In October 2023, the Federal Trade Commission (FTC) implemented an amendment to the Safeguards Rule, mandating that non-bank financial institutions—including auto dealerships—must report data breaches involving more than 500 consumers within 30 days.
This latest development adds a layer of responsibility for dealerships to safeguard sensitive customer information, particularly when it comes to document management.
Many dealerships continue to scan documents in-house, unaware that this practice may expose them to liability and security risks. Having multiple staff members handle documents that contain personal information increases the likelihood of a security breach, leaving dealerships vulnerable to potential fines and damage to their reputations.
A safer alternative is outsourcing document management to an FTC-compliant company. Here’s why dealers should consider this approach:
1. Enhanced Security Measures
Outsourcing to a document management company that complies with FTC regulations ensures heightened security. These vendors employ multi-factor authentication for all access to personal information, adding an extra layer of protection against unauthorized access. Regular penetration testing further fortifies their defenses, and robust insurance policies provide financial coverage in case of a breach.
By entrusting document management to a specialized company, dealerships can benefit from the expertise and resources dedicated to safeguarding sensitive information, reducing the risk of internal security lapses.
2. Compliance with Shredding and Storage Guidelines
Document management companies are well-versed in regulations governing sensitive information handling. They ensure that documents are stored and shredded according to guidelines, reducing the risk of non-compliance and potential penalties. This meticulous adherence to regulations extends to the entire document lifecycle, from pickup to scanning, storage, and eventual shredding.
3. Minimizing Internal Liabilities
Dealerships that maintain document management in-house expose themselves to potential internal liabilities. The more hands involved in the document-handling process, the greater the risk of a security breach or mishandling of sensitive information.
In contrast, outsourcing to a reputable vendor minimizes liabilities as the responsibility for security lies with the vendor. Documents are securely picked up via dedicated drivers or FedExed overnight to the vendor’s facility.
The scanning, storage, and shredding processes all occur in one location, reducing the likelihood of information going missing or being mishandled during an audit.
4. Time and Resource Savings
In addition to enhancing security, outsourcing document management saves dealerships time and resources. In the event of an audit, a dealership relying on an in-house process would need to divert valuable staff to locate and pull the necessary documents.
When outsourcing, this responsibility falls on the vendor, allowing dealership staff to focus on their core tasks. Storing documents digitally also makes them easily retrievable, expediting the audit process.
The recent FTC Safeguards Rule amendment highlights the importance of securing sensitive customer information within auto dealerships. Maintaining a secure document management process in-house holds many risks, while outsourcing to an FTC-compliant vendor is a proactive solution that minimizes liabilities, ensures compliance, and keeps customer information secure.