards Rule are entities who maintain customer information concerning fewer than 5,000 consumers.
What do we have to do?
The June 9, 2023, deadline noted above was a six-month extension of the original compliance deadline for the updated Rule. The extension generally applies to the following items:
- designate a qualified person to oversee their information security program,
- develop a written risk assessment,
- limit and monitor who can access sensitive customer information,
- encrypt all sensitive information,
- train security personnel,
- develop an incident response plan,
- periodically assess the security practices of service providers, and
- implement multi-factor authentication or another method with equivalent protection for anyone accessing customer information.
A business may not be able to tackle all of these items between now and June 9, 2023, but there are several items that could be addressed within that time. Importantly, the Safeguards Rule contemplates that not all covered financial institutions are the same. Specifically, the Rule provides that information security programs required under the Rule must contain administrative, technical, and physical safeguards that are
appropriate to your size and complexity, the nature and scope of your activities, and the sensitivity of any customer information at issue.
In short, covered financial institutions will need to address all of the applicable requirements but perhaps not to the same extent or in the same way as other covered financial institutions. Much will depend on a number of factors noted above, as well as the business’s risk assessment.
