Customers' driver's licenses pose hidden threat to dealers

For a dealership, a customer's driver's license isn't just a driver's license any more.

Based on lawsuits, it's "a $16,000 liability" lying next to the copy machine, says Doug Fusco, founder and CEO of DealerSafeGuardSolutions in McKinney, Texas.

Every dealership employee who touches the license potentially represents a separate violation of privacy rules, Fusco said in a recent interview.

"When you go to an emergency room, or you go to a bank and hand over your ID, at least they're in a secure area," he said. "Your information isn't just sitting around where anybody can see it or anybody with a cell-phone camera can shoot a picture of it, which is what they (thieves) often do."

Raising red flags

DealerSafeGuardSolutions was an exhibitor at last month's NADA exposition in Orlando. Vendors ranging from niche players like Fusco's company to giants such as Reynolds and Reynolds Co. and ADP Dealer Services are tackling Red Flags Rule compliance. The Federal Trade Commission's Red Flags Rule is the Next Big Thing in preventing identity theft.

Under the impending Red Flags Rule, each violation of the rules governing the protection of private customer data represents a maximum civil penalty of $3,500, according to the FTC.

Enforcement of the Red Flags Rule has been postponed repeatedly. Unless it's postponed again, the latest deadline for enforcement to start is June 1, 2010, from an original planned start date of Nov. 1, 2008.

Jumping hurdles

Fusco's firm sells a computer-based system for enforcing Red Flags Rule compliance at dealerships. The three main pieces of the system are a scanner that makes electronic copies of customer documents, a prescribed work flow that strictly limits access to customer data, plus a "dashboard" display that tracks transactions.

No deal can go through until there's a green flag next to each of the steps, Fusco said. For instance, a dealership legally can't check a customer's credit until it has a signed credit application, yet without adequate controls it happens all the time, Fusco said.

Says Dave Robertson, executive director of the Association of Finance & Insurance Professionals in Colleyville, Texas: "There is no greater threat to car dealers than identity theft."

You can reach Jim Henry at