Risks Auto Dealers Need to Know Regarding FTC Safeguards Rule

Auto dealerships are probably already aware of the significant changes to the Federal Trade Commission’s (FTC) Safeguards Rule that will go into full effect come June 2023. Dealers recognize that following regulations will take a significant amount of companies’ resources, most notably time and money. Auto dealerships are wondering if complying with the FTC Safeguards Rule is worth the investment. Even though complying with the amended rFTC Safeguards rules may appear to be a significant hassle, the repercussions of non-compliance can be far more severe. We’ll examine what auto dealerships can face if they fail to comply with the amended FTC Safeguards Rule.

Non-Compliance with the FTC Safeguards Rule Can Lead to 5 Consequences

The consequences auto dealerships can face by non-compliance to the amended FTC Safeguards rules are more severe than a slap on the wrist. It can do considerable harm to their businesses that extend beyond fines and penalties. Consider the following key consequences if auto dealerships fail to comply:

1. Expensive Fines – The new rule allows the FTC to punish dealerships that don’t comply. The maximum fine is $11,000 per day for each time a breach occurs. No fines will be imposed for the first offense, but the FTC can enforce other financial penalties. The FTC has the authority to seek damages for consent violations that can be over $43,000 per day for each violation. That’s a lot of money for companies to bear.
2. Extensive Penalties – The list of penalties that auto dealerships can face if they don’t comply is long and heavy. Additionally, based on previous non-compliance instances handled by the FTC, they won’t hesitate to enforce the penalties to the full extent of the law. Auto dealerships can face long-term consent decrees or massive injunction relief, which can severely impede their business operations. The penalties can force companies to stop engaging in certain activities related to their violation.
3. Litigation Risks – As previously stated, the repercussions of non-compliance extend beyond fines and penalties. Auto dealerships are exposed to potential liability for deceptive tactics. This means that auto dealerships can be sued if they’re in violation of the FTC Safeguards Rule in the event of a security breach. Additionally, they will be required to notify victims following a breach which greatly increases the risk of litigation.
4. Reputational Damage – One of the most obvious and sad consequences of a security breach is the reputational damage to auto dealerships. It will not only impact their clients’ trust, but it will harm their relationships with suppliers and other affiliates. It can limit their ability to transact because banks may refuse to buy their papers. Numerous banks have already sent addendums to numerous dealership groups to that effect.
5. Data Loss – The FTC amended the Safeguards Rule for a reason, and it’s not to make things more difficult for business owners. The FTC Safeguards rule was changed to assist auto dealerships in protecting their companies and clients from data breaches. Their data is valuable, and cybercriminals are aware of how much and will go to great lengths to acquire it. Cybercriminals are working hard to obtain their information and can cost companies millions of dollars if they’re successful.

The United States had the highest cost of a data breach in 2022 and the average cost of a data breach was $9.44 million, which is more than $5 million higher than the global average. The more severe FTC Safeguards Rule can aid in bringing that figure under control.

Avoiding the Consequences of Non-Compliance

The requirements auto dealerships need to implement for compliance can be overwhelming. Companies should seek advice from experts. Reputable IT support companies can assist in breaking it down, determining where companies stand, and discussing how to get their dealerships compliant. Additionally, IT support companies can assist in developing roadmaps to help auto dealerships manage the roadblocks and move forward with their compliance plan more smoothly.

The FTC Safeguards Rule compliance can appear to be a difficult task, but it can serve companies’ interests. It not only assists auto dealerships in maintaining the clients’ trust and suppliers, but it can also serve as a roadmap for protecting one of their most valuable assets: their data. Non-compliance may appear easier in the short term, however, it can have major consequences for their companies down the line. SpearTip will ensure you exceed the basic compliance standards. SpearTip is committed to assisting companies in the financial and automotive industries in meeting their compliance goals. Our advisory, implementation, training, and service-based risk assessments are tailored to meet your business needs. They extend beyond standard audit or compliance checks as we work to ensure your organization and your clients are optimally protected against all manner of cyber threats. Our single-pane-of-glass cybersecurity platform is designed for continuous threat monitoring that combines automation via our vast threat intelligence and our experienced team of experts. SpearTip operates a 24/7/365 SOC staffed with certified engineers and security analysts. Our team engages in active monitoring, rapid response, and real-time threat remediation. Our ShadowSpear Platform is a fully managed, integrable cybersecurity solution powered by our 24×7 SOC. ShadowSpear includes SIEM, MDR, email security, next-gen AV, and much more.

If your company is experiencing a breach, call our Security Operations Centers at 833.997.7327 to speak directly with an engineer.