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Four Keys to Developing a Red Flag Policy Program That Works

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In an effort to decrease car buyer identity theft, the FTC implemented the “Red Flag Rules” in 2010 for all dealerships that offer credit. A red flag is a pattern, practice or specific activity that indicates the possibility of identity theft. The Red Flags Policy Program ensures that dealerships use reasonable policies and procedures to detect, prevent and mitigate the risk of identity theft. Here are four keys to developing a Red Flag Policy Program that works for your dealership:

Complying with Existing Regulations

When preparing to implement the FTC's Red Flag Rules, it's crucial to ensure that your dealership is already providing the required privacy notice to customers and that you already have information safeguards in place. Protecting your customer's personal information is your first priority.

Training Employees to Maintain a Red Flag Policy Program

After appointing one person to coordinate the process of designing, implementing, maintaining and developing a written program, it is essential to educate employees regarding how to detect and respond to red flag indicators. In addition, explain how they should respond once an identity theft has indeed occurred.

Updating a Red Flag Policy Program

Your dealership's red flag program must include a regularly scheduled review and update each quarter and the results must be reported to the owners. The program must also be flexible enough to be updated when owners need to incorporate new indicators of identity theft or to respond to problems highlighted by the program's implementation.

Overseeing a Red Flag Policy Program

The Red Flag rules specifically require that the development, implementation and oversight of the program be overseen by the owners of the dealership. The easiest way to begin implementing the mandatory compliance training at your dealership and to maintain a program that stays FTC compliant, is by finding regulatory compliance software that does the work for you.

Compli, a leading provider of human resources and compliance management solutions, offers training courses and electronic documents that enable managers at all levels to view real-time reporting on employee completed policies, forms and trainings and compliance levels by department.

The Compli Red Flags Rule Compliance Toolkit was developed in consultation with Hudson Cook, LLP, a leading provider of legal services to the consumer finance industry. The Compli Toolkit provides businesses with tools to draft, implement, train, monitor and report on their unique Red Flags program.


Heather Preston For additional information about how Compli can help you implement and maintain Red Flag Policy at your dealership, contact a representative at 1.866.294.5545 or visit Compli online at

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