Your dealership is likely already aware of the major changes to the Federal Trade Commission’s (FTC) Safeguards Rule that will come into effect by December 2022. If so, you also probably know that meeting the compliance requirements will take a lot of company resources – mostly scarce ones like time and money. If you’re reading this right now, you might even be questioning whether complying is worth the investment.
The short answer is – it is. Because while complying with the amended rules might seem like a major headache, the consequences of non-compliance can be much worse.
Intelligent Technical Solutions (ITS) is a managed security service provider with over a decade of experience serving businesses in the financial and auto industries. We have helped dozens of businesses from both sectors meet their compliance requirements.
In this article, we’ll dive into what your dealership could face if you fail to comply with the amended Safeguards Rule.
5 Consequences of Non-Compliance with the FTC Safeguards Rule
The consequences you could face by non-compliance to the amended rule are worse than a slap on the wrist. It can cause significant damage to your company and goes beyond fines and penalties. Take a look below at some of the major blows your dealership might face if you fail to comply:
1. Expensive Fines
The new rule authorizes the FTC to impose fines on dealerships that don’t comply. The maximum fine you can incur is $11,000 per day per occurrence of a breach. Of course, the FTC will not impose fines for the first offense. However, they can enforce other financial penalties. The agency can seek damages for consent violations which could total over $43,000 per day for each violation. That’s a hefty sum for any business to shoulder.
2. Extensive Penalties
The list of penalties that you could incur with non-compliance is long and heavy. And, based on other non-compliance cases handled by the FTC, they will not shy away from enforcing those penalties to the full extent of the law. You could face long-term consent decrees or extensive injunctive relief, which could significantly hamper your business operations. These penalties can force you to cease certain activities in relation to your violation.
3. Litigation Risks
As we mentioned above, the consequences of non-compliance go beyond fines and penalties. It could open your dealership up to potential liability for deceptive practices. That means you could be sued in case of a security breach if you are found to be non-compliant with the Safeguards Rule. In addition, there are cases wherein you will also have to notify victims after a breach. That greatly increases the risk of litigation.
4. Reputational Damage
Damage to your dealership’s reputation is one of the most obvious and unfortunate after-effects of a security breach. Not only will it impact your customers’ trust, but it can also worsen your relationships with suppliers and other affiliates. That could hamper your ability to transact as you could run the risk of banks not buying your paper. In fact, many banks are already sending addendums to this effect to many dealership groups.
5. Data Loss
There’s a reason the FTC updated the Safeguards Rule, and it’s not to make it harder for business owners like you. The rule was amended to help you protect your business and customers from data breaches. Your data is valuable, and cybercriminals know by how much, so they will stop at nothing to get their hands on it. They’re hard at work trying to get your information; if they succeed, it could cost you millions of dollars.
In fact, the US holds the title for the highest cost of a data breach for the 12th year in a row in 2022. The study found that the average data breach in the country costs $9.44 million, over $5 million more than the global average. The more stringent FTC Safeguards Rule could help get that number under control.
How to Avoid the Consequences of Non-Compliance
The number of requirements you need to implement for compliance can all be a little overwhelming. Thankfully, you don’t have to go through it alone. Seek help from the experts. A reliable IT support company can help break it down for you, tell you exactly where your company stands, and discuss how you can get your dealership compliant.
They can also help you develop a roadmap to navigate the obstacles and move forward with your compliance plan more smoothly.
Ready to Comply with the FTC Safeguards Rule?
Safeguards Rule compliance can seem like an uphill battle, but it serves your interests, too. Not only does it help you uphold the trust of your customers and suppliers, but it can also serve as a roadmap to protecting one of your most valuable assets: your data. On the other hand, non-compliance might seem easier in the short term, but it could bring serious consequences for your company down the line.
Failure to comply could bring a series of major blows to your dealership, such as:
- Expensive fines and other financial sanctions
- Extensive penalties like long-term injunctions that could impede your operations
- Increased risk of costly litigation
- Reputational damage that could hamper your transactions
- Data loss costing millions of dollars
ITS is dedicated to helping businesses in the financial and auto industries meet their compliance goals. Learn about how you can leverage managed IT services so you can meet those regulatory requirements. Check out our article: Can an MSP Help You with Regulatory Compliance?
