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

Note, entities that maintain customer information concerning fewer than 5,000 consumers are exempt from some aspects of the Safeguards Rule, such as maintaining an incident response plan. Of course, such a plan is important to have should the entity have a security incident. Also, the business may be required to have such a plan under other laws, including state law, as well as under contracts with the business’s customers.

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.   

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Photo of Joseph J. Lazzarotti Joseph J. Lazzarotti

Joseph J. Lazzarotti is a principal in the Berkeley Heights, New Jersey, office of Jackson Lewis P.C. He founded and currently co-leads the firm’s Privacy, Data and Cybersecurity practice group, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP)…

Joseph J. Lazzarotti is a principal in the Berkeley Heights, New Jersey, office of Jackson Lewis P.C. He founded and currently co-leads the firm’s Privacy, Data and Cybersecurity practice group, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP) with the International Association of Privacy Professionals. Trained as an employee benefits lawyer, focused on compliance, Joe also is a member of the firm’s Employee Benefits practice group.

In short, his practice focuses on the matrix of laws governing the privacy, security, and management of data, as well as the impact and regulation of social media. He also counsels companies on compliance, fiduciary, taxation, and administrative matters with respect to employee benefit plans.

Privacy and cybersecurity experience – Joe counsels multinational, national and regional companies in all industries on the broad array of laws, regulations, best practices, and preventive safeguards. The following are examples of areas of focus in his practice:

  • Advising health care providers, business associates, and group health plan sponsors concerning HIPAA/HITECH compliance, including risk assessments, policies and procedures, incident response plan development, vendor assessment and management programs, and training.
  • Coached hundreds of companies through the investigation, remediation, notification, and overall response to data breaches of all kinds – PHI, PII, payment card, etc.
  • Helping organizations address questions about the application, implementation, and overall compliance with European Union’s General Data Protection Regulation (GDPR) and, in particular, its implications in the U.S., together with preparing for the California Consumer Privacy Act.
  • Working with organizations to develop and implement video, audio, and data-driven monitoring and surveillance programs. For instance, in the transportation and related industries, Joe has worked with numerous clients on fleet management programs involving the use of telematics, dash-cams, event data recorders (EDR), and related technologies. He also has advised many clients in the use of biometrics including with regard to consent, data security, and retention issues under BIPA and other laws.
  • Assisting clients with growing state data security mandates to safeguard personal information, including steering clients through detailed risk assessments and converting those assessments into practical “best practice” risk management solutions, including written information security programs (WISPs). Related work includes compliance advice concerning FTC Act, Regulation S-P, GLBA, and New York Reg. 500.
  • Advising clients about best practices for electronic communications, including in social media, as well as when communicating under a “bring your own device” (BYOD) or “company owned personally enabled device” (COPE) environment.
  • Conducting various levels of privacy and data security training for executives and employees
  • Supports organizations through mergers, acquisitions, and reorganizations with regard to the handling of employee and customer data, and the safeguarding of that data during the transaction.
  • Representing organizations in matters involving inquiries into privacy and data security compliance before federal and state agencies including the HHS Office of Civil Rights, Federal Trade Commission, and various state Attorneys General.

Benefits counseling experience – Joe’s work in the benefits counseling area covers many areas of employee benefits law. Below are some examples of that work:

  • As part of the Firm’s Health Care Reform Team, he advises employers and plan sponsors regarding the establishment, administration and operation of fully insured and self-funded health and welfare plans to comply with ERISA, IRC, ACA/PPACA, HIPAA, COBRA, ADA, GINA, and other related laws.
  • Guiding clients through the selection of plan service providers, along with negotiating service agreements with vendors to address plan compliance and operations, while leveraging data security experience to ensure plan data is safeguarded.
  • Counsels plan sponsors on day-to-day compliance and administrative issues affecting plans.
  • Assists in the design and drafting of benefit plan documents, including severance and fringe benefit plans.
  • Advises plan sponsors concerning employee benefit plan operation, administration and correcting errors in operation.

Joe speaks and writes regularly on current employee benefits and data privacy and cybersecurity topics and his work has been published in leading business and legal journals and media outlets, such as The Washington Post, Inside Counsel, Bloomberg, The National Law Journal, Financial Times, Business Insurance, HR Magazine and NPR, as well as the ABA Journal, The American Lawyer, Law360, Bender’s Labor and Employment Bulletin, the Australian Privacy Law Bulletin and the Privacy, and Data Security Law Journal.

Joe served as a judicial law clerk for the Honorable Laura Denvir Stith on the Missouri Court of Appeals.