Dealerspan News
September Auto Success Magazine Article
Sep 08, 2008Red Flags Rule and my Dealership
The Federal Government on October 31st of 2007 announced a Rule that specifically deals with the prevention of identity theft. Identity theft is the fastest growing crime in America and it will touch 1 out of 8 persons in 2009. The Red Flag Rule went into effect on January 1st of this year and has a mandatory compliance date of November 1st, 2008. Time is of the essence to fully meet this regulation. You are probably asking, “What does this mean for my dealership?” Auto dealers who engage in financing activities are required to establish an Identity Theft Prevention Program that is designed to detect, prevent, and mitigate identity theft.
Your program must consist of 6 components:
- Identify relevant “red flags” (patterns, practices, or activities that indicate the possibility of identity theft) relevant to the credit origination process;
- Detect and evaluate these “red flags” in connection with individual customer transactions;
- Respond to the red flags you detect in an appropriate way to prevent identity theft; and
- Ensure your program is updated periodically to reflect changes in risk to customers from your experiences and new identity theft activity.
- Policy generation and reporting capabilities with annual audits.
- Employee training for those involved in the origination of new accounts.
Identity theft continues to be a major threat to and a significant concern for American consumers. Identity theft costs time and money for financial institutions and/or Auto Dealers which can create significant risks to safety and soundness. Even worse, such fraud wreaks havoc on its victims by destroying credit histories, violating financial privacy, and ruining good names. Dealerspan believes that any financial institution or auto dealer should be vigilant and proactive in helping to protect their customers from this serious financial crime. We are here to support your business with our expertise in the areas of the Red Flag Regulations.
This new rule is involved and complicated but completely manageable with the right personnel and the right technology to assist in becoming compliant.
“So, do yourself a favor – carefully vet new technologies with your compliance counsel. While certain parts of the Rule lend themselves to technological solutions, other parts may require some good old fashioned subjective thinking. Be sure you know which parts are which, and you’ll keep the regulatory wildfires to a minimum.” -(Michael Benoit Hudson Cook LLP)
Jason Blair
President/ Partner
Dealerspan LLC
www.dealerspan.com
