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Red Flags compliance: 4th launch date a charm?

November 15, 2010

After more false starts than a Brett Favre retirement, the Red Flags Rule to combat identity theft is scheduled to take effect Nov. 1.

All motor vehicle retailers, who originate loans or leases must have in place a formal program to prevent crimes in which someone obtains credit or access to a customer’s account using the indentifying information, such as Social Security and Drivers License numbers.

The Federal Trade Commission rules setting forth this new requirement are referred to as the Red Flags Rule. The term "Red Flags" means a pattern, practice or specific activity that could indicate identity theft.

Those who have not done so in advance of the previous deadlines now must adopt a formal identity theft prevention program to guard against Red Flags and take appropriate action when they detect a Red Flag, including investigating further into the identity of the customer seeking credit, and reporting any incidents if ID theft or attempted ID theft is confirmed.

Documentation is critical

Like the Safeguards Rule, the Red Flags Rule requires a dealership to follow a series of enumerated steps and, within each step, take certain specified actions. Just as important, or even more important, than going through the steps and taking the actions, is the DOCUMENTATION of each step and each action taken, from the initial evaluation, to the consideration of sources of information, to the adoption of a formal ID theft prevention plan, to employee training, every step must be documented.

More on the matter is at, or send questions to