Username: Password:        

Red Flags Rule
Are You in Compliance?

Identity fraud prevention is now a matter of federal compliance. In October 2007, the 'Red Flags Rule' was passed to standardize methods for the prevention of identity theft, as part of the last piece of the Fair and Accurate Credit Transaction Act (FACTA) of 2003.

The 'Red Flags Rule' requires dealers to pay attention to certain indicators, or red flags, during financial transactions that may be evidence of identity theft. These could be changes of address or inconsistencies in address or Social Security number. Whether issuing credit or making changes to an existing account, dealers are now not only required to seek out these red flags—they're required to develop an overarching "Identity Theft Prevention Program that detects, prevents and mitigates identity fraud."

However, the regulations don't specify how a dealer's anti-fraud policy should be designed to best protect the consumer and the dealer. Instead, they only list 26 red flags that could be an indication of fraudulent activity—and dealers are finding it's often difficult to assess what to do with that information.

But now, offers the easiest, most effective way for auto dealers to address the Red Flags Rule and implement a new identity theft prevention policy. Called SmartID, this simple-to-use, online program allows you to protect your dealership, and come into full compliance, in minutes.

PatriotDealer is the leading expert in identity theft prevention in the industry.

Understanding Red Flag Requirements

The Red Flags Rule has six basic requirements:

  • Policy
  • Training
  • Detection
  • Prevention
  • Mitigation
  • Program Audit

Policy: Your business must have a written policy describing any transactions or accounts that could be subject to fraudulent use and/or identity theft. The policy also has to outline the methods you are going to use to cover the other five requirements

Training: You must train your employees on the implementation of the policy and monitor the training program to measure its effectiveness.

Detection/Prevention/Mitigation: Within the policy and your daily practices, you must evaluate each transaction to detect and/or prevent fraudulent use. This also must include an ongoing method that protects your customers against future fraud.

Program Audit: You must evaluate the policy and practices at least annually for effectiveness and to consider any new policy features that should be included.

Technology Options

For dealers, much of the focus of the Red Flags Rule will be on the detection, prevention and mitigation (DPM) portion of the regulation. This process will determine your written policy in regards to training, auditing and escalation steps in the event of a 'red flag'. (For more information on three different approaches to the DPM that you can take, read our contributing article in F & I Management and Technology magazine.)

While it may sound confusing, the DPM is easy with and its unique, high-technology approach.

At the touch of a mouse button, our online service called SmartID helps you detect, prevent and mitigate fraudulent use—in minutes. It authenticates the customer's identity without subjective scoring models or vague red flag indicators. Developed by top industry compliance and anti-fraud experts, this proactive, positive identity authentication process covers all the bases, and yet requires minimal manual supporting responsibility.

You'll instantly evaluate each transaction with a system that's easily rolled into your identity theft prevention policy. And with a complete policy, training and auditing solution, there are no lengthy employee training sessions and no guesswork. Plus, you'll enjoy the benefits of having an experienced team of compliance experts at your fingertips seven days a week. No other service can provide you a more complete solution.

Learn more about how SmartID can protect your dealership. Take a free trial, request a personalized demo or sign-up to begin safeguarding your business right now. All dealers are required to comply with the Red Flags Rule. But now that you have SmartID, it's easier than ever.

Please take our free trial, contact us with any questions, request a demo or sign up now begin safeguarding your dealership - and your customers.