As we head into the new year, let’s continue to remain diligent and, as an industry, stay on top of our compliance initiatives.

In the new year, we are going to look back at the three biggest compliance concerns dealers faced throughout 2022.


Identity theft continues to top the list of compliance concerns. thieves have become more cunning and brazen, and adding the complexity is synthetic identity theft. This sophisticated form occurs when a thief creates a new identity using a combination of stolen and fake information. Dealers need to be more vigilant in reviewing their policies and procedures for the Red Flags Rule to ensure they are addressing the risks dealers face in today’s environment. They also need to establish a consistent training schedule for new and existing employees. The policy should include utilizing a compliance tool that reports discrepancies and ensures the dealer takes the appropriate action to clear the discrepancies before moving forward with the sale of the vehicle.

To add to the complex identity theft spiderweb, we have seen an increase in digital deliveries over the last few years. The main reason for the increase was the pandemic that began to plague us almost three years ago. Dealers had to provide customers with a contactless sales experience that included the need for a digital process. This opened an opportunity for identity thieves to prey. As we see more of these, we want to stress the need for a compliant process for digital deliveries. The policy is especially important because the dealer never physically meets the customer in person.

  • The customer submitting an online credit application
  • The dealer running a credit bureau report, a Red Flags search and an OFAC search
  • The dealer contacting the customer using a video conferencing service to ask out-of-wallet questionnaire
  • The dealer obtaining a scanned front and back copy of the customer’s government-issued identification
  • Using Google Earth, the dealer running a search on the provided address to ensure it is a valid location
  • The dealer initiating a second video conference with the customer to review the menu presentation
  • A notary service company being contacted to review the paperwork with the customer, notarize signatures and confirm identity; Alternatively, an e-contracting process being used to execute the documents
  • Finally, upon delivery, the dealer instructing the driver to never deliver the vehicle to another location at the request of the customer; instruct them to contact the dealer if such requests are made by the customer.


The second topic of compliance concern is credit application fraud. It continues to be an issue year after year. The feds diligently continue to prosecute dealers who commit credit application fraud. They specifically look for enhanced changes to the five credit determinants: time at residence, time on job, occupation, income, and housing expense. The dealer’s best defense is to retain signed copies of the source credit application and the submitted credit application that can be compared for consistency.

Rounding out the top three compliance concerns for 2022 is what we refer to as front-end improvement, the practice of increasing an already agreed upon sales price. Some tactics include selling the vehicle above MSRP or increasing the advertised price without any documentation that supports the price increase. Another tactic is charging for a certified preowned warranty (CPO). The deceptive practice of front-end improvement was a hot topic last year after claims against a dealer group that settled for $10 million for accusations they were including “junk fees or add-ons” without the customer’s consent. Situations like this prove that if a dealer is selling above MSRP or at an advertised selling price, they need to be transparent by appropriately disclosing add-ons/addendums and have the customer agree to them in writing. In addition, by definition, a warranty is something provided to the customer by the seller at no charge. For this reason, the dealer cannot charge for the CPO.

As we head into the new year, let’s continue to remain diligent and as an industry, stay on top of our compliance initiatives.

Penelope Bell is an associate at Automotive Compliance Education.

Originally posted on F&I and Showroom