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New FTC Rule on Document Retention Affects Dealers

For years, dealers had a plan for disposing of documents, but recent FTC rule changes have made it time for dealers to come up with a new plan. For example, a dealer recently reached out to TIADA's compliance consultation service for advice on how long to keep denied credit applications.

Updated Guidance on Disposing of Denied Applications

Our guidance in the past was that dealers should keep denied credit applications for at least 2 years, and this was a good plan and working well. However, this guidance must now be changed, and dealers should keep denied applications for ONLY two years due to the new Safeguards Rule.
 

The Safeguards Rule is not yet in effect and will only go into effect 30 days after being officially published by the Federal Register Once the new rule goes into effect, dealers must delete customer information two years after the last time the information is used in connection with providing a product or service to the customer, unless the information is required for a legitimate business purpose, which for denied credit reports would be 25 months. In addition to new more robust document destruction requirements, the Safeguards Rule requires dealers to assess and address the risks to customer information in all areas of their operation including three areas that are particularly important to information security: 

  • - Employee Management and Training 
  • - Information Systems; and  
  • - Detecting and Managing System Failures. 

TIADA is working on various programs to help dealers comply with the Safeguards Rule and will keep you up to date on those programs. Additionally, TIADA in the upcoming weeks and months will issue further guidance on how to comply with the new Safeguards Rule.  

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