New CFPB Data Security Guidance For Financial Companies

The Consumer Financial Protection Bureau (CFPB) is increasing its focus on the potential misuse and abuse of personal financial data. Violations of federal consumer financial protection law can occur when a financial company fails to safeguard consumer data. Companies that cut corners on data security provide insufficient data protections and put their customers at risk of identity theft, fraud, and abuse.

What is considered insufficient data protection?

The term “insufficient data protection” is a bit subjective. If your company is hit with a cyber attack, it can be inferred that there was insufficient data protection in place. Other forms of insufficient data protection practices are:

  • Single-factor authentication
  • Inadequate password management/unauthorized use of passwords
  • Lack of timely software updates

Single-factor authentication

Single-factor authentication is a typical one-step login. Single-factor authentication is insufficient because it doesn’t provide backup protection for your account in case hackers gain access to your username and password. To have adequate data protection, install multi-factor authentication across your accounts and devices.

Inadequate password management/unauthorized use of passwords

When you use weak passwords, it’s more likely for them to be guessed or hacked by an unauthorized individual. Weak passwords include common words and phrases, are easy to guess or brute force, or are simple variations of other existing passwords. Inadequate password management means passwords are stored in a method that poses a cyber risk. Keeping your passwords on a word document or a text file is not ideal, instead consider a password manager like LastPass.

Lack of timely software updates

An updated operating system is crucial for your devices. As new updates are rolled out, these updates patch up any known security holes. Without the software updates regularly occurring, your devices are much more susceptible to a cyber attack.

Cyber insurance and data protection

As a business owner, it’s your responsibility to ensure that your company has adequate data protection in place. You need to take steps to protect your customers’ personal information and ensure that your own business is protected from cyber threats.

A cyber insurance policy will help make sure your business has sufficient data protection in place. Your cyber insurance company keeps up to date with new laws regarding cyber security and can also alert you to new threats that aren’t widely known yet. Cyber insurance policies can be tailored to suit your needs, which means you can choose whether or not to cover certain areas. You may want to consider a policy that covers lost profits, data breaches, and regulatory fines.

While many companies do their best to protect personal data, there is always room for improvement. Even though it is legal with good intentions, many times businesses make mistakes regarding their customers’ personal information, and this is why cyber insurance remains an important resource in the digital age.

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