It’s only a matter of time before the Federal Trade Commission (FTC) makes an example of auto dealerships that are out of compliance with the FTC Safeguards Rule. Right now, compliance officers and auditors tasked with this very job are being sent across the country.
For dealers, staying in compliance can be an overwhelming and costly endeavor, requiring a complex suite of information technology solutions. But failing to comply can result in fines reaching upwards of $50,000.
Document management and storage are one aspect of the Safeguards Rule that challenges many dealers. An employee who makes a mistake as simple as leaving a deal jacket on a table in the lounge or someone’s desk can potentially expose a customer’s sensitive and personal information and put a car dealership at risk for hefty fines.
To ensure compliance with the FTC Safeguards Rule, car dealers have several options:
1. Continue with traditional paper filing and storage methods
2. Set up an in-house process to digitize documents
3. Outsource digitization to a document management solutions provider
Traditional Paper Filing and Storage
Traditional paper filing and storage methods are impractical; they do little to safeguard customer’s personal information. The more employee hands that touch documents with sensitive information, the more at risk your dealership is.
Additionally, paper documents must be stored for seven to 10 years. When you consider that some dealerships produce thousands of documents every week, the costs related to filing and storing these documents off-site can quickly add up.
In-House Processes
While some dealerships may opt for in-house document management, there are inherent risks in doing so. Like the traditional filing and storage process, you want your deals and other documents to touch as few hands as possible. Busy employees can procrastinate or be pulled away from this task easily, so the prospect of files piling up —and their contents being exposed — before someone scans them is very real.
Most dealers appoint this document scanning duty to the F&I office to mitigate risk. But is that how you want your high-paid F&I managers to spend their time? The finance office should generate revenue without being bogged down with mundane duties.
Lack of quality control (QC) with an in-house process can also be problematic. There is a big difference between getting a job done and getting a job done right. When rushed, employees easily miss pages, get files mixed up or include illegible scans. When a compliance audit occurs, a lack of QC can cause a problem because every piece of data needs to be accounted for.
Document Management Solutions
Another option is for dealerships to outsource their document management process to a partner. Outsourcing offers several advantages versus an in-house process.
First, trained experts handle every aspect of the process, from scanning and quality control to easy access storage. They meticulously ensure that every page is scanned, everything is in order and every page is legible.
A document management partner will scan your documents, store the paperwork for six months, and then shred the original documents. Digitized documents are stored in the cloud indefinitely. Outsourcing saves money and reduces the risk of sensitive information falling into the wrong hands.
Outsourcing can also enhance a dealership’s operational efficiency. Freeing employees from time-consuming tasks improves productivity and dramatically reduces the risk of errors when non-specialists handle document management.
When the Inevitable Happens
When (not if) your dealership receives a visit from FTC compliance officers, will you be ready? With traditional paper filing and storage methods, the process of an audit will be painfully long. With an in-house approach, you must rely on your employees to scan and store everything correctly.
At most, FTC compliance officers will give you a day or two notice, and they might want to audit up to 100 deals. If you outsource, the compliance officer can sit at a desk, pull up your document management system or DMS, and search for deals. Your audit will be simple, streamlined and, most of all, compliant.
Dealers must take steps now to protect customer information and stay FTC-compliant. The good news is data security is simple when outsourced to the appropriate experts.
