Compliance Check List: Required Data Processing Terms for MSPs
Are your contracts leaving you exposed? As MSPs face increasing scrutiny over data handling practices, having specific and well-defined data processing terms has become non-negotiable.
Recent cases, like the Acronis litigation in California, highlight the risks of vague contracts. With state, federal, and international privacy laws evolving rapidly, compliance is growing more complex.
For MSPs, these terms not only define responsibilities for handling client data but also act as a legal safeguard against liability, even for issues outside their direct control.
Key Regulations Overview
An MSP must consider not one but several different regulations. Here are the most important ones.
General Data Protection Regulation (GDPR)
MSPs handling EU resident data must meet GDPR standards in their contracts. The agreements need to spell out how you process data, what security measures you use, and how you’ll handle breaches. You also need documented proof showing you follow these rules, including records of your regular compliance checks.
Health Insurance Portability and Accountability Act (HIPAA)
MSPs working with healthcare clients need Business Associate Agreements for HIPAA compliance. Your data processing terms for MSPs must detail how you’ll protect patient records and medical data. You also need specific steps for handling PHI and reporting any data breaches.
Gramm-Leach-Bliley Act (GLBA)
MSPs that handle data for financial institutions must meet GLBA standards. Your data processing terms should explain how you protect customer financial data and what steps you’ll take if there’s a security incident.
Cybersecurity Maturity Model Certification (CMMC)
The CMMC framework introduces tiered compliance requirements for Department of Defense contractors. Your data processing terms must reflect the appropriate CMMC level and include specific controls for handling Controlled Unclassified Information (CUI).
U.S. State Privacy Laws (CCPA/CPRA, etc.)
State privacy laws create a complex web of requirements. The California Consumer Privacy Act (CCPA) and its successor CPRA set stringent standards that often become de facto national requirements. Your terms must address:
- Consumer rights and data access requests
- Data collection and processing limitations
- Specific security measures
- Breach notification timelines
Proactive Approaches to Regulatory Compliance
Other than complying with regulations, here are some proactive measures that you can take to put yourself ahead of potential complications.
1. Periodic Contract Audits
Regular contract reviews are important. They ensure your data processing terms remain current with evolving regulations. That’s why you must establish a quarterly review cycle. So you can assess your agreements against new requirements and industry best practices. Don’t forget to document all reviews and updates. It shows your ongoing compliance efforts.
2. Collaborating with Legal Experts
Privacy regulations constantly evolve. That’s why having a legal expert ensures that your agreements remain compliant and up-to-date.
That’s how you can identify potential gaps in your data processing terms and create strategies to address them effectively.
Common Mistakes MSPs Make in Compliance
Here are some common mistakes you should be aware of in terms of regulatory compliances.
Overlooking State-Specific Regulations
Many MSPs focus solely on federal regulations. And in the process, they miss crucial state requirements. Your data processing agreement checklist must account for the specific states where your clients operate and process data.
Generic Data Processing Addenda
One-size-fits-all templates often fail to address industry-specific requirements. To prevent such issues, customize your terms based on each client’s regulatory environment and business needs.
Failure to Define Responsibilities
Clear delineation of roles and responsibilities is essential. Your terms should explicitly state who is responsible for:
- Data security measures
- Breach notification procedures
- Compliance monitoring
- Incident response
Building a Culture of Compliance Within MSP Teams
You can solve the majority of your potential compliance issues by making these necessary changes in your company culture.
Employee Training Programs
Effective compliance starts with well-trained staff. Develop comprehensive training programs that cover relevant privacy laws, security requirements, and incident response procedures. Regular updates ensure your team stays current with evolving regulations.
Internal Accountability Measures
Implement systematic compliance assessments that evaluate your internal processes and documentation. Regular audits help identify gaps before they become problems and demonstrate your commitment to maintaining strong data protection practices.
Your data processing terms serve as both a legal shield and a framework for client relationships. Regular reviews and updates ensure they continue to protect your MSP as regulations evolve.
Compliance Checklist: Required Data Processing Terms
Want to ensure your MSP data processing terms meet all necessary requirements? Download our comprehensive checklist for a step-by-step guide to compliance.
What’s Inside the Checklist?
- Descriptions of Key Regulations
- An overview of GDPR, HIPAA, GLBA, CMMC, and U.S. state privacy laws
- Basic explanations of what each regulation requires
- Applicability Guidance
- Examples of businesses that fall under these regulations
- Common scenarios MSPs encounter with regulated clients
- Data Processing Terms
- The specific terms required in MSP contracts, such as BAAs and DPAs.
- Essential contract provisions for each regulation
Sample Checklist Sections
Here’s what your checklist must include.
1. General Data Protection Regulation (GDPR)
Description: GDPR governs how personal data of EU residents is collected, stored, and processed, regardless of where the business is located.
Examples of Covered Companies: MSPs working with EU clients, multinational corporations, or e-commerce platforms targeting EU residents.
Required Data Processing Terms:
- Include a Data Processing Addendum (DPA) in all contracts with customers whose data includes information about EU residents.
- The DPA must specify:
- Details on data collection, storage, and transfer practices.
- Rights of the data subject, including access and deletion requests.
- Obligations to report breaches within 72 hours.
Does this regulation apply to your MSP?
[ ] Yes [ ] No
2. Health Insurance Portability and Accountability Act (HIPAA)
Description: HIPAA governs the handling of protected health information (PHI) by covered entities (e.g., healthcare providers) and their business associates.
Examples of Covered Companies: MSPs managing IT systems for hospitals, clinics, or insurance companies.
Required Data Processing Terms:
- Sign a Business Associate Agreement (BAA) with all healthcare clients.
- The BAA must specify:
- That the MSP will safeguard PHI in compliance with HIPAA Security and Privacy Rules.
- That the MSP will report breaches to the covered entity.
- The permitted and prohibited uses of PHI.
Does this regulation apply to your MSP?
[ ] Yes [ ] No
3. Gramm-Leach-Bliley Act (GLBA)
Description: GLBA applies to financial institutions and companies handling sensitive financial data.
Examples of Covered Companies: MSPs providing IT services for banks, loan companies, or mortgage brokers.
Required Data Processing Terms:
- Include a Service Level Agreement (SLA) or addendum specifying:
- Safeguards for customer financial information.
- Responsibilities for identifying and addressing security risks.
Does this regulation apply to your MSP?
[ ] Yes [ ] No
4. Cybersecurity Maturity Model Certification (CMMC)
Description: CMMC applies to contractors working with the U.S. Department of Defense (DoD) and their subcontractors.
Examples of Covered Companies: MSPs supporting IT operations for DoD contractors or managing Controlled Unclassified Information (CUI).
Required Data Processing Terms:
- Include a CMMC Compliance Addendum in contracts, specifying:
- The required CMMC level for data handled by the MSP.
- Obligations to implement security controls for CUI.
- Provisions for periodic audits and assessments.
Does this regulation apply to your MSP?
[ ] Yes [ ] No
5. U.S. State Privacy Laws (e.g., CCPA)
Description: State privacy laws govern how personal data of residents is collected, stored, and shared. Key laws include:
- California (CCPA/CPRA)
- Virginia (VCDPA)
- Colorado (CPA)
- Utah (UCPA)
- Connecticut (CTDPA)
Examples of Covered Companies: MSPs offering IT services to businesses that collect personal data of state residents, such as retailers, SaaS providers, or advertising firms.
Required Data Processing Terms:
- Include a Data Processing Addendum (DPA) specifying:
- Consumer rights, such as opt-out mechanisms for data sales.
- Obligations for data deletion and access requests.
- Prohibitions on using data beyond the purposes specified in the agreement.
Does this regulation apply to your MSP?
[ ] Yes [ ] No
Next Steps
This MSP compliance checklist ensures your contracts meet the data processing requirements of key regulations. Download it today and ensure your MSP is protected.
