|Congress is taking a tougher stand against identity theft by requiring auto dealers to develop and implement a written identity theft prevention program. While most auto dealers already have systems in place to verify the identity of their finance and lease customers, their current systems may not be in compliance with the new, more elaborate requirements called the “Red Flags” Rule.|
The Federal Trade Commission (FTC), the federal bank regulatory agencies and the National Credit Union Administration have issued the Red Flags Rule, requiring auto dealers to create a written identity theft prevention program that allows them to verify, with reasonable certainty, the identity of the individuals entering into a credit or lease transaction. The program should identify, detect and respond to warning signs – known as “red flags” – that indicate if a customer or potential customer could be using stolen information to obtain an indirect or direct loan or lease at their dealership. The program must be in place by Nov. 1, 2008.
1. Put the program in writing.
2. Make a list of things (red flags) that could signal possible identity theft.
*Not all 26 possible red flags will be relevant to the way dealerships do business. In particular, unless a dealership has accounts to which customers can make charges after origination (e.g., house credit accounts), the possible red flags in category 4 are not likely to apply in most cases.
Auto dealers also need to guard against identity theft risks that result from employee access to account information. Employee access should already be limited as part of the dealership’s information security program.
3. Make a list of methods for detection and evaluation if a red flag has occurred.
4. Describe how the dealership will respond when red flags are detected.
This should include a procedure for escalating unresolved situations to senior management.
5. Document all red flag responses and keep them in the customer file.
6. Detail a plan to update the program periodically.
7. Follow the Red Flags Rule guidelines in managing the dealership’s program.
Penalties for Violations
Zurich is committed to helping dealers comply with the federal Red Flag Rules. , contact Zurich at [email protected].
The information in this article was compiled from sources believed to be reliable for informational purposes only. All sample policies and procedures should serve as a guideline, which you can use to create your own policies and procedures. You should consult with your attorney when developing programs, policies and procedures. Zurich does not guarantee the accuracy of this information or any results and further assume no liability for sample policies and procedures, including any information, methods or safety suggestions contained herein. The subject matter of this article is not tied to any specific insurance product nor will adopting these policies and procedures ensure coverage under any insurance policy.
Portions of this overview were taken from and used with the permission of Counselor Library, LLC, publisher of A Dealer’s Guide to the Red Flags Rule by Michael A. Benoit, Hudson Cook, LLP.
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