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Federal Compliance

FTC Safeguards Rule: Mandatory Security for Financial Services

Protect customer information and avoid penalties with a comprehensive cybersecurity program aligned with the revised FTC Safeguards Rule.

FTC Compliant
IRS Pub 4557 Aligned

What is the FTC Safeguards Rule?

The Standards for Safeguarding Customer Information, widely known as the FTC Safeguards Rule, requires financial institutions to protect the security, confidentiality, and integrity of customer information.

Revised in 2021, the updated rule mandates specific technical and procedural safeguards—like encryption, MFA, and qualified oversight—to combat modern cyber threats.

Applies to non-banking financial institutions
Requires a 'Qualified Individual' relative to size
Mandates specific technical controls (MFA, Encryption)
Enforced by the Federal Trade Commission

Key Components

Administrative Safeguards

Designating a coordinator, conducting risk assessments, and training workforce.

Technical Safeguards

Implementing encryption, multi-factor authentication, and monitoring access.

Physical Safeguards

Protecting physical records and devices from unauthorized access or damage.

Who Must Comply?

The definition of "financial institution" is broad. If you handle customer financial information, you are likely covered.

Tax Preparers

And accounting firms handling tax returns

Mortgage Brokers

Companies brokering loans or credits

Auto Dealers

If they extend credit or lease vehicles

Payday Lenders

Check cashers and short-term lenders

Investment Advisors

Non-federally registered advisors

Real Estate Appraisers

And settlement service providers

* This list is not exhaustive. Consult with legal counsel to confirm your status.

Key Requirements Checklist

The updated rule is more prescriptive, mandating specific actions rather than just general outcomes.

Qualified Individual

  • Appoint a Qualified Individual to oversee security
  • Report to board of directors annually
  • monitor and test the security program
  • Oversee service providers

Risk Assessment

  • Conduct periodic risk assessments
  • Identify internal and external risks
  • Assess sufficiency of safeguards
  • Document assessment findings

Technical Safeguards

  • Implement Multi-Factor Authentication (MFA)
  • Encrypt customer information
  • Secure disposal of data
  • Monitor and log authorized user activity

Written Program

  • Develop a written information security plan (WISP)
  • Document incident response plan
  • Establish change management procedures
  • Train employees on security awareness

Consequences of Non-Compliance

The FTC has stepped up enforcement. Non-compliance is a costly business risk.

Critical Risk

FTC Enforcement

Civil penalties of up to $46,000+ per violation

High Risk

State Penalties

Additional fines from state attorneys general

High Risk

Legal Liability

Class-action lawsuits from data breaches

Medium Risk

Reputation Loss

Loss of client trust and business closure

Compliance Built-In, Not Bolt-On

VeritSpace delivers a secure, compliant environment out of the box. We handle the technical safeguards so you can focus on your business.

Required Encryption

Customer data encrypted at rest and in transit as mandated by the Rule.

MFA Everywhere

Multi-factor authentication implemented for all access to customer data.

Detailed Audit Logs

Continuous monitoring and logging of user activity to detect unauthorized access.

Vulnerability Scanning

Regular system scans and patch management to mitigate security risks.

Secure Backups

Encrypted, immutable backups to ensure data availability and recovery.

WISP Support

Guidance and templates to help you document your security program.

Ready to Secure Your Firm?

Get a secure, FTC-compliant environment deployed in minutes. No complex configuration required.

Frequently Asked Questions

Common questions about the FTC Safeguards Rule.

What exactly is the FTC Safeguards Rule?
The FTC Safeguards Rule requires financial institutions (including tax preparers) to develop, implement, and maintain a comprehensive information security program to protect customer information. It mandates specific administrative, technical, and physical safeguards.
Who is considered a 'financial institution' under the Rule?
The definition is broad and includes tax preparers, accountants, mortgage brokers, auto dealers, payday lenders, and non-federally registered investment advisors. Any business significantly engaged in financial activities is likely covered.
Do I need a 'Qualified Individual'?
Yes. You must designate a Qualified Individual responsible for overseeing and implementing your information security program. This can be an employee or a service provider (vCISO).
Is encryption mandatory?
Yes. You must encrypt customer information held on your systems and when transmitted over external networks. VeritSpace handles this automatically for hosted data.
What about the 'small business exemption'?
Financial institutions that maintain customer information for fewer than 5,000 consumers are exempt from some requirements (like the written risk assessment and annual board report), but not the core requirements like MFA, encryption, and having a WISP.
How does VeritSpace help with compliance?
VeritSpace provides the technical safeguards required by the Rule—encryption, MFA, audit logs, and secure infrastructure. We also offer tools and guidance for the administrative requirements like your WISP.

Simplify Your FTC Compliance

Download our free WISP template to meet the "Written Security Plan" requirement, or get a security audit to see where you stand.