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Red Flags

REAL ID Has Arrived

December 2017, F&I and Showroom - Feature

by Gil Van Over - Also by this author

(U.S. Air Force Graphic/James Rainier) 
(U.S. Air Force Graphic/James Rainier) 

Air travel offers a great opportunity to spend a little time putting thoughts to words. The inspiration for this month’s plane-written article was a sign in the airport security line, which read: “Effective Jan. 22, 2018, each traveler must have a READ ID to pass through security.”

The date is right and the REAL ID requirement for air travel is real. Evidently, the implementation date for this obscure law that passed three presidential elections ago has snuck up on us like a copperhead seeking a campfire.

"The first (and more common) issue arises when the driver’s license or ID card has a designation stating “Not Valid for Federal Identification.” At first blush, this certainly gives one pause about whether it can be accepted as identification to sell and finance a vehicle."

Congress passed the REAL ID Act in 2005 with the goal of establishing minimally acceptable security standards for state-issued driver’s licenses and identification cards. The law also prohibits federal agencies from accepting licenses and ID cards for official purposes from those states in which ID-vetting processes do not meet these standards.

Two deadlines loom: On Jan. 28, 2018, anyone traveling through a TSA security checkpoint cannot use a driver’s license or ID card issued by noncompliant states. A valid passport is still acceptable, however.

The second deadline is Oct. 1, 2020. On that day, anyone wanting to fly or enter a federal facility that requires identification must have a REAL ID-compliant driver’s license, state ID or passport. So all those folks in Arizona with driver’s licenses that expire on their 65th birthday will have to renew early to obtain a REAL ID-compliant driver’s license.

So which states don’t comply? Well, the REAL ID Act is not a national identification law, which leaves state compliance as a voluntary decision. As of today, most states are either fully compliant or have been granted an extension to the January 2018 guideline.

There are, however, five states still under review for an extension, leaving their citizens at risk of the deadline: New York, Michigan, Illinois, Missouri, and Louisiana. Some of these states may issue “enhanced” driver’s licenses, which are an acceptable option.

So what does it take to be compliant? Well, the state issuing the driver’s license or ID card must vet documentation the consumer provides to prove the following:

  • A photo or non-photo ID that includes full legal name and birthdate
  • Documentation of birthdate
  • Documentation of legal status and Social Security number
  • Documentation showing name and principal residential address

So far, two issues have surfaced because of the varying states complying with the REAL ID Act that potentially affect dealerships and, more specifically, their efforts to comply with the Red Flags Rule.

The first (and more common) issue arises when the driver’s license or ID card has a designation stating “Not Valid for Federal Identification.” At first blush, this certainly gives one pause about whether it can be accepted as identification to sell and finance a vehicle. As we have learned, it is likely valid (unless it is an obvious forgery) as identification to prove compliance with Red Flags, OFAC, your lender agreement, the USA Patriot Act and any other requirement to positively identify your customer.

However, it is buyer beware on a deal-by-deal basis for dealerships. I recently saw a deal from a credit union with a stip for driver’s licenses: Applicants with a “Federal Limits Apply” stamp are not eligible for CU membership. So watch out for those stips.

The second issue we encountered involved an individual who renewed his driver’s license. After going by a surname all his life — he was born around the time President Kennedy was assassinated — this individual produced his birth certificate to document his birthdate. It turned out his parents were not married at the time of his birth, and the surname on his birth certificate didn’t match the surname on his current driver’s license, military ID, DD 214 and Costco card. So, to be compliant with the REAL ID ACT, his new license has a new surname. Talk about a conundrum,

In this case, the dealer thoroughly documented the file to demonstrate the steps taken to comply with Red Flags, including:

  • Short story in customer’s handwriting outlining the history of his surname and change
  • Successful answering of out-of-wallet questions
  • Retained copies of DD 214 and additional photo ID (not the military ID)
  • Email discussion with the finance source before the credit decision
  • The general manager’s approval to deliver the vehicle

Unfortunately, the experience has prompted the dealer to contemplate yet another form to document these types of cases. Another form usually seems to be an unintended consequence of new laws and compliance with those laws. Other than that, good luck and good selling!

Gil Van Over is the executive director of Automotive Compliance Education (ACE) and the founder and president of gvo3 & Associates. Email him at gvo@bobit.com.

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