Nobody likes to be criticized. The managers that agents work with for income development are the same managers we deal with in our compliance reviews. The manager who falls short of product penetration goals uses excuses to deflect criticism. The same manager apparently belongs to an industry chatroom because there are consistent excuses when we highlight a compliance issue.
Here are some common excuses dealership managers use in attempting to explain away a compliance violation.
“They’re Too Stupid.”
Let’s say during a compliance review we discover the base payment on the menu has been packed to facilitate the sale of voluntary protection products. The F&I manager has increased the number of days to first payment from 45 days to 345 days. The result is the interest for the additional 300 days is capitalized behind the scenes and a new payment is calculated, but the amount financed does not change.
When we point this out, a manager will invariably say: “They’re too stupid to figure out how to do that.”
So let me get this right. Your dealer trusts a manager in charge of spinning an average of 75 deals each month. If the average amount financed on these deals is $25,000, then your dealer has entrusted someone too stupid for nearly $2 million a month in receivables?
If the manager is truly too stupid to figure it out, that also means someone else in the dealership has figured it out and shared the bad practice.
What Law Requires That?
Some of the compliance requirements are codified in state or federal statutes. Many are not specifically codified. For example, payment packing is only specifically prohibited in one state statute (California), but that doesn’t mean you can use that as a sales practice in the other 49. Payment packing is considered a deceptive sales practice and the dark side uses state and federal fraud statutes to attack the practice.
This leads to the recommendation that your dealers must have a policy and procedure manual that creates Dealer Law for those instances when there is not a specific statute.
“They’re Just a Backup” or “They’re new.”
Most F&I managers get a day off during the week. Customers don’t stay away on that day off, so someone must spin the deal. In some cases, it is a sales manager who once worked in the F&I office. Other times, it is a salesperson who aspires to an F&I position.
There is also turnover in this industry. It is not uncommon to see a new person in an F&I position. Deals from backups or green peas invariably come with compliance issues, from not following the dealership’s prescribed processes to missing required documentation to overlooking mistakes.
“They’re just a backup” or “They’re new” are typical excuses. I’ve read court depositions on disputed dealership transactions. A dark-side attorney attacks the fill-in or rookie F&I manager with questions such as: “How much training were you provided in the areas of Truth in Lending? Red Flags? Used-Car Rule? Equal Credit Opportunity Act?”
When the manager responds, “little or none,” it damages the credibility of the dealership’s professed processes and calls into question the sanity of the dealer for putting an inadequately trained employee in charge of a major transaction.
“The ‘Desk’ Set up the Deal.”
A classic deflection technique — it’s someone else’s fault — is learned early in life. Our family had an invisible member while the kids were growing up named “Idunno”. “Who spilled the orange drink on the carpet?” “Idunno.”
Sometimes when we discover the subprime acquisition fee has been added to the price of the vehicle, or the deal includes a side loan of cash back to the customer, a manager’s deflection excuse is: “The ‘Desk’ set up that deal.”
F&I managers are watchdogs. They must have the power to stop a deal if there are compliance violations. They cannot deliver a deal they know is a straw purchase or where unresolved indicators raise the possibility of identity theft. Just because the sales desk handed over a deal fraught with potential compliance violations does not mean the F&I manager must spin it that way. Corrections must be made.
Knowledge is knowing a tomato is a fruit; wisdom is not putting it in a fruit salad. Knowledge is recognizing the difference between a reason and an excuse. Wisdom is acting on a reason and dispatching an excuse. Don’t let lame excuses for non-compliance derail your dealer’s efforts.
Stay safe, good luck, and good selling!