Menu Providers' Perspectives!
Full speed ahead: The Red Flags Rule is in enforcement! Yes, that’s right, the day has finally arrived! And that means the time has come to comply, comply, comply! As of Jan. 1, the FTC not only has the power to go after banks, credit unions and captive lenders that violate the rule, but it can also seek out dealerships that aren’t following protocol.
We knew this day was coming and over the course of 2010 have published several articles explaining what this rule encompasses and how it affects us. Our December issue included an article about the pros and cons of this recently implemented rule from a provider and legal expert’s perspective. One of the ways a software company can assist the dealership in complying with the Red Flags Rule is by incorporating Red Flags checks into the programs used by the dealer.
So, we decided to get the perspective of a few menu providers about the pros and cons of complying with this rule. My thanks go out to MaximTrak Technologies, Ristken Software Services and VisionMenu for providing P&A eMagazine with their perspectives.
We first asked what they feel, as software providers, are some advantages of using Red Flags checks and what advantages do these checks provide dealerships?
Ron Martin, president of VisionMenu, Inc., says, “It is a low-cost, quick-and-easy way for the dealer to ensure that the customer is who they say they are. It evaluates the name and address, age and social security number against a variety of public records to confirm the identity of the person. Now the dealership just needs to make sure that the customer in front of them is actually who they say they are. This is done by evaluating a list of out-of-pocket questions. Sure, there is room for some people to slip through the cracks, but if the process is followed completely, most identity thieves will be uncovered. We at VisionMenu have chosen to leave this process to the expert, which is why we have chosen a company’s web service that specializes in catching identity thieves. We are just facilitating ease of use to the F&I manager by allowing full integration.”
Jim Maxim, president of MaximTrak Technologies, adds that “Federal compliance issues today surrounding identity theft and protection of non-public personal information are some of the hottest topics in today’s business discussions – especially in the financial services arena. Automotive dealers today are being held as accountable for compliance with these regulations as some of the world’s largest banks. So, the risks are huge and it really demands that the dealership principals pay attention to these areas and assess their processes and overall compliance. We incorporate these services to make it quick and easy for the dealer to adopt compliance into their sales and finance processes and to save the dealership time on each and every transaction, which means more time spent selling products.”
Patrick DeMarco, president of Ristken Software Services, says “the biggest advantage is protecting the dealerships against fraudulent buyers and therefore mitigating the risk of a distressed financial situation for the dealership. By incorporating Red Flags technology directly into our menu application, it ensures the F&I managers are completing Red Flags checks at the point of sale. A simple series of questions can protect the dealership and its creditors from identity theft. Ristken does not charge additional fees in our application for Red Flags integration. We feel all of our customers should have that protection benefit in their operations.”
On the flip side, there are shortcomings, and as Jim Ganther mentioned in his December article “it can be easy to fall into the trap of believing the transactional approach is sufficient to address all of a dealership’s obligations under the rule.”
Martin agrees that the checks do tend to provide the dealer with a false sense of security and that the dealer needs to have implemented and documented, in writing, the procedures put in place to detect, prevent and mitigate identity theft. Maxim also says they often see that the shortfalls that are occurring at the dealer-level are in the training, process and policy areas.
Because these menu providers offer challenge questions within their software programs, we asked them how the questions operated within these programs. Maxim says that although some dealers incorporate the challenge questions into every transaction, many do not because it is not required, and they are only prompted with such questions when an alert is caused as a result of a credit report being pulled or something within the system being alerted during the sales process.
All of the participating menu providers provide a Red Flags identity theft prompt that upon selection opens a window that prompts the F&I manager with several challenge questions. Martin adds that based on the circumstances, it is crucial that the challenge questions be answered correctly, and although it is not a full-proof way of confirming the person’s identity, they get as close as they can.
We finally asked our menu provider participants, just as we did of Jim Ganther and Pattie Dillon last month, if they thought that Red Flags checks capabilities should be charged to the dealer. Although Ristken does not charge additional fees in their application for Red Flags integration, both VisionMenu and MaximTrak Technologies do charge for this option. However, Martin says, “Yes, there is a nominal fee. But in order to stay with our high-quality, low-cost model it is an a la carte option for customers. And all things considered, when it comes to compliance, it is money well spent.”
Maxim also notes that his company's Red Flags service “is billed on a per authentication basis – there are no monthly minimums.” He further explains that, “a dealership that sells 500 cars per month should pay more than a dealership that only sells 50 cars per month. The very nature of the service makes it palatable for everyone and ensures that we can provide the same quality of service to every automotive dealer that wants to utilize these services to comply with the Red Flags requirements.”
In spite of the possibility that Red Flags checks can give the dealer a false sense of security, it seems that the benefits of implementing a Red Flags checks program within a menu selling system far outweigh the cons. And, to remain compliant and avoid unnecessary legal issues, it is absolutely necessary the dealer have a written program for compliance and a training program to follow through with their compliance of this rule.