Regulations and Federal Requirements
Red Flag Rule Overview
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Created by Federal Trade Commission in 2008 to prevent identity theft
There are 26 potential red flags under the Red Flag Rule but not all may apply to your dealership. For a list go
to: http://www.bankinfosecurity.com/articles.php?art_id=932
Your dealership is required to develop, implement and administer a Red Flag program
The maximum civil penalty per violation is $3,500
Fair Credit Reporting Act (FCRA)
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The FCRA is amended by the Fair and Accurate Credit Transactions Act (FACT Act) . Section 311 of the FACT
Act implements the Risk Based Pricing Rule to provide additional information on a consumer’s credit report.
With these amendments, the FCRA now requires three (3) kinds of notices:
 Risk Based Pricing Notice
 Credit Score Disclosure
 Adverse Action Notice
Single fines are $100 to $1000, repeat offenders are susceptible to a $2,500 fee per infraction
To learn more you can go to: http://www2.ftc.gov/os/2009/12/R411009riskbasedpricingfrn.pdf
Equal Credit Opportunity Act (ECOA)
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ECOA ensures that all consumers are given an equal chance to obtain credit
Consumers cannot be refused credit because of: Race, Color, Religion, National Origin, Sex, Marital Status,
Age, Applicant’s income comes from public assistance, and/or application has exercised any right under the
Consumer Credit Protection Act
To learn more you can go to: http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre15.shtm
Truth in Lending Act (TILA) Regulation Z
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The Truth in Lending Act (TILA) and its implementing regulation, called Regulation Z, require that certain
financial information be disclosed to consumers to ensure that the marketing information is accurate and can
be achieved
If a trigger term is used, such as down payment, interest rate or term is listed in the marketing material the
details of that finance package must be listed. These include: percentage or amount of down payment,
number and timing of payments, APR and if APR can increase after transaction is complete
Violators of policies set forth in the Truth in Lending Act can face criminal penalties and civil lawsuits
Convictions can result in fines totaling up to $5,000 in addition, up to one year in prison
To learn more you can go to: http://www.fdic.gov/regulations/laws/rules/6500-1400.html
February 10, 2016
Regulations and Federal Requirements
Form 8300
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IRS Form for cash transactions over $10,000
Any persons who receive more than $10,000 while conducting their trade or business must file a Form 8300.
The $10,000 may occur in a single transaction, or a series of related transactions
Failure to adhere to regulations can result in penalties range from $50 to $100 per transaction
To learn more you can go to: http://www.irs.gov/businesses/small/article/0,,id=148821,00.html
Sherman Anti-Trust Act
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The Sherman Anti-Trust Act, approved in July of 1890, is a broad act, but as it relates to financing, the terms
of financing cannot be contingent upon the sale of additional products – this is called “tying arranging”
An example of “tying arranging” is, “If you buy this extended service contract, we can lower your rate by ½
percent.”
Should this occur and a customer file a complaint that resulted in a conviction, jail time up to 10 years and
penalties of up to $1,000,000 could be accessed
To learn more you can go to: http://www.ftc.gov/bc/antitrust/antitrust_laws.shtm or
http://www.infoplease.com/ce6/history/A0844878.html
Patriot Act OFAC List
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Dealers are required by law to review the Treasury Department's Office of Foreign Assets Control (OFAC) list,
which includes the names of individuals, organizations and countries against which the U.S has imposed
sanctions. Dealerships must review this list prior to entering into any sales or finance contract with an
individual, business entity, charitable organization--anyone
There are penalties for those that do not establish procedures to review the OFAC list and there are fines for
dealerships that enter into a contract with anyone on the list
Also, if you enter into a finance contract with a person on the list and then attempt to assign the contract,
your proposed assignee will likely return the contract to you
To learn more you can go to: http://www.fincen.gov/statutes_regs/patriot/
Gramm-Leach-Bliley Act, Safeguards Rule
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The Safeguards Rule, of the Gramm-Leach-Bliley Act, requires financial institutions to develop a written
information security plan that describes how the company is prepared for, and plans to continue to protect
clients’ nonpublic personal information. Insure the security and confidentiality of customer records and
information
Governs the disclosure of non-public personal information, and requires safeguards to:
 Insure the security and confidentiality of customer records and information
 Protect against any anticipated threats or hazards to the security or integrity of such records
 Protect against unauthorized access to or use of such records or information which could result in
substantial harm or inconvenience to any customer
To learn more you can go to: http://www.ftc.gov/bcp/edu/microsites/idtheft/business/safeguards.html
February 10, 2016