Key Takeaways
- The FTC Safeguards Rule requires all financial institutions—broadly defined—to secure customer information through a documented security program.
- Risk assessments, encryption, MFA, and vendor oversight are no longer optional.
- Industries like healthcare and construction must be especially vigilant due to their high exposure and complex IT environments.
- Non-compliance can lead to regulatory penalties, data breaches, and reputational harm.
- A strategic IT partner like Continuous Networks can implement and manage these safeguards, reducing risk while enhancing operational resilience.
What the FTC Safeguards Rule Means for Your Business IT
From financial records to health data, every business that handles sensitive customer information needs to know about the FTC Safeguards Rule. This regulation, part of the Gramm-Leach-Bliley Act (GLBA), requires companies to protect consumer data through a formal information security program. It's not just for banks. If your business processes payments or handles personal information, you may be subject to the rule.
And with recent updates, the stakes are higher than ever.
Here is important information for you to know regarding what the FTC Safeguards Rule is, why it matters, and how it can affect your business. What's more, there are actionable steps your IT team or managed service provider (MSP) should take to stay compliant and reduce risk. This is especially important if you operate in highly targeted industries like healthcare or construction.
What Is the FTC Safeguards Rule?
The FTC Safeguards Rule is part of the GLBA, a federal law that governs how financial institutions must handle consumer information. The Safeguards Rule specifically requires organizations to create, implement, and maintain a comprehensive security program to protect that data.
In 2021, the FTC updated the rule to address cyber risks. These changes include specific technical requirements for businesses handling sensitive data. These requirements include encryption, multi-factor authentication, and continuous risk assessments.
Who Needs to Comply?
The Safeguards Rule applies to "financial institutions" as broadly defined by the FTC. This includes:
- Mortgage brokers
- Auto dealerships offering financing
- Accountants and tax prep services
- Healthcare agencies that help patients navigate financing
- Construction companies that offer credit or financing options
Even if your business doesn't look like a traditional bank, if you collect and store customer data and financial information, you're likely on the hook.
Key Requirements and How IT Services Support Them
Let's look at how the Safeguards Rule translates into everyday IT responsibilities.
Risk Assessments
The rule requires organizations to regularly conduct risk assessments that identify reasonably foreseeable threats. This isn't just a checklist, it's a deep dive into your systems, software, access controls, and vulnerabilities.
A qualified IT partner can:
- Conduct initial and ongoing technical risk assessments
- Identify gaps in compliance and security posture
- Map risks to controls aligned with the FTC requirements
In sectors like long-term healthcare, risk assessments are critical to flag legacy systems, third-party devices, or unsecured communication channels that could also lead to HIPAA violations.
Encryption and Multi-Factor Authentication (MFA)
Encryption is no longer optional. The Safeguards Rule now mandates that sensitive data must be encrypted both in transit and at rest. In addition, companies must implement multi-factor authentication for systems that access customer information.
For general contractors using project management tools or payroll systems in the cloud, this means:
- Encrypting client contracts and employee in platforms like Procore or QuickBooks
- Ensuring MFA is turned on for email and remote access tools
Your MSP should be able to enforce these protections across all devices, cloud apps, and user accounts.
IT Vendor Management
If you work with third-party vendors who handle your data, such as cloud providers, EHR platforms, or even outsourced IT support, you're responsible for ensuring they are using proper security too.
The Safeguards Rule requires businesses to:
- Vet vendors before engagement
- Require contractual assurances that they meet FTC security standards
- Monitor ongoing compliance through audits or reports
In healthcare, this means validating that your EHR system encrypts patient data and provides detailed access logs. In construction, it might mean ensuring your time-tracking or finance apps don't introduce new vulnerabilities.
What Happens If You Don't Comply?
Non-compliance isn't just a legal issue—it's a business risk. The FTC has made clear that failure to meet these standards can result in substantial fines and reputational damage. In fact, per FTC reporting, there has been a rise in enforcement actions across the board.
These actions often follow a data breach, but increasingly they're the result of proactive audits or whistleblowers. Failing to encrypt data, skipping risk assessments, or lacking vendor oversight are all common compliance gaps.
Implementing Safeguards Rule Best Practices
Addressing the Safeguards Rule isn't just about checking boxes. It's about embedding cybersecurity into the fabric of your IT operations. Whether you're overseeing a construction firm with multiple subcontractors or managing a long-term care facility with strict compliance needs, focusing on the following areas can help you meet the FTC's expectations:
- Regular and thorough risk assessments
- Encrypting sensitive data and enforcing MFA
- Reviewing vendor security practices and contracts
- Monitoring system activity and responding to threats
- Training staff on data privacy and security protocols
These practices not only support compliance but also create a stronger, more resilient business environment.
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