Experienced agents know noncompliance isn’t limited to the F&I department. Help your dealers avoid harming customers or running afoul of regulators by kicking their kinks out of the box, off the desk, and away from the showroom. 
 - Photo by Lyubchik Prokopchuk via Getty Images

Experienced agents know noncompliance isn’t limited to the F&I department. Help your dealers avoid harming customers or running afoul of regulators by kicking their kinks out of the box, off the desk, and away from the showroom. 

Photo by Lyubchik Prokopchuk via Getty Images

I spend some time assisting dealers who are subject to litigation or regulatory oversight from the Dark Side. Some of the cases involve cases of alleged fraud and the Dark Side always assumes the dealer or dealership managers are the kink.

Some of the time I can show that the consumer is the one who perpetrated the fraud. Other times not so much.

Part of our responsibility is to let the dealer who employs us know if there is a kink in the house. I’ve compiled a list of potential areas to review to ensure the dealerships you serve are kink-free.

Manufacturing Stips

In 2018, the Federal Trade Commission announced it had shut down three websites that sold consumers several different fake documents to facilitate identity theft and bank fraud.

Unfortunately, a search in today’s search engine using the keywords “fake paystubs” delivers a result of another 10 websites on the first page alone, including one that advertises that the fake document includes a company logo.

To help the dealer uncover sales kinks, periodically review the settings and the results from electronic desking systems.

We found an F&I manager who was creating fake paystubs on demand to satisfy finance source stips. The scam started unraveling when we noticed similar looking paystubs with different company information on the paystub. Fortunately for the dealer, the manager was stupid enough to create the paystubs using company property and the fake website was one of the manager’s favorites.

Suggest your dealer periodically review or restrict the websites employees can access.

Sales Kinks

Kinks are not limited to the F&I offices. In fact, in our compliance reviews, we assign point deductions by department, sales, and F&I. So far, many issues are sales process issues, including: 

1. Payment packing: 

This deceptive practice seems to continue even with the advent of electronic desking systems. There are many variations on what constitutes payment packing, but the basic definition remains intact: Quoting a payment higher than the actual payment for the vehicle and or voluntary protection products contemplated at that point in time. 

Some of the variations include hiding voluntary protection products, using an APR higher than reasonable given the information known at the time, calculating a payment with 365 days to the first payment, or just adding $40 worth of leg to every payment quote.

Read: How to Conduct a Menu Audit

I found a desking template in one electronic desking system named “Retail 40.” Curious, I looked at the template and found that $40 worth of leg was added to every payment quote when that template was used.

To help the dealer uncover sales kinks, periodically review the settings and the results from electronic desking systems.

2. Credit application fraud: 

I recently listened to an FBI special agent who investigated a dealer for bank fraud, and he affirmed what we all know to be the truth: The dealer has an obligation to accurately represent the credit application information to the best of the dealer’s knowledge. 

In other words, don’t make everyone a “manager” because everyone manages something in their life. Don’t give consumers raises or create additional income. Don’t increase time on the job or time at the residence to avoid providing previous employment or residence information.

A credit application audit is required to ensure that the information on the signed source credit application is consistent with the information on the signed submitted credit application.

3. Powerbooking and straw purchases: 

Powerbooking is the practice of adding a nonexistent third-row bench seat to a Prius, or some similar exercise. Inflating the value of the collateral to the finance source to support a higher amount financed is bank fraud.

Straw purchases occur when the person who will be driving the vehicle and paying for it is not on the financed contract. It usually happens when the straw does not qualify for financing. Many times, true to the finance source’s original decision, the straw deal ends up as a default and sometimes becomes a recourse deal to the dealer.

Powerbooking and straws are sometimes tougher to uncover in the deal paperwork with a kinky sales manager, but reviewing requests for recourse payoffs may be a place to start an investigation.

Good luck and good selling.

Gil Van Over is executive director of Automotive Compliance Education (ACE), the Founder and President of gvo3 & Associates, and author of “Automotive Compliance in a Digital World.”

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