Digital Compliance, Part 3
Digital Compliance, Part 3

Serialized articles are like turkey after Thanksgiving: eventually, you get tired of turkey sandwiches, turkey soup, and turkey burritos. It’s time to move on to other things. So this will be the last installment on the topic of Digital Compliance. One last 1,000-word helping and we can put away the cranberry sauce for another year.

In the past two months, we’ve examined online solutions for OFAC, the Safeguards Rule, the Red Flags Rule, F&I menus, the Dodd-Frank Act, Environmental, Health & Safety, Human Resources, and Compliance Training. In this installment, we will consider Product Training, Deceptive Trade Practices, and Audits & Review.

Product Training

I know what you’re thinking – what does product training have to do with compliance? Everything. Indulge a true story to illustrate why (the facts have been changed to protect the author).

Once upon a time, there was a car dealership that sold GAP. Lots of GAP. Virtually every financed deal had GAP in it. And the F&I personnel always proclaimed the benefits of GAP: in the event of a total loss or unrecovered theft, GAP would pay the difference between the actual cash value of the vehicle and remaining balance on the loan.

Small problem - that description of benefits is not true: every GAP policy the dealership sold had a limit of 125 percent of MSRP. And since almost every car the dealership delivered was over-financed (150 percent of MRSP or more), there was almost always a deficiency in the amount paid to GAP claimants. A class action lawsuit followed.

In the course of the lawsuit, the dealership claimed that it was really the GAP provider and its agent that was to blame. If only the provider and agent had explained the limitation, the dealership would never, ever have misled the car-buying public!

Online product training, focusing on the precise contract the dealership sells for GAP, VCSs, and so on, takes away that argument. It is easy to prove exactly what dealership personnel were trained with respect to features, benefits, limitations, and exclusions. This protects providers, agents, and even dealership management. If an F&I manager misleads a customer about a product’s coverages, the dealership can prove how it trained its employees. Any deviation from the company line would be argued to be a frolic of the employee for which the dealership should not be held liable.

Of course, it also helps that dealership personnel who are knowledgeable about a product’s features and benefits are likely to sell more of it. So this creates the happy marriage of compliance and profitability.

Any online training provider should be able to create custom modules and LMS-based testing to verify learning.

Deceptive Trade Practices

This is another counterintuitive topic. How can an online solution detect or prevent deceptive trade practices?

Digitally recording and reviewing the F&I transaction, that’s how. Like online product training, this is both a compliance tool and a sales tool. Let’s look at each function in turn.

First, the sales tool angle. How do NFL players prepare for upcoming games and improve their level of play? By reviewing film. Successful players spend many hours in the film room, watching tape of opponents to prepare to overcome them and tape of their own performance to correct their shortcomings.

The same can happen at dealerships. If a transaction is recorded, review with a manager can detect flaws and correct them. For example, I’ve watched tape of an F&I practitioner that constantly clicked his pen during product presentations. He wasn’t even aware he was doing it – it was just a nervous habit. Once it was pointed out to him in a tape review, he stopped that behavior. Oh, and his PRU doubled overnight.

Then there’s the compliance tool angle. Simply stated, if an F&I practitioner knows his presentation is being filmed and reviewed, what are the odds he will intentionally mislead a customer? And if he inadvertently makes a material error, it can be detected and corrected before it spawns a lawsuit.

Let me put on my lawyer pants and make one thing perfectly clear: do NOT record F&I transactions if you do not intend to review them. To do otherwise is to risk creating evidence of misbehavior that can be used against you. And I would suggest archiving recordings only for the period of time necessary to use them for the purposes mentioned above, then delete them. If you want to pursue this mode of digital compliance, please consult your own counsel first.

A system I’m aware of that combines recording and reviewing by a third party for legal and procedural compliance is offered through IAS.

Audit & Review

As the old saying goes, you cannot expect what you do not inspect. But third-party audits are typically expensive, as they entail travel and expense accounts. Once again, though, the Internet can come to the rescue and eliminate the travel.

Gvo3 & Associates has developed a program that allows for F&I compliance audits from remote locations. Gvo3 provides the dealership with a matrix of deals it wants to review, reducing the chances a dealer will “cherry-pick” the deals it wants examined. Those deal jackets are then scanned and uploaded to a secure gvo3 site for review. After the review is completed, a webinar-based review session with the dealership and written report are provided. After this is completed, the deal files are deleted from the gvo3 site.

While online audits and reviews shouldn’t completely replace “boots on the ground” audits, they can fill the gap between them economically and efficiently.


You made it – three consecutive articles on the broad topic of digital compliance. Feel free to contact the author if you have any questions. Now go stagger off to watch some football. You’ve earned it!