Category: Compliance

Fraud attempts and identity theft related to car buying, leases and loans are a significant problem for auto dealers and lenders. The Federal Trade Commission’s Consumer Sentinel Network Data Book 2023 tracked more than 178,000 auto-related fraud reports last year, while identity theft reports exceeded one million.

Although some categories dropped slightly year-over-year in absolute numbers, there’s no question that the types of fraud and identity theft dealers and lenders face are becoming more sophisticated.

Synthetic ID Fraud

One type that is on the rise is synthetic identity fraud. In these cases, fraudsters create a false identity for a car buyer that’s made up of real pieces of information. The name might be from one person, the address could be from someone else, and the social security number may be stolen from a minor or someone who is deceased. Individually, the items of data check out, but they definitely do not describe a single, real person.

Fortunately, there are advanced compliance tools available for dealerships to help them assess the risk of synthetic ID fraud for each transaction.

Other Identity Fraud

Just because synthetic ID fraud exists doesn’t mean that more traditional fraud attempts have died out. “Know your customer” verification steps are vital to ensure that customers are who they say they are, have legitimate and verifiable employment and income, and are authorized to purchase a vehicle in the U.S.

A digital compliance solution can help dealerships detect fraud attempts at every step of the deal. It can also give dealers the ability to follow and document the proper ID verification steps including red flags, OFAC checks, and out-of-wallet questions as needed.

Identity Theft

Dealerships are not only at risk of selling to someone using a stolen identity—they also handle personal identifying information (PII) for prospects and customers that could fall into the wrong hands and continue the vicious cycle.

This is another area where a digital compliance solution helps safeguard the d6ealership and its customers. Store customer PII digitally to avoid situations where photocopied drivers’ licenses and other sensitive information might be left on a copier or desk where anyone might see them. Digital transactions also reduce the risk that documents may fall into the wrong hands in transit to a lender or state DMV—or be accessed from a file cabinet within the dealership during long-term storage.

Safeguard Your Dealership

Explore how the Dealertrack Compliance solution protects dealerships and consider taking a self-guided demo or requesting a one-on-one consultation.

For a handy guide to the latest compliance knowledge for dealerships, download the free 2025 Dealertrack Compliance Guide.

Disclaimer: This is not meant as legal advice, and we do not purport to provide any legal or regulatory analysis. Consult with your attorney for any legal, regulatory, or compliance questions you may have.

3 Ways to Safeguard Your Dealership in a Consumer-Driven Market

The auto industry remains stable but faces major market shifts heading into 2025. Consumer demand for cars is growing, but consumer preferences for cars are changing. With price as the most important factor in their car buying decisions, consumers face car prices that remain higher than average. To make up for these higher prices, auto dealers may increase incentives in 2025, particularly in financing, to entice consumers to commit to a car purchase.

As auto dealers look for ways to serve cash-strapped consumer buyers, and auto lenders work to address more loan delinquencies, federal and state regulators are monitoring the industry to ensure consumers are being treated fairly.

Here are three initiatives you can take on to ensure your dealership remains compliant:

1. Establish a culture of compliance

The best way for dealerships to protect themselves in this environment is by creating a culture of compliance, data security, transparency, and honesty with customers.

Here are some of the ways to do that:

• Documentation – Establish processes to document your compliance and risk assessments for every deal and store that data securely. Using an electronic system to track and record your completed processes for each deal can be invaluable in the event of an audit or regulatory inquiry.
• Consistency – One of the hallmarks of many consumer protection regulations is non-discrimination. Be sure every customer receives the right consumer notices at the proper times during the deal process to document any exceptions. Create a systematic customer complaint system and work to resolve complaints using a consistent process with timelines and escalation procedures.
• Data Protection – More and more state data privacy laws require businesses to provide certain rights regarding personal information collected by the business. Consider using secure digital storage solutions to ensure that you are protecting and storing customer data your state-required period.

2. Protect your reputation and your profitability

Today’s consumers are empowered to seek remedies from a variety of sources when they have a negative experience. Between the online complaint databases maintained by the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC), state attorneys general, data protection agencies, and the Better Business Bureau, the risks to your dealership of a prolonged consumer dispute multiply.

Consistently following compliance best practices is the best way to protect customers and avoid the ramifications of non-compliance.

3. Download the 2025 Dealertrack Compliance Guide

Sign up now and get the free guide to serve as a compliance reference all year long. Know which regulations apply to your dealership so you can build a solid compliance plan to safeguard your business.

Disclaimer: This is not meant as legal advice, and we do not purport to provide any legal or regulatory analysis. Consult with your attorney for any legal, regulatory, or compliance questions you may have.

Disclaimer: This is not meant as legal advice, and we do not purport to provide any legal or regulatory analysis. Consult with your attorney for any legal, regulatory, or compliance questions you may have.

In an ever-changing regulatory landscape, resources that help you stay up to date on what’s new are important for maintaining your dealership’s reputation and avoiding costly missteps. The Dealertrack Compliance Guide is available each year as a free download to serve as reference guide.

Here are some of the compliance trends we’re seeing:

1. More consumer data privacy

Thirteen states—California, Colorado, Connecticut, Delaware, Florida, Indiana, Iowa, Montana, Oregon, Tennessee, Texas, Utah, and Virginia—have enacted new data privacy and data security laws. Several other states are considering legislation to enact similar laws. Many of these laws become effective this year, so it’s important for dealers to pay special attention to data and security obligations and be proactive in incorporating these new state requirements in compliance action plans.

The New York Department of Financial Services Cybersecurity Rule, amended as of April 29, 2024, requires multi-factor authentication (MFA) for all user accounts accessing information systems.

Things to think about: Data privacy laws apply to all personally identifiable information (PII) collected from consumers. Help protect customer data with a policy forbidding the use of personal devices for data collection. Consult with legal counsel and software vendors to ensure that your information systems and processes meet requirements for handling and securely storing customer data.

2. Tightening security measures

Fraud grew to $8.1 billion in 2022, with a substantial increase in the prevalence of synthetic identity fraud*, which involves fake identities being stitched together from pieces of real identifying information taken from various sources.

Given the rise of fraud, the FTC and states continue to focus on cybersecurity and related enforcement. Throughout this year, expect to see stricter data security and identity theft regulations, more guidelines about how to prevent synthetic ID fraud, and additions to the Safeguards Rule, including expansions of required security measures similar to what we described in the section above.

To protect against identity theft and fraud, many states have also passed laws that restrict how dealers can use and handle a customer’s social security number (SSN) and other non-public information. This can include denying goods or services to a person who declines to give their SSN.

Things to think about: Have plans in place to safeguard your dealership against direct fraud loss and costly lender chargebacks as the result of fraud. Consider adding additional ID verification steps such as pulling out of wallet questions—and look for a compliance solution that can alert you to potential synthetic ID fraud attempts.

3. New data breach disclosure requirement

As of May 13, 2024, non-bank financial institutions have a new data breach disclosure requirement. The Federal Trade Commission (FTC) recently updated the Gramm-Leach-Bliley Safeguards Rule, requiring non-bank financial institutions to report to the FTC any event where unencrypted customer information involving 500 or more consumers has been acquired without authorization.

Things to think about: If your dealership provides financing directly to customers, take note of this regulation and work with your legal counsel to find out how it applies to you.

4. Quiet hours

Having someone’s phone number doesn’t give you the green light to call them anytime you want. The Telephone Consumer Act (TPCA) establishes new federal quiet hours before 8:00 a.m. and after 9:00 p.m. You could be fined $500-$1,500 per call or text message under this if you haven’t obtained written consent from the recipient.

Things to think about: Always maintain a “do not call” database to avoid unwanted communication with consumers. Check the settings of your automated systems to ensure they’re programmed to respect quiet hours. Remember to keep customers’ time zones in mind.

5. Aftermarket pricing transparency and disclosures

Consumer protection regulations and enforcement are increasingly focused on consistent pricing and proper disclosures for F&I aftermarket product sales.

Things to think about: It’s more important than ever for dealerships to provide timely consumer notices and disclosures. Consider using a menu solution to present aftermarket products to car buyers transparently and consistently, and ensure that every product is offered to every customer—at the same price point.

The answers to your compliance questions

Get the free 2025 Dealertrack Compliance Guide so you have it handy whenever you need to check, or double check, the current rules, regulations, and best practices.

*Source: Point Predictive 2023 Auto Fraud Trends Report