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cheat the government…..go to prison

Prison Time For Two Car Dealership Owners Convicted For Bank Fraud

October 01, 2013

A joint investigation including DMV and DOJ

Two Modesto brothers, owners of several car dealerships in Stanislaus and Merced Counties, are heading to prison for more than four years each as a result of their conviction for conspiring to commit bank fraud.

“These men, along with several of their employees falsified the information of potential car buyers in order for the potential buyers to acquire financing,” said Alan Barcelona, president of the California Statewide Law Enforcement Association (CSLEA).  “Our CSLEA members who are investigators with the Department of Motor Vehicles (DMV) and special agents with the Department of Justice (DOJ) investigate these types of crimes in which unscrupulous people put their own financial gain over the law and over unsuspecting consumers who would not have qualified for loans in the first place.”

Together, the FBI, DOJ and DMV Investigations Division conducted a lengthy investigation into the actions of Abdel Jawad, aka Fred Jawad, 38,  and his brother Abdul Jawad, aka Manny Jawad, 39.

The two men  were found guilty after a three-day trial by a federal jury in January 2013. According to evidence presented at trial, the Jawad brothers owned and operated various used automobile dealerships including Own-A-Car, The Auto Store, and Auction 2 U in Modesto. Employees of the dealerships would help  customers to find a vehicle to purchase. Many of the  customers, however, were unable to qualify for a vehicle loan.   The Jawads, and others acting at their direction and on their behalf, conspired to assist the customers in preparing misleading and false financial information for submission to a financial institution in order to obtain financing.

In some instances the defendants conspired to enter fictitious information on loan applications including the names of employers for whom the customers did not work, or, if the customers were employed, inflated earnings amounts. Some of the customers signed these loan applications, while others had no knowledge of how their signatures appeared on the applications.

Because of the defendants’ conduct, financial institutions approved loans to customers who otherwise should not have received financing. As customers were approved for loans, the dealerships received the money as payment for the purchased vehicles.

The two Jawad brothers were sentenced to prison for more than four years each  and ordered to pay approximately $601,000 in restitution to the victims of their fraud.  The pair were ordered to surrender on November 18, 2013 to begin serving their sentences.

Three other defendants in this case have been sentenced after pleading guilty. Armando Fathic Abdallah was sentenced March 4, 2013, to 18 months in prison. Hussein Ali was sentenced to 27 months in prison on March 18, 2013, and Husam Sarama was sentenced in February 19, 2013 to three months in prison.

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Every dealer has a competitive advantage and a reason or two why the consumer should spend money in their dealership and not the other dealers down the block, but remember that no matter how many reasons you give your customer to buy a car from you, consumers have choices. There is great value in a customer having a good experience with you both online and in-person. So get started with a website for your auto dealership and get yourself out there. Make in impact. Showcase your inventory. Get more leads and sell more cars.

The sites we design for dealers are to-the-point and get the job done. Dealers all over the United States are enjoying using our dealer websites. Each site is designed to engage your customer and to convert them from just a website visitor into a web lead. You’ll have site visitors writing to you and calling you

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FTC red flag rules for car dealers offering credit

Red Flags Rule

From Wikipedia, the free encyclopedia
The Red Flags Rule was created by the Federal Trade Commission (FTC), along with other government agencies such as the National Credit Union Administration (NCUA), to help prevent identity theft. The rule was passed in January 2008, and was to be in place by November 1, 2008. But due to push-backs by opposition, the FTC delayed enforcement until December 31, 2010.[1]

In December 2010, the Red Flags Rule was clarified by the Red Flag Program Clarification Act of 2010 [2] to exclude most doctors, lawyers, and other professionals who do not receive full payment at the time when their service is furnished.

 

 

History

The Red Flags Rule was based on section 114 and 315 of the Fair and Accurate Credit Transactions Act of 2003.[3] FACTA was put in place to help Identity Theft Prevention and Credit History Restoration, Improvements in Use of and Consumer Access to Credit Information, Enhancing the Accuracy of Consumer Report Information, Limiting the Use and Sharing of Medical Information in the Financial System, Financial Literacy and Education Improvement, Protecting Employee Misconduct Investigations, and Relation to State Laws.[4]

Coverage

There are two different groups that this rule applies to: Financial Institutions and Creditors.[5] Financial institution is defined as a state or national bank, a state or federal savings and loan association, a mutual savings bank, a state or federal credit union, or any other entity that holds a “transaction account” belonging to a consumer.[6] FACTA’s definition of “creditor” applies to any entity that regularly extends or renews credit – or arranges for others to do so – and includes all entities that regularly permit deferred payments for goods or services [7]

The definition of a creditor was clarified by the Red Flag Program Clarification Act of 2010.[2] Under the Clarification Act, a creditor regularly and in the course of business:

  • Obtains or uses consumer credit reports;
  • Provides information to consumer reporting agencies; or
  • Advances funds which must be repaid in the future (or against collateral).

This definition was further clarified United States Court of Appeals For the District of Columbia Circuit in its March 4, 2010 ruling on The American Bar Association vs. Federal Trade Commission.[8] The court affirmed Senator Dodd’s statement regarding the bill that “lawyers, doctors, … and other service providers [are] no longer classified as ‘creditors’ for the purpose of the red flags rule just because they do not receive payment in full from their clients at the time they provide their services.”

There are many different companies that this rule applies to: this list includes, but is not limited to finance companies, automobile dealers, mortgage brokers, utility companies, and telecommunications companies; or any other company that advances funds or routinely interacts with consumer credit agencies when performing a service and receiving payment once the work is complete.

Elements

The Red Flags Rule sets out how certain businesses and organizations must develop, implement, and administer their Identity Theft Prevention Programs. The program must include four basic elements, which together create a framework to address the threat of identity theft.[9][10]

The program has four elements:

1) Identify Relevant Red Flags

  • Identify likely business-specific identity theft red flags

2) Detect Red Flags

  • Define procedures to detect red flags in day-to-day operations

3) Prevent and Mitigate Identity Theft

  • Act to prevent and mitigate harm when red flags are identified

4) Update Program

  • Maintain the red flag program, including educating operational staff

The Red Flags Rules provide all financial institutions and creditors the opportunity to design and implement a program that is appropriate to their size and complexity, as well as the nature of their operations.[6]

The red flags fall into five categories:

  • alerts, notifications, or warnings from a consumer reporting agency[6]
  • suspicious documents[6]
  • suspicious identifying information, such as a suspicious address[6]
  • unusual use of – or suspicious activity relating to – a covered account[6]
  • notices from customers, victims of identity theft, law enforcement authorities, or other businesses about possible identity theft in connection with covered accounts[6]

Compliance

The FTC has a created a template for businesses that can be populated to meet an individual company’s needs. The template can be found on the FTC website. This template however is appropriate only for small, very low risk businesses.

Red Flag Rule and identity theft

As the Red Flag rule widely defines creditors, many businesses (such as utilities)[11] are required to collect personal information (such as SSN and Driver’s License Numbers) that they do not need and have no use for. This policy is precisely contrary to the FTC’s advice to consumers that they should disclose their social security number to others only when absolutely necessary.[12] This aspect of the Red Flag rule has the unintended consequences of increasing the number of business that hold consumers’ Social Security numbers thereby putting consumers at greater risk for identity theft through data theft.

References

  1. Jump up^ http://ftc.gov/opa/2010/05/redflags.shtm
  2. Jump up to:a b http://www.govtrack.us/congress/bills/111/s3987
  3. Jump up^ http://ftc.gov/opa/2007/10/redflag.shtm
  4. Jump up^ FAIR AND ACCURATE CREDIT TRANSACTIONS ACT OF 2003, Public, Law 108-159, 108th Congress, retrieved 2009-02-02
  5. Jump up^ http://www.ftc.gov/opa/2008/07/redflagsfyi.shtm
  6. Jump up to:a b c d e f g http://www.ftc.gov/bcp/edu/pubs/business/alerts/alt050.shtm
  7. Jump up^ http://www.ftc.gov/opa/2009/04/redflagsrule.shtm
  8. Jump up^ http://www.ama-assn.org/ama1/pub/upload/mm/399/aba-versus-ftc.pdf
  9. Jump up^ http://www.ftc.gov/bcp/edu/pubs/business/idtheft/bus23.pdf
  10. Jump up^ “Identity theft” means a fraud committed or attempted using the identifying information of another person without authority. See 16 C.F.R. § 603.2(a). “Identifying information” means “any name or number that may be used, alone or in conjunction with any other information, to identify a specific person, including any – (1) Name, Social Security number, date of birth, official State or government issued driver’s license or identification number, alien registration number, government passport number, employer or taxpayer identification number; (2) Unique biometric data, such as fingerprint, voice print, retina or iris image, or other unique physical representation; (3) Unique electronic identification number, address, or routing code; or (4) Telecommunication identifying information or access device (as defined in 18 U.S.C. 1029(e)).” See 16 C.F.R. § 603.2(b).
  11. Jump up^ “Start or Install Service”.
  12. Jump up^ ftc.gov. “Deter Minimize Your Risk”.

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how to guide for the FTC red flags rule

Fighting Identity Theft with the Red Flags Rule: A How-To Guide for Business

An estimated nine million Americans have their identities stolen each year. Identity thieves may drain accounts, damage credit, and even put medical treatment at risk. The cost to business — left with unpaid bills racked up by scam artists — can be staggering, too.

The Red Flags Rule1 requires many businesses and organizations to implement a written identity theft prevention program designed to detect the “red flags” of identity theft in their day-to-day operations, take steps to prevent the crime, and mitigate its damage. The bottom line is that a program can help businesses spot suspicious patterns and prevent the costly consequences of identity theft.

The Federal Trade Commission (FTC) enforces the Red Flags Rule with several other agencies. This article has tips for organizations under FTC jurisdiction to determine whether they need to design an identity theft prevention program.

Table of Contents

An Overview

Who Must Comply with the Red Flags Rule

FAQs

How To Comply: A Four-Step Process

Endnotes

An Overview

The Red Flags Rule tells you how to develop, implement, and administer an identity theft prevention program. A program must include four basic elements that create a framework to deal with the threat of identity theft.2

  1. A program must include reasonable policies and procedures to identify the red flags of identity theft that may occur in your day-to-day operations. Red Flags are suspicious patterns or practices, or specific activities that indicate the possibility of identity theft.3 For example, if a customer has to provide some form of identification to open an account with your company, an ID that doesn’t look genuine is a “red flag” for your business.
  2. A program must be designed to detect the red flags you’ve identified. If you have identified fake IDs as a red flag, for example, you must have procedures to detect possible fake, forged, or altered identification.
  3. A program must spell out appropriate actions you’ll take take when you detect red flags.
  4. A program must detail how you’ll keep it current to reflect new threats.

Just getting something down on paper won’t reduce the risk of identity theft. That’s why the Red Flags Rule has requirements on how to incorporate your program into the daily operations of your business. Fortunately, the Rule also gives you the flexibility to design a program appropriate for your company — its size and potential risks of identity theft. While some businesses and organizations may need a comprehensive program to address a high risk of identity theft, a streamlined program may be appropriate for businesses facing a low risk.

Securing the data you collect and maintain about customers is important in reducing identity theft. The Red Flags Rule seeks to prevent identity theft, too, by ensuring that your business or organization is on the lookout for the signs that a crook is using someone else’s information, typically to get products or services from you without paying for them. That’s why it’s important to use a one-two punch in the battle against identity theft: implement data security practices that make it harder for crooks to get access to the personal information they use to open or access accounts, and pay attention to the red flags that suggest that fraud may be afoot.

Who Must Comply with the Red Flags Rule: A Two-Part Analysis

The Red Flags Rule requires “financial institutions” and some “creditors” to conduct a periodic risk assessment to determine if they have “covered accounts.” The determination isn’t based on the industry or sector, but rather on whether a business’ activities fall within the relevant definitions. A business must implement a written program only if it has covered accounts.

Financial Institution

The Red Flags Rule defines a “financial institution” as a state or national bank, a state or federal savings and loan association, a mutual savings bank, a state or federal credit union, or a person that, directly or indirectly, holds a transaction account belonging to a consumer.4 While many financial institutions are under the jurisdiction of the federal bank regulatory agencies or other federal agencies, state-chartered credit unions are one category of financial institution under the FTC’s jurisdiction.

Creditor

The Red Flags Rule defines “creditor” based on conduct.5

To determine if your business is a creditor under the Red Flags Rule, ask these questions:

Does my business or organization regularly:

  • defer payment for goods and services or bill customers?
  • grant or arrange credit?
  • participate in the decision to extend, renew, or set the terms of credit?

If you answer:

  • No to all, the Rule does not apply.
  • Yes to one or more, ask:

Does my business or organization regularly and in the ordinary course of business:

  • get or use consumer reports in connection with a credit transaction?
  • give information to credit reporting companies in connection with a credit transaction?
  • advance funds to — or for — someone who must repay them, either with funds or pledged property (excluding incidental expenses in connection with the services you provide to them)?

If you answer:

  • No to all, the Rule does not apply.
  • Yes to one or more, you are a creditor covered by the Rule.

Covered Accounts

If you conclude that your business or organization is a financial institution or a creditor covered by the Rule, you must determine if you have any “covered accounts,” as the Red Flags Rule defines that term. You’ll need to look at existing accounts and new ones6.  Two categories of accounts are covered:

  1. A consumer account for your customers for personal, family, or household purposes that involves or allows multiple payments or transactions.7 Examples are credit card accounts, mortgage loans, automobile loans, checking accounts, and savings accounts.
  2.  “Any other account that a financial institution or creditor offers or maintains for which there is a reasonably foreseeable risk to customers or to the safety and soundness of the financial institution or creditor from identity theft, including financial, operational, compliance, reputation, or litigation risks.”8 Examples include small business accounts, sole proprietorship accounts, or single transaction consumer accounts that may be vulnerable to identity theft. Unlike consumer accounts designed to allow multiple payments or transactions — always considered “covered accounts” under the Rule — other types of accounts are “covered” only if the risk of identity theft is reasonably foreseeable.

In determining if accounts are covered under the second category, consider how they’re opened and accessed. For example, there may be a reasonably foreseeable risk of identity theft in connection with business accounts that can be accessed remotely — say, through the Internet or the telephone. Your risk analysis must consider any actual incidents of identity theft involving accounts like these.

If you don’t have any covered accounts, you don’t need a written program. But business models and services change. You may acquire covered accounts through changes to your business structure, process, or organization. That’s why it’s good policy and practice to conduct a periodic risk assessment.

FAQs

  1. I review credit reports to screen job applicants. Does the Rule apply to my business on this basis alone?No, the Rule does not apply because the use is not “in connection with a credit transaction.”
  2. What if I occasionally get credit reports in connection with credit transactions?According to the Rule, these activities must be done “regularly and in the ordinary course of business.” Isolated conduct does not trigger application of the Rule, but if your business regularly furnishes delinquent account information to a consumer reporting company but no other credit information, that satisfies the “regularly and in the ordinary course of business” prerequisite.

    What is deemed “regularly and in the ordinary course of business” is specific to individual companies. If you get consumer reports or furnish information to a consumer reporting company regularly and in the ordinary course of your particular business, the Rule applies, even if for others in your industry it isn’t a regular practice or part of the ordinary course of business.

  3. I am a professional who bills my clients for services at the end of the month. Am I a creditor just because I allow clients to pay later?No. Deferring payment for goods or services, payment of debt, or the purchase of property or services alone doesn’t constitute “advancing funds” under the Rule.
  4. In my business, I lend money to customers for their purchases. The loans are backed by title to their car. Is this considered “advancing funds”?Yes. Anyone who lends money — like a payday lender or automobile title lender — is covered by the Rule. Their lending activities may make their business attractive targets for identity theft. But deferring the payment of debt or the purchase of property or services alone doesn’t constitute “advancing funds.”
  5. I offer instant credit to my customers and contract with another company to pull credit reports to determine their creditworthiness. No one in our organization ever sees the credit reports. Is my business covered by the Rule?Yes. Your business is — regularly and in the ordinary course of business — using credit reports in connection with a credit transaction. The Rule applies whether your business uses the reports directly or whether a third-party evaluates them for you.
  6. I operate a finance company that helps people buy furniture. Does the Rule apply to my business?Yes. Your company’s financing agreements are considered to be “advancing funds on behalf of a person.”
  7. In my legal practice, I often make copies and pay filing, court, or expert fees for my clients. Am I “advancing funds”?No. This is not the same as a commercial lender making a loan; “advancing funds” does not include paying in advance for fees, materials, or services that are incidental to providing another service that someone requested.
  8. Our company is a “creditor” under the Rule and we have credit and non-credit accounts. Do we have to determine if both types of accounts are “covered accounts”?Yes. You must examine all your accounts to determine which are “covered accounts” that must be included in your written identity theft prevention program.
  9. My business accepts credit cards for payments. Are we covered by the Red Flags Rule on this basis alone?No. Just accepting credit cards as a form of payment does not make you a “creditor” under the Red Flags Rule.
  10. My business isn’t subject to much of a risk that a crook is going to misuse someone’s identity to steal from me, but it does have covered accounts. How should I structure my program?If identity theft isn’t a big risk in your business, complying with the Rule is simple and straightforward. For example, if the risk of identity theft is low, your program might focus on how to respond if you are notified — say, by a customer or a law enforcement officer — that someone’s identity was misused at your business. The Guidelines to the Rule have examples of possible responses. But even a business at low risk needs a written program that is approved either by its board of directors or an appropriate senior employee.

How To Comply: A Four-Step Process

Many companies already have plans and policies to combat identity theft and related fraud. If that’s the case for your business, you’re already on your way to full compliance.

1. Identify Relevant Red Flags

What are “red flags”? They’re the potential patterns, practices, or specific activities indicating the possibility of identity theft.9 Consider:

Risk Factors. Different types of accounts pose different kinds of risk. For example, red flags for deposit accounts may differ from red flags for credit accounts, and those for consumer accounts may differ from those for business accounts. When you are identifying key red flags, think about the types of accounts you offer or maintain; the ways you open covered accounts; how you provide access to those accounts; and what you know about identity theft in your business.

Sources of Red Flags. Consider other sources of information, including the experience of other members of your industry. Technology and criminal techniques change constantly, so it’s important to keep up-to-date on new threats.

Categories of Common Red Flags. Supplement A to the Red Flags Rule lists specific categories of warning signs to consider including in your program. The examples here are one way to think about relevant red flags in the context of your own business.

  • Alerts, Notifications, and Warnings from a Credit Reporting Company. Changes in a credit report or a consumer’s credit activity might signal identity theft:
    • a fraud or active duty alert on a credit report
    • a notice of credit freeze in response to a request for a credit report
    • a notice of address discrepancy provided by a credit reporting company
    • a credit report indicating a pattern inconsistent with the person’s history B for example, an increase in the volume of inquiries or the use of credit, especially on new accounts; an unusual number of recently established credit relationships; or an account that was closed because of an abuse of account privileges
  • Suspicious Documents. Documents can offer hints of identity theft:
    • identification looks altered or forged
    • the person presenting the identification doesn’t look like the photo or match the physical description
    • information on the identification differs from what the person with identification is telling you or doesn’t match a signature card or recent check
    • an application looks like it’s been altered, forged, or torn up and reassembled
  • Personal Identifying Information. Personal identifying information can indicate identity theft:
    • inconsistencies with what you know — for example, an address that doesn’t match the credit report or the use of a Social Security number that’s listed on the Social Security Administration Death Master File
    • inconsistencies in the information a customer has submitted to you
    • an address, phone number, or other personal information already used on an account you know to be fraudulent
    • a bogus address, an address for a mail drop or prison, a phone number that’s invalid, or one that’s associated with a pager or answering service
    • a Social Security number used by someone else opening an account
    • an address or telephone number used by several people opening accounts
    • a person who omits required information on an application and doesn’t respond to notices that the application is incomplete
    • a person who can’t provide authenticating information beyond what’s generally available from a wallet or credit report — for example, someone who can’t answer a challenge question
  • Account Activity. How the account is being used can be a tip-off to identity theft:
    • shortly after you’re notified of a change of address, you’re asked for new or additional credit cards, or to add users to the account
    • a new account used in ways associated with fraud — for example, the customer doesn’t make the first payment, or makes only an initial payment; or most of the available credit is used for cash advances or for jewelry, electronics, or other merchandise easily convertible to cash
    • an account used outside of established patterns — for example, nonpayment when there’s no history of missed payments, a big increase in the use of available credit, or a major change in buying or spending patterns or electronic fund transfers
    • an account that is inactive is used again
    • mail sent to the customer that is returned repeatedly as undeliverable although transactions continue to be conducted on the account
    • information that the customer isn’t receiving an account statement by mail or email
    • information about unauthorized charges on the account
  • Notice from Other Sources. A customer, a victim of identity theft, a law enforcement authority, or someone else may be trying to tell you that an account has been opened or used fraudulently.

2. Detect Red Flags

Sometimes, using identity verification and authentication methods can help you detect red flags. Consider whether your procedures should differ if an identity verification or authentication is taking place in person, by telephone, mail, or online.

  • New accounts. When verifying the identity of the person who is opening a new account, reasonable procedures may include getting a name, address, and identification number and, for in-person verification, checking a current government-issued identification card, like a driver’s license or passport. Depending on the circumstances, you may want to compare that to information you can find out from other sources, like a credit reporting company or data broker, or the Social Security Number Death Master File.10 Asking questions based on information from other sources can be a helpful way to verify someone’s identity.
  • Existing accounts. To detect red flags for existing accounts, your program may include reasonable procedures to confirm the identity of the person you’re dealing with, to monitor transactions, and to verify the validity of change-of-address requests. For online authentication, consider the Federal Financial Institutions Examination Council’s guidance on authentication as a starting point.11 It explores the application of multi-factor authentication techniques in high-risk environments, including using passwords, PINs, smart cards, tokens, and biometric identification. Certain types of personal information — like a Social Security number, date of birth, mother’s maiden name, or mailing address — are not reliable authenticators because they’re so easily accessible.

You may be using programs to monitor transactions, identify behavior that indicates the possibility of fraud and identity theft, or validate changes of address. If so, incorporate these tools into your program.

3. Prevent And Mitigate Identity Theft

When you spot a red flag, be prepared to respond appropriately. Your response will depend on the degree of risk posed. It may need to accommodate other legal obligations, like laws about providing and terminating service.

The Guidelines in the Red Flags Rule offer examples of some appropriate responses, including:

  • monitoring a covered account for evidence of identity theft
  • contacting the customer
  • changing passwords, security codes, or other ways to access a covered account
  • closing an existing account
  • reopening an account with a new account number
  • not opening a new account
  • not trying to collect on an account or not selling an account to a debt collector
  • notifying law enforcement
  • determining that no response is warranted under the particular circumstances

The facts of a particular case may warrant using one of these options, several of them, or another response altogether. Consider whether any aggravating factors raise the risk of identity theft. For example, a recent breach that resulted in unauthorized access to a customer’s account records would call for a stepped-up response because the risk of identity theft rises, too.

4. Update The Program

The Rule recognizes that new red flags emerge as technology changes or identity thieves change their tactics, and requires periodic updates to your program. Factor in your own experience with identity theft; changes in how identity thieves operate; new methods to detect, prevent, and mitigate identity theft; changes in the accounts you offer; and changes in your business, like mergers, acquisitions, alliances, joint ventures, and arrangements with service providers.

Administering Your Program

Your Board of Directors — or an appropriate committee of the Board — must approve your initial plan.  If you don’t have a board, someone in senior management must approve it.  The Board may oversee, develop, implement, and administer the program — or it may designate a senior employee to do the job. Responsibilities include assigning specific responsibility for the program’s implementation, reviewing staff reports about compliance with the Rule, and approving important changes to your program.

The Rule requires that you train relevant staff only as “necessary.” Staff who have taken fraud prevention training may not need to be re-trained. Remember that employees at many levels of your organization can play a key role in identity theft deterrence and detection.

In administering your program, monitor the activities of your service providers. If they’re conducting activities covered by the Rule — for example, opening or managing accounts, billing customers, providing customer service, or collecting debts — they must apply the same standards you would if you were performing the tasks yourself. One way to make sure your service providers are taking reasonable steps is to add a provision to your contracts that they have procedures in place to detect red flags and either report them to you or respond appropriately to prevent or mitigate the crime. Other ways to monitor your service providers include giving them a copy of your program, reviewing the red flag policies, or requiring periodic reports about red flags they have detected and their response.

It’s likely that service providers offer the same services to a number of client companies. As a result, the Guidelines are flexible about service providers using their own programs as long as they meet the requirements of the Rule.

The person responsible for your program should report at least annually to your Board of Directors or a designated senior manager. The report should evaluate how effective your program has been in addressing the risk of identity theft; how you’re monitoring the practices of your service providers; significant incidents of identity theft and your response; and recommendations for major changes to the program.12

FTC Resources

Identity Theft
ftc.gov/idtheft

Endnotes

1 The Red Flags Rule was issued in 2007 under Section 114 of the Fair and Accurate Credit Transaction Act of 2003 (FACT Act), Pub. L. 108-159, amending the Fair Credit Reporting Act (FCRA), 15 U.S.C. ‘ 1681m(e). The Red Flags Rule is published at 16 C.F.R. ‘ 681.1. See also 72 Fed. Reg. at 63,771 (Nov. 9, 2007). You can find the full text athttp://www.ftc.gov/os/fedreg/2007/november/071109redflags.pdf. The preamble B pages 63,718-63,733 — discusses the purpose, intent, and scope of coverage of the Rule. The text of the FTC rule is at pages 63,771-63,774. The Rule includes Guidelines B Appendix A, pages 63,773-63,774 — intended to help businesses develop and maintain a compliance program. The Supplement to the Guidelines — page 63,774 — provides a list of examples of red flags for businesses and organizations to consider incorporating into their program. This guide does not address companies’ obligations under the Address Discrepancy or the Card Issuer Rule, also contained in the Federal Register with the Red Flags Rule.

The Rule was amended in 2010 by the Red Flag Program Clarification Act of 2010, 15 U.S.C. 1681m(e)(4), Pub. L. 111-319, 124 Stat. 3457 (Dec. 18, 2010).

2 “Identity theft” means a fraud committed or attempted using the identifying information of another person without authority. See 16 C.F.R. ‘ 603.2(a). “Identifying information” means “any name or number that may be used, alone or in conjunction with any other information, to identify a specific person, including any —

(1)           Name, Social Security number, date of birth, official State or government issued driver’s license or identification number, alien registration number, government passport number, employer or taxpayer identification number;

(2)           Unique biometric data, such as fingerprint, voice print, retina or iris image, or other unique physical representation;

(3)           Unique electronic identification number, address, or routing code; or

(4)           Telecommunication identifying information or access device (as defined in 18 U.S.C. 1029(e)).”

See 16 C.F.R. ‘ 603.2(b).

3 See 16 C.F.R. ‘ 681.1(b)(9).

4 The Rule definition of “financial institution” is found in the FCRA. See 15 U.S.C. ‘ 1681a(t). The term “transaction” is defined in section 19(b) of the Federal Reserve Act. See 12 U.S.C. ‘ 461(b)(1)(C). A “transaction account” is a deposit or account from which owners may make payments or transfers to third parties or others. Transaction accounts include checking accounts, negotiable orders of withdrawal accounts, savings deposits subject to automatic transfers, and share draft accounts.

5 “Creditor” and “credit” are defined in the FCRA, see 15 U.S.C. 1681a(r)(5), by reference to section 702 of the Equal Credit Opportunity Act (ECOA), 15 U.S.C. ‘ 1691a. The ECOA defines “credit” as “the right granted by a creditor to a debtor to defer payment of debt or to incur debts and defer its payment or to purchase property or services and defer payment therefor.” 15 U.S.C. ‘ 1691a(d). The ECOA defines “creditor” as “any person who regularly extends, renews, or continues credit; any person who regularly arranges for the extension, renewal, or continuation of credit; or any assignee of any original creditor who participates in the decision to extend, renew, or continue credit.” 15 U.S.C. ‘ 1691a(e). The term “person” means “a natural person, a corporation, government or governmental subdivision or agency, trust, estate, partnership, cooperative, or association.” 15 U.S.C. ‘ 1691a(f). See also Regulation B. 68 Fed. Reg. 13,161 (Mar. 18, 2003).

The Clarification Act has modified the definition of “creditor” however. For purposes of the Red Flags Rule, a creditor —

“A.          means a creditor, as defined in section 702 of the [ECOA], that regularly and in the ordinary course of business—

(i)            obtains or uses consumer reports, directly or indirectly, in connection with a credit transaction;

(ii)           furnishes information to consumer reporting agencies, as described in section 623 [of the FCRA], in connection with a credit transaction; or

(iii)          advances funds to or on behalf of a person, based on an obligation of the person to repay the funds or repayable from specific property pledged by or on behalf of the person;

B.            does not include a creditor … that advances funds on behalf of a person for expenses incidental to a service provided by the creditor to that person.”

6 An “account” is a continuing relationship established by a person with a financial institution or creditor to obtain a product or service for personal, family, household, or business purposes. 16 C.F.R. ‘ 681.1(b)(1).  An account does not include a one-time transaction involving someone who isn’t your customer, such as a withdrawal from an ATM machine.

7 See 16 C.F.R. ‘ 681.1(b)(3)(i).

8 16 C.F.R. ‘ 681.1(b)(3)(ii).

9 See 16 C.F.R. ‘ 681.12(b)(9).

10 The verification procedures are set forth in the Customer Identification Programs Rule applicable to banking institutions, 31 C.F.R. ‘ 103.121. This Rule may be a helpful starting point in developing your program.

11 “Authentication in an Internet Banking Environment” (Oct. 2, 2005) available athttp://www.ffiec.gov/pdf/authentication_guidance.pdf.

dmv vehicle registration procedures for licensed car dealers

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motorsport market weighs in on the indiana car dealer license situation

Art is our competition

http://www.motorsportsmarket.com/pages_new/indianadealers.asp

we agree the indiana car dealer license scheme is problematic in california

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Indiana dealer licenses: Good option or not?

Below are some of the issues to consider in getting an out-of-state (Indiana) dealer license vs. a California dealer license.

Wholesale Dealers Cannot Sell to the PublicThe Indiana dealer websites offer an Indiana wholesale dealer license. A wholesale license does not allow sales to the public. You will not be able to sell to the public through Craigslist, E-Bay, AutoTrader.com, etc., or even your own website. You cannot sell to friends, or relatives, either with the Indiana wholesale dealer license. You can only sell to other licensed dealers, or possibly export. To sell to the public, you need the California retail dealer license, available only through the California DMV.

Wholesale Dealer “Partnering” with a Retail DealerSome Indiana sites also offer to introduce you to a retail dealer that you can sell your cars to. This raises several other issues.

 

  • First, most retail dealers will have little or no interest in purchasing vehicles from you. They could have purchased the vehicle directly from the same dealer auction as you – without your commission.
  • Second, the sites promote that you can sell your vehicles to their retail dealers, and that these dealers will then sell to your buyers. What is not addressed is the practical issue of how you will obtain those buyers. As a wholesale dealer you cannot sell to the public, so therefore you are not permitted to advertise your vehicles to the public. To do so would be fraud, advertising vehicles to people you cannot sell to. You also cannot consign your cars to another dealer to have them sell your vehicles for you. That violates DMV regulations. So selling to another dealer to try and make retail profits with a wholesale license is not a viable business model.
  • Third, the retail dealers will not help you for free. You will need to pay them. This could be part of an ongoing “service fee” you will be required to pay to the Indiana business, or a commission for each vehicle, if any, the retail dealer might sell.

 

Ongoing ChargesThe Indiana dealer operations generally charge several hundred dollars per month to use their service. A California dealer license, on the other hand, requires no ongoing monthly fees. However, California dealers must have at least an office location, which is an ongoing expense. Then again, Indiana requires an office location too. The difference is that you pay the Indiana dealer business for the privilege of using their business location to get their license instead of rent for your own California office and dealer license. The savings, if any, would be the difference between the rent paid in California vs. the fees charged by the Indiana dealer business. Any savings, however, must still balanced with the other issues with having an out-of-state license vs. a California dealer license.

Office RentTo get a California wholesale dealer license, DMV requires only an office – no display area, nor any sign. Often times this means you can have a home office without any additional rent. You also avoid all the monthly charges for any out-of-state dealership service. Even if you do get an office, it only needs to be big enough for a desk or table, and a filing cabinet. You can even sublease space where other business are located to keep your office expenses very low. Then you have your own business location and presence in California, the state where you live, and the state in which you do business.

Changing from Wholesale to RetailIf you get an Indiana wholesale dealer license, that’s all you can be, a wholesale dealer selling to other dealers, or possibly exporting. However, if you get the California wholesale dealer license, you can always later covert to retail sales, or add a retail branch location to your wholesale license. In other words, you can start with a wholesale license (with very low overhead, maybe even a home office), and later get a new location with an office, display area big enough for 2 vehicles, and a two foot square sign, to get your retail license. Getting your California dealer license allows you to change to retail, or wholesale, at any time, and have as many locations as you want in California. The Indiana license does not.

Travel to IndianaTo get the Indiana dealer license, you will have to travel to Indiana. You will have to meet with the Indiana Secretary of State Compliance Officer to request approval for an Indiana dealer license. This is considerably more expensive, and time consuming, than attending any California dealer Pre-Licensing class to get your California dealer license. In addition, when reviewing their dealer license contracts, look to see which state’s laws apply to your dealership, and where any court,arbitraion, or other legal proceedings will have to take place. Chances are excellent you will be bound by Indiana law, and required to appear in Indiana to either collect money owed to you, or to defend yourself. No one wants problems, but if something does come up between you and another party, it is considerably easier and substantially less expensive to collect and defend in your own backyard.

Dealer Bonds and InsuranceAll dealers, Indiana or California, require a dealer bond and dealer insurance. The Indiana dealer businesses offer to sell you their bonds and their insurance, which is a nice service. On the other hand, we provide you the names and contact information for the bond and insurance companies that have recently provided California dealers the lowest rates. To make this list, these companies must be refered to us by dealers. We receive no kickback, or fee, from any company on this list. These companies make the list by providing the best rates and services, period.

“Sharing” a California Dealer’s LicenseSome sites are offering, for hundreds of dollars per month, to add you onto an existing dealer license in your state. This is not easy as few dealers will take the risk to do this. There are considerable risks for you too. These situations can be like arranged marriages where the parties don’t know each other but are put together and their fortunes and losses depend on the actions of the other. Potential issues include the following:

  • Cost. The money you pay every month to use the license is money you could have been investing in your own business and your own inventory, not theirs.
  • As a member of another business, you are subject to rights and obligations of all the others involved in that business, many, if not most of whom, you may never know.
  • Their dealer business could fail, through no fault of your own. Then you have no dealer rights. You cannot buy more vehicles, nor sell the vehicles you already own, potentially sticking you with inventory you cannot move.
  • Your business assets, including your inventory and money, are subject to being taken in a lawsuit because of actions by others using the same dealer license. The bottom line is that you will be responsible for protecting your assets, including attorney’s fees.
  • The more people that sign up for this arrangement, the more money the organizers make, and the less control you have. Your assets are also at greater risk with each new member that joins.
  • If you feel sharing a dealer license is a good deal for you, be certain to take the time to read the fine print on any contracts you are required to sign, or have an attorney review them. Also, ask all your questions, even if they seem silly. Make sure the answers provided match the written contracts you are asked to sign The contract are binding. What you are told to encourage you to sign them is not.

current list of dmv certified car dealer license schools

DMV Dealer Education Providers

Dealer education providers listed by type of class offered area (served) and name.
Area and
Type of Class Offered
Online/Home Study Continuing Education title Bay Area title Northern Area title Central Area title Southern Area title Provider
**X Auto Support Group
Phone: 1-714-588-1511
Email: E2000perez@yahoo.com
X Best Solutions
Phone: 1-619-546-4064
X X X X X Motorsports Market On-Line Courses, Live Classes and Home Study
Phone: 1-800-980-1967
Internet: www.motorsportsmarket.com
X X X X X Automotive Systems Analysis
Phone: 1-800-564-0984
Internet: www.autosystemsanalysis.com
X X X X X TriStar Motors, LLC
Phone: 1-800-901-5950
Internet: www.gotplates.com
X X 24-7 Dealer Training Specialists
Phone: 1-951-833-8398
Internet: www.24-7dealerclass.com
X X California Auto Dealer Education
Phone: 1-661-871-3311
Internet: www.cadeclasses.com
X Central Valley Dealers
Licensing Renewal Service
Phone: 1-209-333-0900
Email: chuckwentland@aol.com
X Superior Vehicle Dealer Training Institute
Phone: 1-949-305-8402
Internet: www.superiorbonds.com
X X Inland Empire/Orange County Dealer School
Phone: 1-909-880-1380
Internet: www.bigcardealer.com
X X X Dealer Training Experts of Northern California
Phone: 1-408-910-3876
Internet: www.dealersclass.com
X X X X X Dealer Intel
Phone: 1-415-613-4754
Internet: www.dealerintel.com
X X X X X $85 Dealer Education
Phone: 1-951-541-8390
Internet: www.waynesinsurance.com
X X X X Los Angeles Dealer School
Phone: 1-310-227-6920
Internet: www.dealerclass.com
*X Dealer License Seminars of San Diego
Phone: 1-619-665-6440
Internet: www.dealerseminars.com
X X X X X Golden State Educational Services
Phone: 1-916-395-7004
Internet: www.goldenstateeducation.com
X X Dealer Lessons
Phone: 1-877-772-3332
Internet: www.dealerlessons.com
X X X X X Dealer Education Services
Phone: 1-888-323-0031
Internet: www.dealereducation.com
X X Coffer Dealer Education
Phone: 1-888-694-1444
Internet: www.cofferdealereducation.com
X Cesar Carrascos Dealer Licensing Seminars
Phone: 1-619-474-0477
Internet: www.carrascogroup.com
X Colby Learning Center of San Diego
Phone: 1-619-559-5748
Email: colbylearning@aol.com
X X Dealers Support Group
Phone: 1-818-758-9951
Internet: www.dealerssupport.com
X Online Auto Dealer ED
Phone: 1-877-724-6150
Internet: www.onlineautodealered.com
X California Accredited Dealer Education
Phone: (714) 300-4148
Email:: cadeclass@aol.com

*Prelicensing only
**Continuing Education only

Last updated: 07/23/2012

dmv retro license plates may make a revival

Retro license plate proposal on the move

California lawmakers can’t roll back gas prices or revive eight-track tape players, but they soon may offer motorists something else from decades past: replica license plates.

Assembly Bill 1658 would allow the Department of Motor Vehicles to issue plates resembling those of the 1950s, through ’80s for a fee – $50 initially, $40 per year – to cover administrative costs and raise money for environmental projects.

Assemblyman Mike Gatto, a Los Angeles Democrat who proposed the bill, said it capitalizes on nostalgia and recent production of retro-style vehicles. “What’s old is new,” he says, “and it might make the state a little money, too.”

Plates would not be issued by the DMV until 7,500 had been ordered by the public. They would come in three classic designs, with black lettering on a yellow background, or yellow lettering on either a black or blue background.

The new plates would not be exact reproductions, however. Current plates have seven digits, for example, while those of decades past had six. Reflectivity and font-type standards also have changed through the decades.

AB 1658 received bipartisan support in the Assembly Transportation Committee, 14-0, and is awaiting action in the Assembly Appropriations Committee.

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we estimate your wholesale

home based part time car dealer license

expenses below:

your car dealer bond $ 300.

your car dealer training $ 150.

your car dealer insurance $ 1800.

your car dealer license $ 150.

your car dealer plates $ 150.

your car dealer forms $ 200.

your car dealer office expenses $ 500.

your car dealer auction access $ 100.

your car dealer checking account $ 250.

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car dealer red flag rules musical chairs…..the music just stopped…..are you certified ???

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can you afford a data breach ???

the california attorney general announced the formation of the privacy unit

specifically designed to enforce state and federal identity theft laws

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rule # 1 for car dealers offering credit

RED FLAG RULES

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we offer a complete compliance solution for $ 500.

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