Red Flag Rules May Be Green Light for Litigators

Dealerships across the country are preparing to comply with impending Red Flag rules established by the federal government in an effort to combat identity thieves.

Getting up to speed on those rules is important but it's not just a matter of complying with a new set of regulations.

It's also about steering clear of lawyers looking to take civil action against dealers, says James Lawrence, director-dealer services for the dealer-services firm Compli.

A dealership not following through with ID-theft safeguards may attract the attention of “a hungry lawyer” who will dig into a store's business practices and policies, trying to find gaps and turning them into legal issues, he says.

Some legal firms specialize in that.

“The delay is all well and good, it will help a lot of folks get prepared,” Lawrence says. “It won't be the FTC (Federal Trade Commission) knocking on your door, so much as a lawyer who understands the situation better than an average dealer.”