Automotive Compliance: A Complex and Ever-Changing Landscape
- Automotive compliance is a complex and ever-changing landscape.
- There are several federal and state regulations that automotive dealerships must follow
- Staying up-to-date and in compliance with these regulations is critical to avoid costly penalties.
What Is Automotive Compliance?
Automotive compliance is an umbrella term that encompasses all compliance-related activities required of automotive dealerships. This includes ensuring that dealerships comply with federal and state regulations and industry self-regulatory guidelines.
Automotive executives and professionals must navigate these regulations to ensure compliance. One of the automotive executives’ most complex challenges is meeting auto dealer regulations. Auto dealer regulations are designed to protect consumers from unfair and deceptive practices. These regulations can be complex and difficult to understand. Automotive executives must be familiar with the regulations to comply with them.
Failure to comply with auto dealer regulations can result in significant penalties, including fines and revocation of the dealer’s license. Additionally, failure to comply with auto dealer regulations can damage the reputation of the dealership and the automotive industry.
The automotive compliance landscape is constantly changing. New regulations are enacted, and old regulations are amended regularly. Automotive executives must stay up-to-date on these changes to ensure compliance. Navigating the automotive compliance landscape can be a difficult and daunting task. However, it is essential for automotive executives to understand and comply with the regulations.
Automotive Compliance: What Do The Laws Stipulate?
As mentioned earlier, federal and state governments highly regulate the automotive industry. Here is an overview of some of the most important laws that automotive dealerships must comply with:
The CAN-SPAM Act is a federal law that regulates commercial email messages. This law applies to all businesses, including automotive dealerships. The CAN-SPAM Act requires businesses to include a valid physical address in their email messages and to allow recipients to opt-out of receiving future messages.
This law also prohibits using false or misleading information in email messages. For example, businesses cannot use a false sender name or subject line. Additionally, businesses cannot use email messages to promote illegal activity.
Contacting potential customers by phone is another common marketing tactic used by auto dealerships. The Telephone Consumer Protection Act (TCPA) is a federal law that regulates telemarketing calls.
The TCPA requires businesses to get consent from a consumer before making telemarketing calls. This law also restricts the use of automated dialing systems and pre-recorded messages. The National Do Not Call Registry lists consumers who have opted out of receiving telemarketing calls. Businesses should observe the National Do Not Call Registry and only make telemarketing calls to consumers who have not opted out.
The Gramm-Leach-Bliley Act (GLBA) is a federal law that requires financial institutions to protect the confidential information of their customers. This law applies to automotive dealerships that offer financing and leasing services. The GLBA requires dealerships to develop and implement a written information security program. This program must include measures to protect customer information from unauthorized access, use, and disclosure.
The GLBA requires dealers to have implemented reasonable safeguards to protect customer information. This includes:
- Developing, implementing, and maintaining a comprehensive information security program
- Limiting access to customer information to employees who have a business need for such access
- Training employees on the importance of information security and the dealership’s policies and procedures
- Ensuring that service providers who have access to customer information maintain appropriate safeguards
When auto dealers are implementing and maintaining their information security programs, they should consult with compliance and legal professionals to ensure that their programs are in compliance with the GLBA. Dealerships should consider various factors when determining what safeguards are reasonable, such as the type of customer information involved, the sensitivity of the information, and the dealership’s size and complexity.
Financing and Leasing Regulations
The Truth in Lending Act (TILA) and the Consumer Leasing Act (CLA) are two of the most important federal laws that govern auto financing and leasing. These laws are designed to protect consumers by requiring lenders to disclose the terms of the loan or lease agreement clearly and concisely.
For auto dealerships that offer financing and leasing services, compliance with TILA and CLA requires the following:
- Disclosing the terms of the loan or lease agreement to the customer in a clear and concise manner
- Providing the customer with a written statement of the terms of the transaction
- Disclosing the annual percentage rate (APR) and the total amount financed
TILA and CLA also restrict certain practices, such as bait-and-switch advertising and unfair financing terms. Auto dealerships must train their employees on these laws and ensure that they comply with the requirements. Dealerships should also have policies and procedures in place to ensure compliance.
Identity Theft Protection
Federal laws require auto dealerships to take measures to protect customers’ information from identity theft. The Red Flags Rule is a federal law that requires businesses to develop and implement a written program to detect, prevent, and mitigate identity theft. The Red Flags Rule applies to businesses that offer financing services, such as auto dealerships.
Under the Red Flags Rule, businesses must develop and implement a written program that includes the following:
- Identifying relevant red flags for identity theft
- Detecting red flags that occur in the normal course of business
- Preventing and mitigating identity theft that occurs in the normal course of business
- Training employees on the procedures for detecting, preventing, and mitigating identity theft
When developing their programs, businesses should consider the type of customer information they have, the methods they use to collect and store information, and the type of identity theft that could occur. If a potential vehicle purchaser attempts to use false or misleading information, this could be a red flag for identity theft.
The Cash Payment Rule
The Cash Payment Rule is one automotive compliance measure that cannot be overlooked. The Cash Payment Rule is a federal law that requires businesses to take certain steps when they accept cash payments of $10,000 or more.
Form 8300 is a federal form that businesses must use to report those cash payments. The form must be filed within 2 weeks of the cash payment. The Cash Payment Rule applies to all businesses, not just auto dealerships.
This law is designed to prevent money laundering and other financial crimes. Dealerships must have procedures to ensure compliance with the Cash Payment Rule. These procedures should include training employees on the requirements of the law and documenting cash transactions.
IT Solutions That Can Deliver Results
Auto dealerships rely increasingly on technology to help them comply with the various laws and regulations that apply to their businesses. Several IT solutions can help auto dealerships comply with the Red Flags Rule, the Cash Payment Rule, and the CAN-SPAM Act.
Some IT solutions that can help with compliance include:
- Security: Security solutions can help businesses protect customer information and prevent identity theft.
- Email: Email solutions can help businesses manage email communications and ensure compliance with the CAN-SPAM Act.
- Antivirus: Antivirus solutions can help businesses protect their systems from malware and other security threats.
These are just a few IT solutions that can help auto dealerships comply. Many other solutions are available, and the best solution for a particular dealership will depend on its specific needs.
Let 360 Smart Networks Help You Stay Compliant
It is essential for automotive executives to understand and comply with the regulations. An IT compliance solutions provider can help you navigate the ever-changing compliance landscape and ensure that your business complies with the latest regulations. 360 Smart Networks has developed industry-leading IT solutions that benefit all of our clients. By outsourcing your IT compliance needs to our experts, you can focus on running your dealership and leave the compliance to us.
Contact us today to book your IT services consultation.