Compliance Isn’t Solely F&I’s Responsibility

Just as many in the industry operate under the mistaken impression that compliance is just an “F&I thing,” many also operate under a similar mistaken impression that agents only help with training and assistance in the F&I office. I know many agents who spend a fair amount of time with sales managers on “road-to-the-sale” processes that affect compliance. If your agency offers sales process training, there are some compliance issues that either start or germinate in sales that you should be aware of.

The findings in our compliance consulting practice confirm that the majority of compliance concerns either start in sales or germinate during the sales process. Somehow, some way, the idea that compliance in the variable process has been pegged as “F&I compliance” is prevalent and misleading.

The fact that a majority of compliance issues are sales-related should not shock your system. Only one of the 10 steps on the road to the sale process takes place in F&I. Steps One through Eight are sales responsibilities. Step Nine is the F&I turnover, then back to sales for delivery.

Many touchpoints along the road to the sale with the consumer present a potential requirement to conform to a state or federal law or statute. Many other touchpoints require an employee to subscribe to dealer law to avoid a

deceptive practice.

Let’s look at the sales touchpoints in a 10-step “Road to the Sale” process:

1. Meet and greet: Not much here from a compliance perspective. Granted, it is bad business to greet a consumer with bad breath, matted hair and wrinkled clothes, but these are certainly not compliance concerns. In fact, there probably will not be any compliance concerns if the consumer walks away immediately.

However, consumer questions about the advertised price, a price quoted in a website, or factory incentivized financing may creep into the discussion.

2. Interview: This is the needs-assessment step. Most dealers want to discover the consumer’s desires, so there should not be any gathering of nonpublic personal information (NPI), credit applications or trade-in specifics.

Some consumers may offer up information about a bad credit history or being upside down in a trade. Some veteran salespeople may then skip some of the “road to the sale” steps. They figure out that this consumer cannot buy or finance a vehicle and send them packing. The consumer must be given a privacy notice if this wily old dog has gathered NPI. Or, if the consumer signed a five-liner to pull credit, an adverse action notice is required.

What if the wily old dog figured out quickly that the consumer is a subprime candidate and moves to step three? The consumer is led to a used vehicle with a potential fee added to the sale price.

3. Vehicle selection: Potential compliance pop-ups inherent to this step including handling a subprime fee, CPO warranty or fees, and advertised price.

4. Walkaround: After the consumer selects a vehicle, the salesperson walks the consumer around the vehicle, pointing out the features, benefits and differences from competitive makes. During this walkaround, there may be questions about labeling on new vehicles such as the Monroney label or dealer addendum.

On a used vehicle or prior demonstrator, the used car buyer’s guide must be prominently displayed. A used vehicle may also be plastered with a “Certified” sticker, which may raise questions about CPO warranties or — heaven forbid — adding a CPO fee to a non-CPO vehicle.

If the discussion between salesperson and consumer for a used vehicle in Steps One through Four have been in Spanish, a Spanish-language buyer’s guide is required.

5. Test drive: A salesperson is usually instructed to gather up driver’s license and insurance information before the consumer is permitted to get behind the wheel. Gathering and copying the driver’s license is usually the first piece of NPI obtained by the salesperson. This triggers the federal requirement to provide the consumer with the dealership’s privacy notice.

Some dealers prefer to wait until the consumer becomes a customer and deliver the privacy notice in F&I. Assuming a 25% closing ratio, this means that three-quarters of required privacy notices are not provided.

6. Trade evaluation: Part of the trade evaluation must take current recalls, prior use, prior damage and branded titles into account. While pulling Carfax, AutoCheck, NMVTIS and SaferCar.gov searches are not a compliance requirement on a trade-in, they can certainly provide much-needed information on the value of the trade.

7. Present numbers and ask for the sale: This is the where the compliance concerns heat up. Potential pitfalls include accepting credit applications, pulling credit bureau reports, desking deals, powerbooking, providing credit score disclosure notices, running OFAC, dealer doc fees, factory incentives, and making a copy of a military ID.

8. Close: The close is where creative sales managers can revert to “Wizard of Oz” mode, sitting at the tower instead of behind a curtain. Sometimes, to close deals, a sales manager will resort to old-school tricks such as developing a deferred down payment plan, incorporating cash back to the customer, structuring a straw purchase, or requiring a backup contract be executed with a different down payment.

9. F&I turn: The F&I manager firms up the paper trail execution — including final pencil, menu, buyer’s order, RISC or lease, and product enrollment forms — and acts as the backup checker to make sure sales did everything it was supposed to do.

10. Delivery and service drive intro: Most of the dealer’s compliance requirements have been met with their newest customer. Potentially, though, the salesperson may start mining this new customer for prospects. Armed with the neighbor’s or relative’s name, address, phone, fax and cell numbers, the salesperson may ignore do-not-call lists or CAN-SPAM requirements.