How to Become Compliant with the FTC Safeguards Rule

February 1, 2024

Towards the end of 2021, the FTC announced an update to the Safeguards Rule. The FTC implemented this rule to protect consumers by ensuring data protection measures are in place within financial institutions. Keep reading as we share the top tips from our pros here at Sterling Ideas for ensuring your business complies with the FTC Safeguards Rule.


Understanding the FTC Safeguards Rule

The Federal Trade Commission’s Standards for Safeguarding Customer Information, otherwise known as the Safeguards Rule, was created to ensure that customer information remains secure. It originally began in 2003 but has been amended more recently to ensure it keeps updated technology in mind. The Safeguards Rule applies to financial institutions, which is a term used to describe the activities that a business carries out. Mortgage lenders, finance companies, mortgage brokers, collection agencies, and other financial advisors are some of the many businesses that must remember this rule.  However, many other businesses that aren’t commonly considered “financial institutions” are also in scope of this regulation if they are engaging in activities that are financial in nature or are even incidental to financial activities.


The Safeguards Rule lists several examples of financial institutions that must comply, and they may surprise you.  They include retailers that extend credit by issuing their own credit card, automobile dealerships that lease vehicles, personal property or real estate appraisers, career counselors who specialize in providing services to individuals who have a financial aspect to their career selections, accountants or other tax preparation services, travel agencies that offer financial services, companies acting as “finders” between buyers and sellers, and many more.  It is significant to note that postsecondary institutions of higher learning are subject to the Safeguards Rule if they engage in financial activities, such as participating in Title IV funding.


As a business owner to whom the FTC Safeguards Rule applies, you must develop and maintain a security program that protects customer information. This security program means the company should protect any paper or electronic records you have within non-public personal information. When companies don’t comply with these rules, the penalties can be very serious and costly.


Steps to Achieve FTC Safeguards Rule Compliance

We encourage you to follow the steps below so your business can comply with the FTC Safeguards Rule and hopefully avoid the potential of heavy fines for your company.


1. Conduct a Risk Assessment

The first step to compliance with the FTC Safeguards Rule is to conduct a risk assessment. Start by identifying sensitive information you have within your business and then evaluate potential risk areas. From there, you’ll have the data you need to design a security program for your business.


2. Design and Implement a Comprehensive Information Security Program

Once you’ve conducted a thorough risk assessment, you’ll want to start designing an information security program for the unique needs of your business. You’ll need to ensure you have access controls, system inventory, data encryption, secure development practices, authentication protocols, secure disposal procedures, change management procedures, and the logging and monitoring of authorized user activities.  Once you have designed your program, you then need to take the time to educate your employees on security best practices to ensure they also support your business in following the FTC Safeguards Rule.


3. Regular Monitoring and Updates

Once you’ve put your program in place, you might think your work is done, but that’s not the case. It’s essential that you carry out continuous risk assessments, which will help you overcome the challenges of changing technology and an expanding customer database. Periodic security audits should be scheduled so that you can update your security policies based on emerging threats.


Employee Training and Awareness

Educating your employees is a big part of ensuring your business remains in compliance with this rule. No matter what job role someone holds within your financial institution, there’s a strong chance they work with personal data regularly. Conducting regular and engaging training sessions will help reinforce the importance of this task to your team and create a culture of data security within your organization. Your leaders will also need to take the lead on this project and lead by example to ensure your employees follow suit.


Documenting Compliance Efforts

In case of concerns about your compliance, the best way to protect your business from a fine or further investigation is to ensure you maintain records of the risk assessments you carry out. Document all of the security policies and procedures you have in place and establish a compliance documentation system that you can easily show to new employees or anyone who needs to review your paperwork.


Responding to Security Incidents

Should you have a security incident within your workplace, you need to know how to respond quickly and effectively to ensure you don’t breach the FTC Safeguards Rule. While we hope your business never suffers a security incident, it’s important to prepare for one now by creating an Incident Response Plan.  That way, should you end up in an emergency situation, you will know how to respond quickly and effectively.


Regular FTC Compliance Audits

Periodic FTC compliance audits are something businesses of any type use to ensure they comply with any rules and laws that apply to their business. By hiring external auditors, you can receive an unbiased assessment and feedback, which can help you improve your processes and ensure you don’t overlook any gaps in your processes that you may not notice when working on the same tasks every day. Should you find that you do have any issues following an audit, you’ll want to make sure you quickly resolve these issues. The longer you put off any concerns, the greater the chance you’ll end up with a fine.

The enforcement date for the FTC Safeguards Rule was June 9, 2023.  The high fines your company could receive for not following the rule should be enough motivation to start carrying out risk assessments and implementing a program that will protect your business for years to come. Compliance isn’t a one-and-done task; it’s something you need to focus on continually to ensure your team is carrying out their work as expected.


Here at Sterling Ideas, we can support you with FTC Safeguards compliance. Our team will be happy to discuss how we can make remaining in compliance easier for you. Contact us today with any questions about FTC Safeguards compliance or to discuss how we can help you over the upcoming months and years to protect your business.


If you want to know more about our compliance packages, please visit our website.


About Sterling Ideas

Founded in 1999 and based in Tampa, FL, Sterling Ideas has a proven track record of success in helping clients implement technology solutions to strengthen their companies and achieve compliance requirements or goals. For more information on our technology services, please submit an inquiry via our contact form. We look forward to hearing from you and having the opportunity to help prosper your organization.

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