Red Flags Rule Compliance for Car Dealers

The Red Flags Rule is an important regulation impacting auto dealers. The Red Flags Rule was created by the FTC and other federal agencies to help prevent identity theft. Almost all auto dealers will be impacted by the Red Flags Rule. If you lend to customers, check customer credit history, or extend credit in any way, you must comply with the Red Flags Rule.

In simple terms, the Red Flags Rule requires that you develop a program to identify the signs of identity theft and take appropriate action when potential identity theft is detected.

What counts as a “Red Flag” of identity theft? The regulation is not completely specific, as it is meant to be a general law that requires dealers themselves to designate specific signs of identity theft. Your dealership must keep updated with changing technology and criminal techniques for identity theft. That said, some common signs to look for include:

  • Suspicious or inconsistent identification documents
  • A fraud alert within a customer’s credit history
  • Account activity way outside of normal history, such as sudden increases in credit usage
  • Mail or email that is undeliverable, customers not responding to communications
  • And more...

Red Flags Rule compliance extends to both new customers and existing customers. For existing customers, you must pay special attention to issues common to identity theft such as change of address requests and similar.

Your car dealership must have an active Identity Theft Protection Program to comply with the Red Flags Rule. This program must be approved by a senior manager, and a senior manager should oversee, develop, implement, and administer the program. The Identity Theft Protection Program (ITTP) for your auto dealership must also be regularly updated to keep pace with changes in technology and other factors.

About DCS

Dealer Compliance Services will create a compliance plan that works with your daily operations in each department.

Your dealership’s custom solution will include ongoing Auditing, Testing, Training, and Documentation.

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