Why Red Flags Rules Matter To You

iStock_000002123532XSmallSoon, you’ll be in the market for another vehicle. Whether it’s a practical vehicle for the family’s summer vacation, sending the kids off to college with reliable wheels, or that little red Porsche you’ve eyed for years, we’re all “in the market” now and then.

As a result of financing or leasing a vehicle, your non-public personal information is put “out there” making the risk of identity theft a very real concern. The privacy risks and realities of financial transactions are real and cost consumers and business billions of lost dollars each year.

In 2007, Congress and federal banking regulators created the Red Flags Rule. Again in 2010, they enacted new legislation narrowing the definition of “a creditor”,  and recently updated a list of over 30 recommended practices (Red Flags) to safeguard consumer information.

Auto dealerships are among those financial institutions that are required by the Federal Trade Commission to protect your private information by implementing the Red Flags rules. What are they looking out for?

1. Each dealership must identify and establish reasonable ways to IDENTIFY warning signs or Red Flags during the normal course of business transactions.

2. Second, each dealership must create a way to DETECT the possible Red Flags of identity theft, which present themselves during the course of business.

3. Third, each dealership must create an ACTION plan to follow in the event a red flag presents itself.

4. Finally, because of the persistent nature of financial crime, they must RE-EVALUATE their plan to reflect new and evolving areas of risk.

Financial institutions who meet the definition of a “creditor” must  also:

  • Designate a compliance coordinator
  • Perform a Red Flags  risk assessment
  • Develop a written ID Theft protection plan
  • Develop an employee training plan
  • Perform periodic audits
  • Report annually to and gain approval from top executives

Identity theft is STILL the fastest growing and most under prosecuted crime in America. Fixing the damage done to your credit profile often takes hundreds of hours of grueling and meticulous research, follow-up and written documentation. Since 1 in 10 Americans has already been a victim of identity theft, the problem has already touched you or someone you know.

Remain alert during your next vehicle purchase, then buckle up and enjoy the ride!

Dale Penn is a professional speaker, trainer and  privacy / identity expert. He is the author of the award-winning book, Identity Theft Secrets: Exposing The Tricks Of The Trade. Follow him on Twitter @DalePenn

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