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How PALIDIN Works to Help Compliance with the FTC Safeguards Rule

Sean Trundy

As the name suggests, the purpose of the Federal Trade Commission’s Standards for Safeguarding Customer Information – the Safeguards Rule, for short – is to ensure that entities covered by the Rule maintain safeguards to protect the security of customer information. The Safeguards Rule took effect in 2003, but after public comment, the FTC amended it in 2021 to make sure the Rule keeps pace with current technology. While preserving the flexibility of the original Safeguards Rule, the revised Rule provides more concrete guidance for businesses. It reflects core data security principles that all covered companies need to implement.

Who’s covered by the Safeguard Rule?

The Safeguards Rule applies to financial institutions. An entity is a “financial institution” if it’s engaged in an activity that is “financial in nature” or is “incidental to such financial activities.

How do you know if your business is a financial institution subject to the Safeguards Rule? To help you determine if your company is covered the FTC provides 13 examples of the kinds of entities that are financial institutions under the Rule, including:

  1. Mortgage lenders,
  2. Payday lenders,
  3. Finance companies,
  4. Mortgage brokers,
  5. Account servicers,
  6. Check cashers,
  7. Wire transferors,
  8. Collection agencies,
  9. Credit counselors and other financial advisors
  10. Tax preparation firms,
  11. Non-federally insured credit unions, and
  12. Investment advisors that aren’t required to register with the SEC.
  13. The 2021 amendments to the Safeguards Rule add a new example of a financial institution – finders. Those are companies that bring together buyers and sellers and then the parties themselves negotiate and consummate the transaction.

What does the Safeguards Rule require companies to do?

The Safeguards Rule requires covered financial institutions to develop, implement, and maintain an information security program with administrative, technical, and physical safeguards designed to protect customer information. The Rule defines customer information to mean “any record containing nonpublic personal information about a customer of a financial institution, whether in paper, electronic, or other form, that is handled or maintained by or on behalf of you or your affiliates

Your information security program must be written and it must be appropriate to the size and complexity of your business, the nature and scope of your activities, and the sensitivity of the information at issue. The objectives of your company’s program are:

  • to ensure the security and confidentiality of customer information;
  • to protect against anticipated threats or hazards to the security or integrity of that information; and
  • to protect against unauthorized access to that information that could result in substantial harm or inconvenience to any customer.

Here's how PALIDIN can assist organizations in complying with the FTC Safeguards Rule

PALIDIN can help auto dealerships comply with the FTC Safeguards Rule by providing a robust identity authentication solution that helps prevent identity theft and fraud in the dealership's operations. The FTC Safeguards Rule requires financial institutions, including auto dealerships that offer financing or leasing options, to develop, implement, and maintain a comprehensive information security program to protect customer information.

  1. Identity Verification: PALIDIN utilizes advanced automated forensic techniques to authenticate the identity documents presented by customers. By verifying the authenticity of ID documents, PALIDIN helps ensure that the dealership is dealing with legitimate customers and not fraudsters using stolen identities.
  2. Fraud Prevention: PALIDIN acts as a deterrent to potential fraudsters by flagging any suspicious or forged documents, prompting further verification steps. This proactive approach helps prevent fraudulent transactions and protects the dealership from financial losses and reputational damage.
  3. Compliance Monitoring: PALIDIN's solutions can assist auto dealerships in monitoring and documenting their compliance efforts related to identity verification and fraud prevention. By maintaining a record of all identity verification processes, the dealership can demonstrate its commitment to safeguarding customer information as required by the FTC Safeguards Rule.
  4. Secure Data Storage: PALIDIN Enterprise offers secure cloud-based storage for fraud-related data, ensuring that sensitive customer information is protected according to industry standards. This feature helps auto dealerships maintain the confidentiality and integrity of customer data, a key requirement of the FTC Safeguards Rule.

In summary, PALIDIN's identity authentication solutions can play a vital role in helping auto dealerships comply with the FTC Safeguards Rule by enhancing customer identity verification processes, preventing fraud, and maintaining secure data practices. By leveraging PALIDIN's capabilities, auto dealerships can strengthen their information security programs and protect both their customers and their business operations.

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