CFPB’s Focus on Data Security and Breaches: Essential Steps for the Mortgage C-Suite

In the modern financial landscape, data security is more critical than ever, especially for mortgage banking companies that handle sensitive customer information. The Consumer Financial Protection Bureau (“CFPB”)  seems to be amping up its focus on protecting consumer data, as seen by Director Rohit Chopra’s recent remarks at the Aspen Institute, signaling an era of ever-increasing scrutiny and stricter regulations.  C-suite executives must understand the significance of these changes and take proactive measures to safeguard data and prevent costly data breaches.

The Growing Threat of Data Breaches

Data breaches have become an escalating threat, exposing millions of consumers to identity theft, financial fraud, and other risks. The 2017 Equifax data breach, which compromised the personal data of nearly 150 million Americans, is a prime example of how allegedly poor data security can have devastating consequences.

For more than a year, Director Chopra has been emphasizing that the risks extend beyond financial loss and asserted that foreign actors, including nation-states, have orchestrated large-scale cyberattacks to collect sensitive information about U.S. citizens, potentially compromising national security.  In this evolving environment, the CFPB seems to be intensifying its efforts to hold companies accountable for data protection failures, making data security a top priority for financial services companies.

CFPB’s New Data Security Focus: What it Means for Mortgage Companies

Privacy laws like the Fair Credit Reporting Act (“FCRA”) and Gramm-Leach-Bliley Act (“GLBA”) impose stringent data protection requirements on financial institutions, especially those handling consumer credit information.  With the CFPB’s emphasis on holding so-called “data brokers” and others accountable, businesses can expect regulatory changes targeting the security of sensitive information.

For mortgage lenders and servicers, the CFPB’s heightened focus on data security means stricter regulations are on the horizon.  Failure to comply could result in steep penalties, and damage to a company’s financial standing and reputation.

Steps C-Suite Executives Must Take to Enhance Data Security

In light of the CFPB’s aggressive stance on data protection, C-suite executives should take steps immediately to strengthen their company’s security infrastructure.  Here are five such steps:

1. Conduct a Comprehensive Data Security Audit
Regularly review your company’s data security measures to identify vulnerabilities. Make sure your IT systems and security protocols comply with both existing and upcoming CFPB regulations.

2. Enhance Encryption and Data Access Controls
Encrypt all sensitive customer data and restrict access to authorized personnel. Implement multi-factor authentication (MFA) and role-based access controls to reduce the risk of internal breaches.

3. Ensure Vendor Compliance
Third-party vendors are a common weak link in data security. Conduct thorough due diligence on your vendors and partners to ensure they comply with CFPB regulations on data security. Establish strong contractual agreements outlining the data protection requirements.

4. Stay Informed About CFPB Rulemaking
The CFPB’s anticipated rulemaking on data brokers could significantly impact how mortgage companies handle consumer data. Stay updated on the latest developments and prepare to adjust your data security policies accordingly.

5. Implement a Strong Data Breach Response Plan
Even with the best security measures, data breaches can still happen. Develop a clear and actionable response plan that includes timely breach notification to affected consumers, regulators, and other stakeholders. The faster your company can respond to a breach, the less damage it will cause.

The Risks of Non-Compliance: What’s at Stake?

For mortgage banking companies, non-compliance with CFPB data security standards can lead to severe consequences, including:

·        Hefty financial penalties for violating privacy laws like GLBA.

·        Reputational damage that erodes consumer trust and confidence.

·        Lengthy investigations and enforcement actions that distract from core business.

Moreover, the potential for class-action lawsuits and increased scrutiny from federal regulators make it imperative for C-suite executives to prioritize data protection and ensure their organizations meet applicable regulatory standards.

Conclusion:  Preparing for a New Era of Data Security Compliance

As the CFPB sharpens its focus on data security and prepares new regulations to address data breaches, mortgage companies must take proactive steps to safeguard customer information.  By ensuring compliance with the FCRA, GLBA, and other relevant regulations, mortgage lenders and servicers can mitigate the risks of costly regulatory penalties associated with data breaches.

Data security is no longer just an operational concern—it’s a key business priority that requires the full attention of C-suite executives. In an era of heightened regulatory scrutiny, the companies that invest in robust data protection measures today will be better positioned to succeed tomorrow.

For more information, contact Troy Garris at troy@garrishorn.com.