The FTC’s Safeguards Rule requires non-banking financial institutions, such as mortgage brokers, motor vehicle dealers, and payday lenders, to develop, implement, and maintain a comprehensive security program to keep their customers’ information safe. In October 2021, the FTC announced it had finalized changes to the Safeguards Rule to strengthen the data security safeguards that financial institutions are required to put in place to protect their customers’ financial information. The FTC also sought comment on a proposed supplemental amendment to the Safeguards Rule that would require financial institutions to report certain data breaches and other security events to the Commission.
“Companies that are trusted with sensitive financial information need to be transparent if that information has been compromised,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “The addition of this disclosure requirement to the Safeguards Rule should provide companies with additional incentive to safeguard consumers’ data.”
The amendment announced requires financial institutions to notify the FTC as soon as possible, and no later than 30 days after discovery, of a security breach involving the information of at least 500 consumers. Such an event requires notification if unencrypted customer information has been acquired without the authorization of the individual to which the information pertains. The notice to the FTC must include certain information about the event, such as the number of consumers affected or potentially affected.
The Commission voted 3-0 to publish the notice amending the Safeguards Rule in the Federal Register. It becomes effective 180 days after it is published there. 