In today’s automotive retail landscape, virtually all new car sales include some form of financing. In many cases, the auto dealership will be the lender, and many dealerships find that the lending side of the automotive business is profitable and successful. However, acting as a lender exposes auto dealerships to many important laws and regulations that dealerships must comply with. 

One of these important regulations is the Disposal Rule. This is a federal regulation, part of FACTA, which requires all businesses that use consumer reports to dispose of them properly and protect against “unauthorized access to or use of the information.” 

This means that when your dealership pulls a customer’s credit report as part of a standard sale, you must later safely dispose of these credit documents. It’s not acceptable to leave them just “lying around” as many dealers might do, or even to have them loosely stored in a filing cabinet or tossed in the recycling. Your dealership must treat these consumer reports as confidential information, and dispose of them securely. 

Fortunately, the government does allow some flexibility on how this disposal must occur. Your dealership has some leeway to determine reasonable disposal methods based on the nature of the consumer information and the cost and complexity of disposal methods. However, some basic standards to meet for proper disposal can include:

It’s also worth noting that most dealers must comply with both the disposal rule and the GLB Safeguards rule, which requires dealers to create a written information security plan. In many cases, the correct compliance procedure is to incorporate your Disposal Rule procedures into the GLB security plan.

If you’re an auto dealership that provides loans or any other kind of financial services to your customers, or if you interact with consumer reports for any other reason, it is likely that you’ll need to comply with the Disposal Rule. Failure to comply could lead to fines and hefty penalties, as well as loss of customer trust.


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