Saturday, April 19, 2008

Are You Compliant? Part 2

A Review of Recent Developments Part 2

• When you send a deal out to one or more finance companies and no one extends credit to the customer

• When you send a deal out, the finance company wants to extend credit with different terms and the customer refuses the new terms

Additional legwork on the part of the dealer may be required, but compliance will be in their own hands instead of someone else’s. And that’s a good thing.

Document Disposal

Under the authority of the Fair and Accurate Credit Transactions (FACT) Act, the Federal Trade Commission (FTC) developed the Disposal Rule. It went into effect in 2005. Under the rule, dealers must dispose of sensitive information included in their customers’ credit reports. The rule is simple: “You have to take reasonable and appropriate measures.” While the rule doesn’t define what “reasonable” is, it does suggest certain measures that a dealership should consider. These include having a written disposal plan; hiring a certified destruction contractor; auditing the contractor to make sure data is properly destroyed; and taking appropriate measures to dispose of both physical and electronic data.

How the recommendations protect the dealer is similar to how the NADA guidelines work. The rule only asks for reasonable efforts when disposing of a customer’s personal information. But if you get sued by a customer because his or her data was not disposed of properly, the court may ask if you followed the FTC recommendations. If you didn’t, it may look like you didn’t take the reasonable steps.

Next Page: Part 3

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