The Compliance Bombshell

Picture this: You are meeting with your dealer and discussing the previous month's performance metrics. The numbers are great. Your training and the managers’ execution tell a remarkable story. Then the dealer drops the bombshell — “I want your help with compliance.” 

You have been hit with the compliance bombshell. Your value to the dealer is compliant-based sales training and production. What more does your client want?

Compliance means different things to different people. When hit with the compliance bombshell, you need to understand what compliance means to your client and what exactly you are being asked to do. 

Does compliance mean your dealer has read about the revised Safeguards Rule and knows December 9, 2022, is a drop-dead date? The changes are so voluminous and technology-leaning, that you don't want to take this on by yourself. You have help, as there are vendors who can implement an effective Safeguards solution. You need to look at the revised Safeguards requirements for your agency while you are at it.

Is your Dealer reacting to the $10 million Federal Trade Commission (FTC) headline? The Federales' case is available on its website at https://www.ftc.gov/system/files/ftc_gov/pdf. The solution is transparent disclosures and a paper trail documenting consumer consent to purchases at every step in the road to the sale.

Perhaps your dealer's 20-Group recently discussed credit application fraud and the dealer wants you to check credit apps. This means comparing the five key credit determinants between the source credit app and the submitted credit app to see if any one of the five have been jacked to improve the likelihood of a favorable credit decision.

Maybe there was a LifeLock commercial playing on the dealer’s TV during your meeting, and identity theft and Red Flags sufficiency is a concern. Compliance with the Red Flags Rule is a structured approach of policy development, training, vender selection, and transactional review. Many Agents are well versed in this structured approach — help is available if needed.

Or the dealer wants an over-arching solution, one that the federales refer to as a Compliance Management System (CMS). A CMS combines a compliant process development and implementation and an audit process to ensure compliant execution. I’ve written articles to help you manage through the development of a CMS.

Once you figure out what the dealer is looking for, and that involves monthly reviews, here are your options (ranked worst to best):

1. Create and implement a forms checklist
2. Conduct monthly deal audits
3. Train a dealership employee to conduct monthly deal audits
4. Create and implement a transactional compliance checklist
5. Enroll your dealer in ContinuACE

Forms Checklist

This checklist simply tracks whether required forms are in the deal jacket or digital deal file, or if any of the required forms are missing. The tracker who completes the forms checklist is not required to review the form for accuracy, consistency with other forms, or signatures. This approach provides a minimal comfort level that the forms are being completed but leave several compliance holes in the process.

You Can Conduct Monthly Deal Audits

Go ahead and commit to spending some time shuffling through deal files instead of training on production and compliance. You surely understand why this is one of the worst solutions.

Train A Dealership Employee

This solution requires identifying a dealership employee with the skill set and temperament to spend time looking through deal files, understanding what to look for, knowing what a straw purchase or power booking is, reviewing the employee’s audits, and starting all over again when the employee moves to another opportunity.

Compliance Checklist

A compliance checklist should be part of every dealership’s compliance initiative. A properly developed, implemented, and completed compliance checklist should unearth the common compliance mistakes, including inconsistent prices on documents, missing documents, uncleared Red Flags, credit application inconsistencies, and others. The best approach requires both the F&I manager and the compliance or billing clerk to complete the entire checklist and affirm that each item on the checklist is properly completed before the deal is billed.

Stay safe, Good luck, and Good selling!

Gil Van Over is the executive director of Automotive Compliance Education (ACE). He is also the founder and president of gvo3 & Associates.