Building a Dealership Identity Theft Prevention Program That Works
With the FTC’s Red Flags Rule in full effect, multi-location dealership groups need more than a policy document. They need a living, operational Identity Theft Prevention Program (ITPP) that can scale across rooftops.
Here’s how to build one that doesn’t just meet regulatory requirements, but actually helps you prevent costly buybacks and reduce operational expense:
Step 1: Identify Relevant Red Flags in Your Workflow
Begin by mapping your finance and sales workflows and asking: Where is identity or income information collected, and what can go wrong?
Some common red flags in dealerships include:
- Inconsistent or incomplete application data
- Unverifiable employment or inflated income
- Applicants using SSNs that don’t match credit profiles
- Applications submitted from the same IP/device with different identities
Tip: Use tools like IEValidateTM and BorrowerCheckTM to proactively identify and address these issues before a deal reaches funding.
Step 2: Implement Scalable Detection Mechanisms
Once red flags are defined, develop processes to detect them across all locations consistently.
This can include:
- Standardized steps for reviewing applications
- Alerts or scorecards integrated into F&I systems
- Real-time risk indicators from third-party solutions
Best practice: Centralize your fraud detection tools and monitoring so that all rooftops operate under the same guidelines.
Step 3: Define Response Protocols
When a red flag appears, what happens next?
Your ITPP should define:
- Who reviews flagged deals
- What supporting documents are required
- When to escalate or reject the application
- How incidents are logged and reported
Compliance tip: Your response process must show both intent and action to mitigate identity theft. Just flagging the risk isn’t enough.
Step 4: Train Every Rooftop
An ITPP is only as effective as the people who follow it.
Conduct regular training sessions for sales, F&I, and compliance staff that cover:
- What the Red Flags Rule requires
- What fraud looks like in real-world scenarios
- How to use your detection tools and follow the playbook
Use recent fraud cases or anonymized examples from your network to make training real and relevant.
Step 5: Monitor, Update, and Audit
Set a review cadence (at least annually) to assess the effectiveness of your ITPP and:
- Update red flag criteria based on new fraud trends
- Review tool performance and gaps
- Conduct internal audits or spot checks at rooftop level
Consider leveraging data from BorrowerCheck or IEValidate to inform updates to your ITPP criteria.
In short, Red Flags Rule compliance shouldn’t be a reactive checkbox—it should be a repeatable process that evolves with your dealership group. By implementing modern detection tools, standardized responses, and centralized oversight, your ITPP becomes a real safeguard, not just a file in a drawer.
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