Section 1: Recent Occupational Licensing Rule Changes and Reminders

What changes have occurred since you got your license, or last renewed it?
Below is a summary of significant changes, including issues the DMV is currently monitoring more closely to insure your compliance.
If you have not done so already, we strongly suggest subscribing to the DMV email alerts to stay on top of all industry updates.

Recent Occupational Licensing Changes – 2018 and newer:

• 2023 – 2024) DMV Online Occupational Licensing Portals

Historically, dealer license applications and renewals were mailed in to the DMV.
In 2023, the CA DMV launched their Occupational Licensing Portals – also known as ‘DMX’, ‘Online Access Modules’, or ‘Occupational Licensing Online’.
This online system is still in a state of development, and we continuously update our courses with the most recent information from the DMV.

You will create your OL Portal, and that is where you will submit your auto dealer license application and renewal. Some paperwork – such as your Pre Licensing certificate, and Surety Bond certificate – will still be provided to you as a hard copy. You will upload a photo of that hard copy to your portal, and keep the phyiscal certificate for your records.
The DMV has ‘how to’ videos on their Occupational Licensing portal login page, which we suggest watching before you create your OL portal.
If you need assistance with your portal, you can contact Occupational Licensing at (916) 229-3126.

• 4/2024) Electronic Business Records; OLIN 2024-05 Vehicle Dealer Record Storage

“A dealer may create an original electronic business record if the electronic record is:
Created in a non alterable format that allows the document to be readily accessible and retrievable.
Legible, complete, and accurate.
Retained in a manner that allows the business record to be retrieved and made available to the DMV for inspection in three business days.”

• 6/30/2023) Business Hours / By Appointment Only

Per this memo [https://www.dmv.ca.gov/portal/file/23olin08-pdf/] the DMV has now stated “Operating business “by appointment only” does not comply with the requirement of occupying an established place of business continuously or at regular periods. Regulation compliance requires an authorized person(s) to be available to the public at the dealer location during regular business hours.”
We are currently working with the DMV on behalf of dealers for clarification on this requirement.

• 5/11/2023) New 2023 FTC Privacy Disclosure Rules

As stated by the FTC, the 2023 Safeguards Rules apply to auto dealers who:
● Extend credit to someone (for example, through a retail installment contract) in connection with the purchase of a car for personal, family, or household use;
● Arrange for someone to finance or lease a car for personal, family, or household use; or
● Provide financial advice or counseling to individuals.
If you engage in these activities, any personal information that you collect to provide these services is covered by the Privacy Rule. Examples of personal information include someone’s name, address, phone number, or other information that could be used to identify them
individually. The Privacy Rule applies if you collect personal information about someone in connection with the potential financing or leasing of a car, even if that person does not fill out a formal application. The Privacy Rule does not apply to you if a person buys a
car with cash or arranges financing on their own through another lender. For more information on the application of the Safeguards to auto dealers, please see FAQ FTC’s Privacy Rule and Auto Dealers.

If you want additional information on the Gramm-Leach-Bliley Act/FTC Safeguards Rules, please use the following links:
https://www.ftc.gov/business-guidance/privacy-security/gramm-leach-bliley-act

“Compliance deadline for certain revised FTC Safeguards Rule provisions extended to June 2023”
https://www.ftc.gov/business-guidance/blog/2022/11/compliance-deadline-certain-revised-ftc-safeguards-rule-provisions-extended-june-2023

“FTC Safeguards Rule: What Your Business Needs to Know”
https://www.ftc.gov/business-guidance/resources/ftc-safeguards-rule-what-your-business-needs-know

• 2/22/2023) New Sales and Use Tax Rates Effective April 1, 2023

CDTFA special notice: “To find the specific tax rate for your area or business location on our website, go to Find a Sales and Use Tax Rate. The new rates will be displayed on April 1, 2023. If you have questions about this notice, please call our Customer Service Center at 1‑800‑400‑7115.”
Additional resource: California City & County Sales & Use Tax Rates

• 1/13/2022) New Policy: TOPs will not be issued to extend the operational period of a report of sale (ROS) and/or temporary license plates (TLP) beyond the 90-day period allowed by statute.

When a vehicle is purchased through a dealer, the dealer is required to submit an electronic ROS to the Department of Motor Vehicles (DMV) within five days after the date of sale.
Dealers must then submit a corresponding application to DMV with all fees due:
• For used vehicles, within 30 days of the date of sale.
• For new vehicles, within 20 days of the date of sale.
DMV Documentation: Vehicle Industry News VIN 2022–03 Temporary Operating Permit (TOP) Issuance to Dealers

• Temporary License Plates (TLP) Attachment Problems and Solutions. VIN 2019-09

Problem: Some dealers have been improperly attaching TLP’s to vehicles. This is causing the TLP to swing around, making them difficult to read, and causing them to tear and fall off. Other dealers have been using incorrect TLP paper, causing additional TLP failures. These situations have resulted in lost revenue from bridge tolls, as well as traffic citations for the new owners of the vehicles.

Solution 1: Proper TLP paper material must be used. It can be obtained from one of the authorized TLP providers. Below is the list of DMV approved providers:
Fairfax Imaging: fairfaxsoftware.com
American Driving Records:  caevrreg.com
Automated Vehicle Registration Services: avrs.com/temptags
Dealertrack: go.dealertrack.com/catemptags
Motor Vehicle Software: dmvdesk.com

Solution 2: TLP must be securely attached to the vehicle. To be securely attached, DMV requires dealers to attach the TLPs to the vehicle using all four perforations in the corners of the TLP paper. If a vehicle does not have four points of attachment, then the dealer must attach the TLPs in a manner that will prevent the TLP from swinging and flapping.

• Assembly Bill 516 (“AB 516”), effective January 1, 2019, requires dealers to prepare Reports of Sales electronically (on line), and to print Temporary License Plates when vehicles are sold.

DMV will no longer accept the hard copies of the Reports of Sale issued by DMV to dealers prior to 2019. DMV will also not allow dealer promotional paper plates to be placed on vehicles at the time of sale. As of January 1, 2019, dealers must electronically generate Reports of Sale at the time of sale. Dealers will also print Temporary License Plates (“TLP”) to put on the vehicles in situations where the vehicles do not already have California plates.  The processing of the Reports of Sale electronically, and the printing of the TLP can be done either through the Business Partner Automation Program, or through Fairfax Imaging. Both procedures are described below.
Business Partner Automation Program:
Dealers can process their vehicle licensing and registration paperwork electronically using DMV’s Business Partner Automation Program. This can be done at the moment of sale, avoiding most paperwork, missed time deadlines, and storage of old documents.  The BPA program has been used by many dealers for a number of years now and has been well received. You can use your current BPA provider to comply with AB 516, or you can sign up with a BPA provider.  The following are the four DMV-approved BPA providers:

DEALERTRACK
Contact: Chris Triana – Phone: 860-235-4725

MOTOR VEHICLE SOFTWARE CORPORATION
Contact: Eddy Partida – Phone: 818-706-1949

AUTOMATED VEHICLE REGISTRATION SERVICES
Contact: Mark Kithcart – Phone: 707-790-8504

AMERICAN DRIVING RECORDS
Contact: Scott Faulds – Phone: 916-288-6616

Note that the document preparation fee that BPA dealers are permitted to charge buyers will increase from $80.00 to $85.00 starting January 1, 2019.

Fairfax Imaging

Fairfax Imaging has been approved by DMV to implement the electronic Report of Sale and TLP processes for dealers who are not part of the BPA program discussed above. Fairfax describes their process as follows:
“The Report of Sale will be printed at the end of each transaction.  The registration procedures that dealers currently follow will not change.  With this system, dealers will print out the Report of Sale forms using a local computer and printer and process registration of vehicles sold in the same manner as currently processed, by utilizing a First Line Business Provider, through DMV Industry Business Centers (IBCs), a registration service or by mail to the department.”
This means that instead of DMV providing dealers with hard copies of Report of Sale Forms, dealers will print their own using the Fairfax system. With this system DMV will have the Report of Sale information as soon as the dealer puts inputs it into the Fairfax system. The dealer can then print out the completed Report of Sale, and will still have up to 30 days to send the hard copy application to DMV as they have in the past.
Fairfax will also provide dealers the capability to print Temporary License Plates (“TLP”). These paper plates will have the Report or Sale numbers printed on the plates, so the plates match up to the Reports of Sale. The TLP program, already used in other states, is designed to  help cut down on vehicle theft. Fairfax calls their system “Quick Tags.”
Fairfax conducts training sessions in person or online, and can be contacted at: fairfaximaging.com
Note that the document preparation fee that Fairfax Imaging dealers are permitted to charge buyers will increase from $65.00 to $70.00 starting January 1, 2019.
For additional specific details on the changes and new procedures, please see DMV  VIN 2018-20

• AB 1274: Smog Exemption Extended to 8 Model Years

Effective January 1, 2019, AB 1274 exempts motor vehicles that are 8 or less model-years old from being inspected biennially upon renewal of registration. This is up from the former law which exempted vehicles 6 or less model years old.  An annual smog abatement fee of $25 will be assessed on the motor vehicles that are 7 or 8 model-years old.

Occupational Licensing Reminders – 2018 and older:

AB 1447: 30 Day or 1,000 mile warranty requirements, and GPS use limitations for buy here-pay-here dealers

AB 1447 requires Buy Here Pay Here (“BHPH”) dealers to issue a 30-day or 1,000 mile warranty, and to limit the use of GPS or starter interrupt devices on every BHPH vehicle sold.
Who Is a BHPH Dealer?
A BHPH dealer is one who does BOTH of the following:
– Enters into conditional sales contracts, pursuant to Civil Code section 2981, or lease contracts pursuant to Civil Code section 29857(d), which are subject to Title 14 of Part 4 of Division 3 of the Civil Code. However, a “conditional sales” contract does not include contracts for the sale of vehicles if all amounts owed under the contract are paid in full within 30 days.
– Assigns less than 90% of all un-rescinded conditional sales or lease contracts to unaffiliated third-party finance or leasing sources within 45 days of the consummation of those contracts.

A BHPH dealer IS NOT:
– A lessor who primarily leases vehicles that are two model years or newer
– A dealer that certifies 100% of its vehicle pursuant to V.C. 11713.18, AND
– Maintains an on-site service and repair facility licensed by the Bureau of Automotive Repair, AND
– Employs five or more master technicians certified by the National institute for Automotive Service Excellence.

AB 1447 Details

Warranty Requirement
BHPH dealers must provide a 30 day,or 1,000 mile warranty, covering at least the following components:
– Engine, including all internally lubricated parts
– Transmission and transaxle
– Front and rear wheel drive components
– Engine cooling system
– Alternator, generator, starter, and ignition system, not including the battery
– Braking system
– Front and rear suspension systems
– Steering system and components
– Seatbelts
– Inflatable restraint systems installed on the vehicle as originally manufactured
– Catalytic converter and other emissions components necessary for the vehicle to pass a California emissions test
– Heater
– Seals and gaskets on components described in this subdivision
– Electrical, electronic, and computer components, to the extent that those components substantially affect the functionality of other components described in this subdivision

Buyer’s Guide

Any Buyer’s Guide displayed on a vehicle offered for sale or lease by a BHPH dealer shall list each of the above systems and components and shall specify that the BHPH dealer will pay 100 % of the cost of parts and labor for repairs covered by the warranty. The BHPH dealer shall make the repair, or provide a refund notwithstanding the fact that the warranty period has expired, if the buyer or lessee notified the BHPH dealer of the failure of a covered system or part within the warranty period. This section shall not apply to any defect or nonconformity caused by the unauthorized or unreasonable use of the vehicle following the sale, or to any property damage not to the vehicle arising out of the failure of a covered part.

Safety Equipment Requirement

A BHPH dealer shall not sell or lease any vehicle unless the vehicle meets all of the safety equipment requirements of Division 12 (commencing with Section 24000) of the Vehicle Code. (However, do remember that vehicles sold at wholesale to other dealers do not have to meet the retail sale safety standards.)

Rights may not be waived

Any agreement between a BHPH dealer and a buyer or lessee that disclaims, limits, or waives the rights set forth in this section shall be void as contrary to public policy. If a BHPH dealer fails to give a buyer a written warranty pursuant to this section, the BHPH dealer shall be deemed to have provided the warranty as a matter of law.

Requiring payments in person

AB 1447 prohibits requiring a buyer to make payments in person. In addition, it prohibits repossessing a vehicle, or charging a penalty, following a timely payment of a deferred down payment as specified in the purchase agreement.

Electronic tracking or disabling devices

AB 1447 prohibits BHPH dealers from using electronic tracking or disabling devices after the sale, except as specified below. Violations are misdemeanors, and are punishable by fines of up to $1,000.

A BHPH dealer shall not do any of the following:

A BHPH dealer shall not utilize electronic tracking technology to obtain or record the location of the vehicle, unless the buyer is expressly made aware of the existence and use of the tracking technology by the BHPH dealer, the buyer’s written consent is obtained, and either (A) or (B), or BOTH, apply:

• (A) The electronic tracking technology is used solely to verify and maintain the operational status of the tracking technology, to repossess the vehicle, or to locate the vehicle to service the loan or keep the loan current.
• (B) The electronic tracking technology is used solely for any optional service to the buyer and both of the following conditions are met:
  • The agreement to utilize electronic tracking technology for the optional service is separate from the purchase and sale agreement, is not a condition of the purchase or sale agreement for the vehicle, and is executed after the completion of the purchase or sale agreement for the vehicle, AND
  • The buyer is permitted to cancel the optional service at any point in the future without affecting the sale of the vehicle, and is informed of his or her ability to do so.

The dealer may not disable the vehicle by using starter interrupt technology, unless the BHPH dealer complies with all of the following provisions

• Notifies the buyer in writing at the time of the sale that the vehicle is equipped with starter interrupt technology, which the BHPH dealer can use to shut down the vehicle remotely; and
• The written disclosure provided to the buyer at the time of sale informs the buyer that a warning will be provided no less than 5 days before the use of starter interrupt technology for weekly payment contracts, and 10 days for all other contracts.
• A final warning of no less than 48 hours must be given before the use of starter interrupt technology for both types of contracts. The notice must also disclose the manner and method in which that warning will occur. The dealer shall offer the buyer a choice of warning methods, including warning from the device, telephone call, email, or text message, if available, provided that the warning method does not violate applicable state or federal law.
• In the event of an emergency, the buyer will be provided with the ability to start a dealer-disabled vehicle for no less than 24 hours after the vehicle’s initial disablement.

AB 1534: Reasonable market value label for BHPH Dealers

AB 1534 requires BHPH dealers to prominently display a label on all used vehicles for sale that states the Reasonable Market Value (“RMV”) of that vehicle.
The RMV is the average retail value of a used vehicle based on the condition, mileage, year, make, and model of the vehicle, as determined within the last 60 days by a nationally recognized pricing guide that provides used vehicle retail values, or pricing reports, to vehicle dealers or the public. “Nationally recognized pricing guide” includes, but is not limited to, the Kelley Blue Book (KBB), Edmunds, the Black Book, or the National Automobile Dealers’ Association (NADA) Guide.

AB 1534 requires the RMV labels meet the following standards

• The RMV label must contain the heading: “REASONABLE MARKET VALUE OF THIS VEHICLE” in 16 point bold print, and text in at least 12 point print.
• The RMV label must be located next to any window sticker identifying the equipment provided with the vehicle. If there is no such window sticker, the RMV label must be otherwise prominently displayed and readily readable.
• The RMV label must include the information used to arrive at the value, including but not limited to the use of a nationally recognized used vehicle value guide.
• The BHPH dealer shall provide prospective buyers a copy of any information obtained from a nationally recognized pricing guide that the buy-here-pay-here dealer used to determine the reasonable market value of the vehicle.
• The RMV label must include the date the reasonable market value was determined.
• The RMV label must indicate the RMV provided is only for comparison shopping purposes, and is not the advertised, or retail sales price, of the vehicle.

AB 1215 – “NMVTIS” (National Motor Vehicle Title Information System) and the Electronic processing of documents.

California law AB 1215, effective July 1, 2012, and AB 516, effective January 1, 2019, did the following:
– Increased the fees that dealers can charge for licensing
– Required new dealers, and encouraged used dealers, to use electronic lien and electronic titling (“ELT”) services
– Regulated dealer disclosure of damaged used vehicles

Under AB 1215, and AB 516, dealers are able to charge a document preparation fee of up to $85.00 for each used vehicle purchase transaction if the dealer uses the Business Partner Automation program. If the dealer uses the Fairfax Imaging program, the dealer may charge a $70.00 document preparation fee.

AB 1215 further required California new and used dealers to obtain a National Motor Vehicle Title Information System (NMVTIS) report on each used vehicle before offering it for sale. Dealers can do this by using a sanctioned NMVTIS Consumer Access Provider such as instaVIN, Auto Data Direct, or VinAudit.com. Note: If you sign up with VinAudit, you can use the promo code “MotorsportsMarket” to get their discounted rate.

The NMVTIS report contains the most up-to-date (usually updated every 24 hours) title information from all states. The report contains vehicle history information from state DMV’s, salvage auctions, junkyards, and insurance companies. If the NMVTIS report reveals a branded title, such as “Salvage,” “Flood Damaged,” or one of approximately 50 other state branding terms, that information must be disclosed to the consumer. This is done by attaching a red 4” x 5” window sticker to the vehicle that warns potential buyers about the branding on the title. The dealer must also provide a copy of the NMVTIS-based car history report to the buyer. Only official NMVTIS Access Providers can be used to provide the reports to dealers. A complete list of NMVTIS Consumer Access Providers is available on the NMVTIS Web site, at NMVTIS Access Providers. For more specific information about the sticker and the NMVTIS reporting requirements, see the “NMVTIS” section below.

Further AB 1215 Details

Below are more AB 1215 rules, and how they changed prior laws & regulations. These rules became effective July 1, 2012, unless otherwise indicated below:

Temporary Operating Permit:s No longer issued as of January 1, 2019

Effective January 1, 2019, the Temporary Operating Permit, aka Used Vehicle Dealer Notice, will no longer be issued by dealers.  The AB 516 requirement that all dealers submit their Report of Sales electronically at the time of sale, removes any need or requirement for Temporary Operating Permits. Instead, dealers will attach Temporary License Plates to vehicles. See the beginning of this section for further information on AB 516.

$65.00 and $80.00 Document Preparation Fees increased to $70.00 and $85.00 by AB 516 as of January 1, 2019. Effective January 1, 2019, AB 516 and V.C. 4456.5(a)-(c) authorizes a dealer using an approved DMV Business Partner Automation provider to charge a document processing fee not to exceed $85.00. Dealers who use Fairfax Imaging shall not charge more than $70.00. The EVR filing charge may not exceed the actual amount the dealer is charged by a first-line service provider. No fee in this section shall be represented as a governmental fee.

Two Day Cooling Off Period Amendments: V.C. 11713.21(2)(D) Authorizes USED VEHICLE dealers, when offering a Contract Cancellation Option after OCTOBER 1, 2012, to charge 1% of the purchase price if the vehicle has a cash price of more than $30,000, but less than $40,000. The term “cash price” has the same meaning as subparagraph (A) of paragraph (1) of subdivision (a) of Civil Code 2982. Cash price” excludes registration, transfer, titling, license, California tire, and optional business partnership automation fees.

Conditional Sales Contract Amendments: Civil Code Section 2982, which applies to both new and used vehicle dealers, is amended as follows.

The term “Cash Price” for Conditional Sales Contracts is the price of the vehicle excluding the following:

• Document processing charges,
• Charges to electronically register or transfer the vehicle,
• Taxes imposed on the sale,
• Pollution control certification fees,
• Prior credit or lease balance on property being traded in,
• The amount charge for a service contract,
• The amount charged for a theft deterrent system,
• The amount charged for a surface protection product,
• The amount charged for an optional debt cancellation agreement, and
• The amount charge for a contract cancellation option agreement.

The Cash Price excludes the charge to be retained by the seller for document processing authorized pursuant to Section 4456.6 of the Vehicle Code. The Cash Price excludes the charge to electronically register or transfer the vehicle authorized pursuant to Section 4456.5 of the Vehicle Code. The Cash Price also excludes the subtotal representing the sum of the amounts described above. If the minimum finance charge provided by subparagraph (B) or subparagraph (C) of paragraph (1) of subdivision (j), if either is applicable, is greater than the earned finance charge as of the date of prepayment, the holder shall be additionally entitled to the difference. This subdivision shall not impair the right of the seller or the seller’s assignee to receive delinquency charges on delinquent installments and reasonable costs and fees as provided in subdivision (k) or extension or deferral agreement charges as provided in Section 2982.3.

If the seller imposes a charge for document processing, or to electronically register or transfer the vehicle, the contract shall contain a disclosure that the charge is not a governmental fee. “Cash price” means the amount for which the seller would sell and transfer to the buyer unqualified title to the motor vehicle described in the conditional sale contract, if the property were sold for cash at the seller’s place of business on the date the contract is executed, and shall include taxes to the extent imposed on the cash sale and the cash price of accessories or services related to the sale, including, but not limited to, delivery, installation, alterations, modifications, improvements, document preparation fees, a service contract, a vehicle contract cancellation option agreement, and payment of a prior credit or lease balance remaining on property being traded in.

Lease Contracts: Civil Code Section Amendments: Section 2985.8 of the Civil Code, which is applicable to both new and used dealers, is amended as follows: (4) A brief description of each vehicle or other property being traded in, and the agreed upon value of the vehicle or property, if the amount due at the time of signing the lease, or upon delivery, is paid in whole or in part with a net trade-in allowance; or if the “Itemization of Gross Capitalized Cost” includes any portion of the outstanding prior credit or lease balance from the trade-in property. (5) The charge, if any to be retained by the lessor for document processing authorized pursuant to Section 4456.5 of the Vehicle Code, which may not be represented as a governmental fee. (6) The charge, if any, to electronically register or transfer the vehicle authorized pursuant to Section 4456.5 of the Vehicle Code, which shall not be represented as a government fee.

NMVTIS:

V.C. 11713.26(a)-(h) requires dealers to obtain a National Motor Vehicle Title Information System (NMVTIS) history report for all used vehicles for sale. If the vehicle has a branded title, such as “salvage,” dealers must also attach a warning sticker on the vehicle advising the buyer. The specific requirements of V.C. 11713.26 are outlined below.
What is included in an NMVTIS Vehicle History Report?
According the Department of Justice (“DOJ”), NMVTIS Vehicle History Reports are  intended to only provide data on five key indicators associated with preventing auto fraud and theft. They are listed, and explained, by the DOJ below.

If a NMVTIS vehicle history report for a used vehicle indicates that the vehicle is or has been a junk automobile or a salvage automobile or the vehicle has been reported as a junk automobile or a salvage automobile by a junkyard, salvage yard, or insurance carrier pursuant to Section 30504 of Title 49 of the United States Code, or the certificate of title contains a brand, a dealer shall do both of the following:

(1) Post the red label disclosure (see below) on the vehicle while it is displayed for sale at retail in at least 14-point bold black type, except for the title “Warning” which shall be in at least 18-point bold black type, on at least a 4 x 5.5 inch red background in close proximity to the Federal Trade Commission’s Buyer’s Guide:

(2) And provide the retail purchaser with a copy of the NMVTIS vehicle history report upon request prior to sale

The above sections do not apply to a used vehicle for which NMVTIS does not have a record.

As used in this section the following terms have the following meanings:

“NMVTIS” means the National Motor Vehicle Title Information System established pursuant to Section 30501 et seq. of Title 49 of the United States Code.

“NMVTIS vehicle history report” means a report obtained by a sanctioned/licensed NMVTIS data provider. No other vehicle history reports are sufficient.

This section shall not create any legal duty upon the dealer related to the accuracy, errors, or omissions contained in a NMVTIS vehicle history report that is obtained from a NMVTIS data provider or any legal duty to provide information added to NMVTIS after the dealer obtained the NMVTIS vehicle history report.

This section does not apply to the sale of a recreational vehicle, a motorcycle, or an off-highway motor vehicle subject to identification under Section 38010.

Salesperson’s Licenses

Dealers are permitted to post copies of salesperson’s licenses at their dealerships, instead of only original licenses which were required under the old rules. The original license must still be surrendered to the dealer while the salesperson is employed there. At such time as the salesperson is no longer employed by the dealer, the dealer must return the original license to the salesperson, and destroy the remaining copies. A salesperson may work for more than one dealership only if all of the dealers share a common controlling ownership (50% or more) of all the dealerships where the salesperson works.

Notification of Consumer Credit Score

When a dealer obtains a consumer’s credit score for use with a consumer’s credit application, the dealer must provide the potential buyer a summary of the credit information report in compliance with Federal credit score reporting requirements. The following form may be used to comply with these requirements: Credit Summary Form

Federal Trade Commission Identity Theft Red Flag & Address Discrepancies

All vehicle dealers engaging in finance activities must have a written Identity Theft Protection Program in place. The “Red Flag Rules” require the program to include, at a minimum, the following four “reasonable policies and procedures:”

• Identify what are Red Flags for a covered account.
• Detect Red Flags when they appear
• Respond to the Red Flags to prevent and mitigate identity theft
• Periodically update the program to reflect changes in risks to customers or the safety and soundness of the dealer against identity theft.

The Federal rules also require the following:

• Approval of the written program by either the board of directors, or a committee of the board (if you have either one of these), or a designated employee at the senior management level.
• Continued oversight/monitoring of the development, implementation, and administration of the program and training your staff.

The Red Flag rules do not specify an exact process for your program. You only need a program that is appropriate to the size and complexity of your financing activities at your dealership. The following are a few examples of ways to identify, detect, and respond to identity theft, and to update your program after you create it.

Identifying Red Flags – Look for the following:

• An application that appears to be forged or altered
• A consumer report that contains an address discrepancy, fraud alert, or credit freeze
• A change of address notice quickly followed by an application for a new credit card
• A Social Security number that has already been provided by another
• An address or phone number that has been provided by several others
• A creditor has been notified that the customer is not receiving statements
• A long inactive account is being used

Detecting Red Flags

• Verify the identity of applicant
• Authenticate your applicant by verifying their other existing accounts

Responding to Red Flags

• Monitor the suspect account
• Contact the customer
• Change passwords
• Notify law enforcement if you suspect identity theft

Failure to Comply

• Potential penalties included but are not limited to: Civil penalties for each violation
• DMV enforcement action – potential suspension or revocation of your dealer license

Final Point

You need to be able to justify that the written policies and procedures that you put into place are reasonable and adequate to minimize the risk of identity theft at your dealership.

Federal Identity Theft Red Flags Rules Link

To review the actual Federal Red Flag law, go to Federal Red Flag Rules

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