Red Flag Enforcement still on the FTC radar for car dealers

Federal officials don’t seem to be routinely monitoring whether dealerships are complying with the Red Flags Rule, which went into effect last year, compliance expert Gil Van Over told Automotive News.

“I haven’t seen any enforcement action being taken as a pre-emptive measure,” he said.

Even so, dealerships face dire consequences if identity theft is detected and the store didn’t comply with the rule, said Van Over, president of gvo3 & Associates in Crown Point, Ind.

The Red Flags Rule is aimed at preventing identity theft. Dealers must create and maintain a written plan for complying. The plan spells out how the dealership will detect “red flags” and who’s responsible for doing what. Examples of red flags include a photo ID that does not look like the customer, an address that doesn’t match the customer’s official records, or a customer who is in an unusual hurry and doesn’t take delivery in person.

Carole Reynolds, senior attorney for the Federal Trade Commission’s Division of Financial Practices, says the Red Flags Rule is still on the FTC’s radar. “It is something that can be and remains a focus,” she said last month during an Automotive News F&I Week Webinar.

Attorney Michael Benoit of the Hudson Cook law firm, who also spoke during the Webinar, noted that several states have identity-theft laws, too: “What I have seen are attorney generals launching investigations against creditors where there has been an identity theft, and where it appears that lax procedures or ineffective compliance played a part in letting that happen.”


You can reach Jim Henry at

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