Tag Archive | "Red Flags Rule"

NADA University Announces Legal, Regulatory Webinars


McLEAN – NADA University announced it is now offering all of its legal and regulatory webinars – live and on-demand – at no cost to NADA and American Truck Dealer (ATD) members and their staffs.

Dealer members may extend this benefit to their contracted financial and legal professionals by adding those professionals as licensed users within their NADA University account.

“Dealers face an enormous challenge in staying updated and compliant on complex legal and regulatory requirements, so NADA U has responded by expanding access to critical information that will make that job a lot easier,” said Michelle Primm, managing partner of Cascade Auto Group and chair of NADA’s Dealership Operations Committee.

NADA U’s legal and regulatory webinars focus on a variety of topics, including the following:

  • Credit score disclosure requirements
  • The Family and Medical Leave Act
  • The Federal Trade Commission’s (FTC) new model privacy notice
  • FTC Red Flags Rule
  • The new Small Business Administration dealer floorplan loan program
  • Organized labor issues and response
  • Wage and hour compliance
  • Risk-based pricing rule
  • UNICAP safe harbor methods
  • Comprehensive Safety Analysis program

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DealerTrack Backs Its Industry-Leading Compliance Solution With $25,000 Red Flags Guarantee


LAKE SUCCESS – DealerTrack is offering a $25,000 Red Flags Guarantee to current and new subscribers of its Compliance Solution, a suite of compliance tools available in the automotive retail industry.

The new Red Flags Guarantee from DealerTrack will cover associated government-issued fines up to $25,000, should a dealership be cited for non-compliance with the Red Flags Rule while using the DealerTrack Compliance Solution.

“With auto identity theft on the rise, a new era of regulatory requirements has emerged, and DealerTrack has dealers covered when it comes to compliance,” said Robert Granados, vice president and general manager, Finance Solutions, DealerTrack.

“Backed by our extensive experience navigating the compliance and regulatory landscape and years of safeguarding dealers from identity theft, we can confidently offer this guarantee. No other company delivers the breadth of compliance safeguards coupled with such a guarantee.”

The DealerTrack Compliance Solution helps protect a dealership throughout the sales and F&I process, including credit reports and Red Flags, credit application submissions, menu presentations, and document storage and retrieval.

The solution allows dealers to work all deals on one fully integrated and secure platform to streamline the process and protect their dealership and its customers.

The Red Flags Rule, which is enforced by the Federal Trade Commission (FTC), requires businesses and organizations to adopt and implement an Identity Theft Prevention Program. The program should be designed to detect, prevent and mitigate identity theft when establishing or maintaining consumer credit and certain business accounts.

The potential liability dealers could face from not complying with the rule includes, but is not limited to, $3,500 per violation under the Fair and Accurate Credit Transactions Act of 2003, up to $16,000 in penalties under the FTC Act, and potential lawsuits from the FTC and State Attorney Generals.

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Veratad Technologies Partners With VisionMenu On Compliance Solutions


TEANECK – Veratad Technologies LLC, a provider of identity verification and compliance solutions, announced that its Red Flags Rule and ID verification solutions will be offered to all VisionMenu Inc. dealerships nationwide.

VisionMenu, a provider of software selling solutions to automotive and powersports dealerships, selected Veratad to provide a seamless solution delivered directly to a dealer’s menu services. This online solution, which makes verifying an identity a simple matter of a few clicks, is designed to protect dealerships against losses due to fines for non-compliance, as well as fraud and identity theft.

“The Red Flags Rule requires dealers to detect, prevent and mitigate identity theft. Dealers using online ID verification are taking an important step in meeting their compliance requirements and assuring the person presenting a verifying document is in fact who they say they are,” said John Ahrens, managing director at Veratad. “In addition to avoidance of fines for non-compliance, use of online ID verification is a way for dealers to reduce their risk of fraud and mitigate the reputational risk associated with the theft of a consumer’s identity.”

Ron Martin, CEO of Vision Menu, said “We selected Veratad because of their industry leadership and experience. We are always looking for enhancements to our solutions that will offer value to our dealership customers, and while VisionMenu is known for helping dealers sell more units, increasing F&I product sales and profitability analytics, the addition of Veratad allows us to offer our dealerships a powerful tool that protects them from fraudulent transactions and potential fines for non-compliance.”

Veratad’s Red Flags Knowledge Based Identity Verification tool is now available in VisionMenu Pro. To learn more about VisionMenu or Veratad’s Red Flags Rule special offer, contact your VisionMenu Representative or call Veratad toll free at (888) 510-7343.

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Mitigate, Shmitigate


Attorneys are not like normal people. When normal people wake up in the middle of the night, they think about sex, money troubles or the burritos they ate before going to bed. But not attorneys. They think about the hidden meaning of 16 CFR 681, Appendix A, Part IV. At least this one does.

Let me explain. 16 CFR 681 is commonly known as the Red Flags Rule. It applies to most financial institutions and, because most car dealerships originate financing, it applies to most dealerships. Whether or not the FTC officially begins its oft-delayed enforcement of the Rule on Jan. 1, 2011, it has been in effect since Jan. 1, 2008.

The Rule itself contains 4,074 words; I boil the Rule’s requirements down to seven:

  1. Policy (an Identity Theft Prevention Program (“ITPP”), to be exact)
  2. Training (staff on how to effectively implement the ITPP
  3. Detect (attempts at identity theft)
  4. Prevent (instances of identity theft)
  5. Mitigate (the effects of identity theft)
  6. Oversee (service provider agreements)
  7. Ensure (that the ITPP continues to work over time)

Yeah, I know – George Carlin’s seven words were far more interesting. But these words carry legal requirements, so they deserve special attention. Today, my attention is drawn to “Mitigate.”

The Red Flags Rule clearly requires dealerships to have a policy in place that mitigates identity theft in connection with their “covered accounts.” In a dealership, “covered accounts” would mean installment sale contracts and leases. But what does “mitigate” mean?

Of all 4,074 words of the Rule, not one – not one! – is spent defining one of its seven basic requirements. Except, maybe, Appendix A, Part IV. That section is titled “Preventing and Mitigating Identity Theft.” The problem is, you can’t tell if the text that follows is addressing prevention or mitigation. And more to the point, if the dealership faithfully followed all of the suggestions in Appendix A, Part IV, no rational person would believe an identity theft event would have been effectively mitigated.

Appendix A, Part IV lists eight possible actions to prevent and mitigate identity theft (nine if you count the last one – “Do nothing”). Of the eight, only four could apply to an installment sale contract or lease: (b) Contacting the customer; (f) Closing the account; (g) Not attempting to collect on a covered account or not selling a covered account to a debt collector; and (h) Notifying law enforcement.

So the problem is, even if a dealership performs those four tasks, is an identity theft event really mitigated?

Logically speaking, by the time a criminal enters a dealership and attempts to take delivery of a vehicle in a victim’s name, an identity theft has already occurred. What is left to occur is monetary damage flowing from that identity theft. If a thief accomplishes delivery of a vehicle by getting it funded in the victim’s name, mitigation is accomplished in a narrow sense by canceling the financing.

But in a broader sense, mitigation hasn’t really occurred: the victim’s identity is still circulating and capable of being misused again and again, and the dealer now owns the paper. Ouch!

For true mitigation to even begin, at a minimum, a fraud alert must be placed on the victim’s credit file – and the dealership is not required to take that step. Curious. Mitigation would also logically imply investigating what other damage has been done using the stolen identity, and then unwinding that damage to return the identity to its pre-event status.

While the Rule does not require it, granting either every victim or every customer access to identity theft recovery service would provide a more meaningful level of mitigation, and certainly a higher level of customer satisfaction. Before we discuss this service, a couple of definitions would be helpful.

Assisted Recovery is the process of a victim attempting to restore his own identity with the advice of a professional. This advice is usually provided through a “how to” manual and, in some cases, telephone consultations. But the actual tasks necessary to restore an identity are performed by the victim.

Blanket Coverage is where ID recovery services are provided to every member of a defined group, such as every customer of a dealership. Because it is essentially group coverage, blanket coverage is less expensive than individual coverage.

Fully-managed Recovery is the restoration of a victim’s identity to its pre-event status performed by professional identity recovery advocates rather than by the victim. It is accomplished by the victim filling out and providing to the recovery advocate a limited power of attorney, which authorizes the recovery advocate to act on the victim’s behalf. Although the victim must cooperate with the process for it to be successful, the heavy lifting is done by professionals, not the victim.

In the vernacular, assisted recovery isn’t worth a 480 BEACON score in a Lexus dealership. A victim doesn’t want to be told how to fix a problem – he wants the problem solved. And the best way to do that is through a fully managed recovery.

Fully managed recovery by a reputable provider is the gold standard. But if provided after the fact, it is quite expensive. Such ex post facto remediation’s generally start in the four-digit range and can go up quickly, depending on the complexity of the case. Blanket coverage – providing the coverage to all finance or lease customers (cash customers aren’t covered by the Rule, but it’s a nice touch) – is the most economical way of providing meaningful mitigation to a dealership’s customers.

Again, this level of mitigation goes beyond the bare requirements of the Rule, but it more clearly accomplishes the Rule’s intent.

Oh, yeah – what about the dealership that had to eat the $45,000 RISC on a vehicle it delivered to the identity thief? Who mitigates that? Answer: nobody. That’s where prevention really comes into play – a good topic for next time.

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MicroBilt Offers Compliance Solutions for Risk-Based Pricing, Red Flags Rules


KENNESAW — MicroBilt Corporation, a provider of risk management services, introduced two solutions to help dealers comply with the Risk-Based Pricing (RBP) Rule and Red Flags Rule (RFR), which became effective Jan. 1, 2011.

The RBP Rule is part of the Fair and Accurate Credit Transactions Act (FACTA). The rule requires companies that use a credit report or score in connection with a credit decision to provide a risk-based pricing notice to a consumer when the company grants credit on material terms that are not the most favorable terms offered to a substantial proportion of consumers, F&I and Showroom reported. Risk-based pricing is the practice of setting the interest rate or other terms of credit to a consumer based on the consumer’s credit report or score.

The RBP Rule provides companies with two compliance options: the RBP Notice or a Credit Score Disclosure Exception Notice. MicroBilt offers the Credit Score Disclosure Exception Notice as a standard service for all customer data contracts.

The RFR is also part of the FACTA. The RFR require credit providers to define their processes for detecting “red flags” in identity verification, such as discrepancies in address histories, fraud alerts on consumer reports, suspicious use of Social Security numbers, inactive accounts that suddenly become active, credit-freeze notifications, credit reports showing unusual patterns of activity, notices from victims of identity theft or law enforcement agencies and discrepancies between applications and third party information.

MicroBilt offers Red Shield, MicroBilt’s FACTA Red Flags solution, which is designed to eliminate some of the most difficult front-end steps in the Red Flag process. It analyzes the likelihood of identity fraud and provides a “Pass” or “Fail” grade. If a transaction passes, it is automatically guaranteed against fraud for up to $25,000. The consumer is also protected against identity-theft losses for another $25,000. If a “fail” response is returned, the client is given a range of manual options that can be used to reduce the risk of identity theft or fraud in the transaction.

MicroBilt offers a low cost, on-demand FACTA Red Flags Training course designed to meet the Red Flags training requirements and to make understanding the RFR fun, fast and easy. An online, real-time FACTA Red Flags hotline — that responds to Red Flag questions within 24 hours is available.

MicroBilt also offers an on-demand training of the Fair Credit Reporting Act which requires users of consumer reports to follow specific rules and guidelines when using private consumer data. FCRA compliance regulation responsibilities can be complex and any business that deals with consumer data must understand the basic concepts and provisions of the FCRA to ensure it adheres to the FCRA compliance regulations.

In addition, MicroBilt offers OFAC compliance by providing access to extensive anti-terrorist “watch list” searches as part of its standard credit and identity reporting. MicroBilt screens more than 60 critical “watch lists” including those maintained and mandated by the US Treasury Department’s Office of Foreign Assets Control (OFAC).

“For smaller businesses in particular, keeping up with federal regulations and their compliance with those regulations such as Risk-Based Pricing, Red Flags, FCRA, OFAC, etc. is a major challenge,” said Walt Wojciechowski, CEO of MicroBilt. “Along with the obvious business risks of non-compliance, the legal penalties associated with violations of these regulations can be devastating to the small business. With our simple compliance tools, we’re trying to help customers do more business with less risk and less confusion without having to become experts on federal regulations.”

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CoreLogic Credco Introduces Online Dashboard for Red Flags Compliance


POWAY, Calif. – CoreLogic Credco, a provider of automotive specialty credit reporting solutions and a division of CoreLogic has introduced Red Flag Viewpoint, an integrated online reporting dashboard that combines, summarizes and delivers easy-to-read reporting on Red Flags Rule compliance efforts for automotive dealers.

Developed in collaboration with Compli and part of Credco’s comprehensive Red Flag compliance suite, Red Flag Viewpoint is designed to help dealers meet the Red Flags Rule’s requirement of regularly monitoring and updating their Identity Theft Prevention Program.

The Red Flags Rule went into effect January 1, 2008, and is scheduled for mandatory enforcement by the Federal Trade Commission beginning January 1, 2011.

“Without sufficient data and the latest technological advances, deterring identity theft and maintaining compliance with the Red Flags Rule can be a complex, time-consuming task,” said Kevin Clements, senior vice president of corporate development for CoreLogic Credco. “Red Flag Viewpoint is specifically designed to simplify the monitoring and reporting requirement of the Rule, easily and effectively, allowing dealers to stay focused on sales objectives and other critical operations.”

Red Flag Viewpoint’s proprietary algorithms and reporting capabilities enable dealers to conveniently analyze their applicant portfolio on multiple levels to monitor for potential Red Flag risk. Available on Compli’s intuitive web-based platform, the easy-to-use interface lets users report directly off key identity verification alert statuses; access dynamic views of their entire applicant pool and associated risks; and export data for auditing and reporting.

Using Red Flag Viewpoint means dealers can easily monitor, analyze and report on a wide range of customer data provided exclusively by Credco. They can drill down on metrics and audit reports for detailed analytics, or view customer data as broadly as needed. Reporting analytics can also be viewed either on entire dealers groups or individual dealers. For more information, automotive dealers can call (866) 348-2404 or visit www.credcoservices.com/RFM.

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