Automobile Compliance Standards to Protect Against Potentially Career-Ending Consequences
- Regulatory bodies continually make new laws that govern the world of car dealerships.
- Your auto dealership must understand and implement the critical compliance standards to avoid the dreaded penalties and hefty fines.
- However, many automotive professionals face challenges in meeting complex regulatory requirements.
- Many complain that they lack the expertise, time, and staffing to help them navigate the compliance world.
- Overlooking compliance requirements can harm your auto dealership business as you risk attracting hefty penalties or imprisonment.
Automobile professionals and executives face challenges meeting the ever-changing and strict auto dealers’ laws and regulations. Both federal and local governments impose these laws to ensure every dealer conducts their business transparently and legally, given the kind of sensitive information auto dealerships handle. Part of what the increasingly strict compliance laws regulate include:
- The IT department
- Human resources
- Business development companies
- Fixed operations
- Finance and insurance department
Your dealership must understand and implement the critical compliance standards to avoid getting on the wrong side of the law. Breaching any critical compliance requirement can attract crippling penalties, result in a jail sentence, and license revocation.
What Is Automobile Dealership Compliance?
Automobile dealership compliance constitutes all regulations and laws that the federal and state governments impose on automotive dealers. The compliance laws regulate how your car dealership handles data, sales, insurance, customer communication, and financing options.
For your automotive dealership to be deemed compliant, you must meet the set regulatory requirements imposed by the law. For instance, you are responsible for auditing your business for compliance, addressing the existing compliance risks, and training your employees about compliance culture.
While there are several compliance requirements that your auto dealership should meet, there are five most critical ones you should consider to avoid costly penalties.
The 5 Most Critical Automotive Compliance Requirements to Meet Regulatory Standards
There are many compliance standards your automobile dealership should adhere to. However, the most critical measures to protect your business include:
1. The Security and Privacy Rule
The security and privacy rule require every automobile dealership to protect the privacy and confidentiality of its customer’s data. The law regulates how your dealership ought to handle personal data, impacting how you conduct the following:
- Collect personal data
- Store the data you collect
- Share customers’ personal and financial data
Your car dealership must implement security solutions that protect the sensitive data you handle by implementing measures such as:
- Data masking renders sensitive information useless to unauthorized persons while providing real data versions for authorized users.
- Controlling access — only giving users access to necessary information and nothing more
- Encrypting at-rest and in-flight data
- Ensuring third parties of your dealership maintain the proper safety practices
- Training employees on how to handle data safely.
The law requires your organization to have the right frameworks to protect the sensitive data you handle.
2. Secure Data Disposal Rule
This law requires your auto dealership to protect the confidentiality of customer data even when you’re disposing of them after use.
The end of the life cycle is critical for the responsible management of sensitive data. The federal data disposal rule sets security protocols for safe data disposal by:
- Permanently erasing digital records
- Shredding papers with sensitive information
- Physically destroying storage devices
Your job when disposing of sensitive data is not to leave customers’ sensitive data vulnerable to predators.
3. Reporting Cash Payment of Over $10,000 Rule
The IRS requires any auto dealer that receives more than $10,000 in a cash payment to report and fill out Form 8300. In addition, your dealership must report the sale within two weeks of the transaction.
The premise of the rule is to detect and prevent money laundering. Auto dealerships handles huge sums of money, making them an easy money-laundering avenue.
Filing Form 8300 is critical when your car dealership receives customer cash payments more often. It’s important to note that the $10,000 limit doesn’t only apply to single transactions. If your customer pays in cash installments that exceed $10,000 in a given year, you’re also required to file form 8300.
4. The Red Flag Rule
The Federal Trade Commission (FTC) imposes the Red Flag Rule to detect, prevent and mitigate identity theft. The rule requires your automobile dealership to have and implement a written Identity Theft Protection Plan (ITPP).
Your ITPP should lay out how your business conducts the following:
- Identifies suspicious identification documents
- Checks for unusual changes in the customer’s credit report
- Confirms that emails and mailing addresses are deliverable
- Checks for unusual account activity
If you identify or suspect a case of identity theft, you’re obligated to report it. Most predators target auto dealers by making big purchases using someone else’s information. If a criminal transacts with your dealership under a stolen identity, you may be held partly liable if your dealership lacks an ITPP.
5. The Equal Credit Opportunity Act
Dealerships that provide financing options are considered lenders and must therefore comply with the Equal Credit Opportunity Act (ECOA). The Act states that NO lender should discriminate against any borrower on the following basis:
- National origin
- Marital status
In addition, the law requires dealerships to notify applicants of the action taken on their application, retain records of credit applications, and report credit history in the names of both spouses.
Defying ECOA can lead to severe penalties and hefty fines of up to $500,000. If an applicant doesn’t qualify for the credit, you must explain why they didn’t qualify or if the terms of credit changed.
The Consequences of Non-Compliance
Every compliance requirement includes criminal penalties that can lead to imprisonment or hefty fines if breached.
Your dealership must have written policies that outline the steps for handling each compliance procedure. Your organization should periodically train all employees in the approved process. Without staying compliant, your business risks incurring hefty fines and other penalties.
Retrofit Technologies Can Help Your Automobile Dealership Stay Compliant
The compliance requirements in the automobile dealership industry are quickly changing. Your business needs to stay current with compliant issues because failure to do so can be detrimental to your business.
At Retrofit Technologies, we have experts who can help your employees learn about Federal Compliance Regulations and best practices to help your business stay compliant. We’ve been helping businesses in New England since 1983 with compliant issues, and we can help you, too. Contact us today for comprehensive compliance solutions.