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Red Flags Rule: The Cost of Noncompliance

Posted by Vanguard Dealer Services on Apr 20, 2017 10:45:00 AM

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Everyone in the auto industry knows about the Red Flags Rule. It's a set of federal regulations that is meant to protect the consumer from identity theft. While keeping up with the ever-changing requirements is no small task, simply ignoring them can lead to hefty fines.

In an article titled The Rising Cost of Noncompliance, Ken Suprenant states that:

"the propagation of rules and escalation of enforcement should persuade more dealers to invest in basic compliance safeguards."

He then goes on to discuss some of the regulations that pertain to the automotive industry. He points out that some regulations may not actually mention the auto industry, but apply to them all the same. One example is the Fair Credit Reporting Act (FCRA) which is designed to protect consumer's credit information. 

Another example is the Adverse Action notice, which requires a dealership to provide a written notice to the consumer when credit is denied. As if that weren't enough, auto dealerships are also required to be in compliance with foreign regulations as monitored by the Office of Foreign Assets Control (OFAC). Penalties for noncompliance in this area are extensive and can include up to 30 years in jail, $10 million in company fines, and a $1 million per incident fine. 

Given the enormity of the costs, it makes sense that most dealerships aren't equipped with the knowledge and manpower to make sure they are in compliance. That's where Vanguard Dealer Services can help. We provide full-service F&I and guide your efforts to ensure that your dealership is in compliance with all regulations. Contact us today and let us help you on the road to compliance.

 

Topics: red flags rule

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