Data Sharing Comes With Risk

Customer information is one of a dealership’s most valuable assets. Protect it.

Michael Charapp

March 29, 2012

3 Min Read
Michael Charapp
Michael Charapp

There is no end to the marketers that claim to have a secret formula that will bring customers flocking to a dealership showroom.

Whether it is a program to attract customers who haven’t been in lately, or a plan to attract customers based on a pitch to refinance their loans or a system to prospect customers to sell them a second car, many have one thing in common:

Provide them with access to your customer base and watch the magic happen! Unfortunately, the only magic you may see is the equity in your customer list disappearing.

It is puzzling how willing dealers are to give vendors with whom they have no experience access to customer information. Sure, a marketer may give you an agreement under the Federal Trade Commission’s Safeguards Rule saying it won’t misuse the non-public personal information of your customers.

But what good is that from a company that may have little or no assets? What good is that from a company that may fold at any time and be reconstituted with a new name at a new address?

Customer information is a valuable asset to a business. Simple data on buying patterns and pricing can be sold to companies that market the results. The actual names, addresses, email addresses and phone numbers of dealership customers are even more valuable.

Why risk making that available to someone you may know little about?

If you wish to do business with a marketer that must use your customer information, what do you do? The first step, without question, is to get a safeguards agreement pursuant to the FTC rule. That is mandatory. But you must do much more.

Check out the vendor. Where is it located? What does a rating service have to say about it? Are its references real, and what do they have to say about the company? Does the company have bank or vendor references?

Do not simply give open access to your dealer management system. Once in your DMS, a marketer can take any information it wants.

Instead of DMS access, push your data to the marketer. Even then, carefully select the information you provide. Why give out your whole customer list and allow your vendor to sort it when you can pre-select specific information to give?

Under the agreement you sign with a supplier, find out how it will use your information.

Often, a company will agree to protect private customer information but then develop information profiles from your data that it will market. If you do not want this, get an agreement to that effect.

Make sure the vendor agreement protects your rights. If there is misuse and you must sue, make sure the contract allows you to file suit in your hometown rather than go across the country to do so.

If you receive an email from someone you don’t know, telling you they can magically transform your life if you just let them visit your home and spend a few hours there while you and your family are at the movies, would you do that?

Of course not. You know you would have a high likelihood of returning to a house that has been cleared out. So why let someone you don’t know into your DMS system?

Your customer information is one of your dealership’s most valuable assets. Protect it. Make sure you know with whom you are dealing, and that you have solid assurances, that you can enforce, that your information will be protected.

Michael Charapp is a lawyer who represents auto dealers. Based in McLean, VA, he is at (703) 564-0220 or [email protected].

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