F&I And The Safeguards Rule
The Federal Trade Commission (FTC) “Standard for Safeguarding Customer Information” went into effect May 23. Along with the Patriot Act and the Privacy Act the Safeguards Rule mandates that motor vehicle dealerships not only know who they are doing business with, but take steps to protect sensitive customer information from fraudulent use.
You’ll find the key to complying with the safeguarding rule in the P&L column: Process & Location.
It’s the Process, S _ _ _ _ _!
Review your internal process for working with customer files. Pay special attention to the flow of the deals in progress, the pre-check deals, the dead files, and the access to fax machines. Think about who, what, when and where. Who handles the deals? What happens when the deals are worked? When are the deals and customer information shared, moved, or transmitted? Where are the deals when the managers are out of their offices? Assign one person to set up, monitor, and modify the process to ensure that each customer’s non-published information is maintained in a secure area.
Location, Location, Location
Recently I was in a dealership where the main fax machine was located in one office and the working files were located in another F&I office. A separate fax machine was in the special finance manager’s office. The special finance manager’s office opened onto the showroom, with no door, no secure area, and a fax machine sending & receiving sensitive customer information. In today’s legal environment, this dealership’s liability was kicked up several notches.
A better solution would be to first consolidate all the working customer files and put the files and the main fax machine in the F&I office. Locate the fax machine and files behind the F&I manager’s desk, out of reach and out of the line of vision of a customer sitting at the desk. If your dealership uses a rack system, place the files in the racks so that the customer’s personal information is concealed from public view.
Keep dead files (transactions that for various reasons did not become deals) for a period of 25 months from the date of action notice for an individual and 12 months for a business. A dead file will typically contain a credit statement, perhaps a credit report, and a worksheet. After the time limit has expired the file should be completely destroyed.
Deals approved by the sales manager should go directly to the F&I manager. The F&I office should have file cabinets that lock as well as a lock on the door. When the manager is out of the office the office should be locked so that both working files and dead files are in a secure environment.
Everyone in the motor vehicle business understands the significance of the Profit & Loss column. Paying attention to the Process & Location column when offering finance & insurance products keeps customer information safe and guards against dealership liability.
Resources
For more information on the Safeguards Rule, contact the National Automobile Dealers Association, the Recreational Vehicle Dealers Association, or your legal counsel. This article is intended for informational purposes only and is in no way meant to constitute legal advice.
World of Special Finance, September 2003, p. 34