On the Front Burner

Compliance, though it may not be the sexiest topic agents broach with their dealer-clients, could make the difference between keeping them happy and losing them.

If clients find out about regulatory changes from their agent’s potential competitors before their agent informs them, the interlopers can win the business just from pointing out the agent was behind the eight ball, compliance expert Shannon Robertson says.

“'Your current agency didn’t tell you about the Safeguards Rule changes?'" he said, playing the role of an agent trying to win over new business. "'You’re exposed – they don’t care about you.’”

To help agents avoid ending up in that position, he shared advice at the recent Bobit Agent Summit that they can use to not only protect their client bases but expand them.

Scope of the Task

Robertson, executive director of the Association of Finance and Insurance Professionals, started his talk by displaying a graphic developed by the National Automobile Dealers Association called “Regulatory Maze.”

Looking at the model-like cutout of a cartoon auto dealership may have felt deflating for agents due to the dizzying number of listed regulations dealers face, and Robertson acknowledged it’s overwhelming. But he said they can get up to speed with help of their own. Dealers, he pointed out, don’t have the time or typically the motivation either to keep abreast of it all.

“Your dealers don’t go to a compliance academy. They start their business because of things they’re good at, not because they’re good at everything on this slide.”

Compliance stakes are high, he reminded the agents. A business can be held criminally liable for its employees’ actions, even if those actions violate the dealer’s own policies.

The good news is that if the dealer has policies and procedures and trains on them regularly, any fines can be reduced by up to 95%, Roberston said. That’s major incentive for agents to guide them in establishing an effective compliance program.

Basic Framework

Before touching compliance directly, agents should coach dealers to set the tone by developing core values if they haven’t already, values that hopefully align with the agent’s own values. Dealers should display these in their stores and teach them to employees, instructing them to make decisions based on the values.

Then they should establish a formal plan to resolve any customer complaints, Robertson said. That’s because unresolved complaints run the realistic risk of triggering an on-site audit, one of a dealer’s worst nightmares. If a customer feels ignored, they’re more likely to find out where they can complain to a listening ear.

Beyond that, agents can help dealers do the following:

• To help prevent that from happening, he advised that dealers also develop a customer cancellation process and have a dedicated, qualified compliance officer on staff who has a vested interest in the dealership. Robertson strongly recommends that person not also be the store’s finance officer.
• A dealership should have the aforementioned compliance policies and procedures, annually train employees on how to comply with them, and maintain a log verifying everybody completed the training.
• In addition to the compliance policy itself, the store should also establish a written desking process that desking managers are regularly trained on so that all customers are treated consistently.
• Drilling down into product pricing, agents should advise dealers to maintain a set markup to start all customers so that the dealership isn’t vulnerable to discrimination or junk fee claims.
• Further, he suggested agents encourage dealerships adopt NADA’s model voluntary protection products policy, which guides them in bolstering their VPP selection and sale of VPPs for improved compliance.

“If you’re providing value to dealers and keeping competitors out, those are the things you need to do,” Robertson said.

Above and Beyond

After the foundational compliance framework is in place at a client’s dealership, agents can guide them in building on it.

Dealers should conduct internal audits and retain an external expert to do annual audits, said Robertson, who indicated that the former alone can, again, reduce any court fines by up to 95% because it shows the store is doing its due diligence.

Serving as a guide to help dealers do everything they can to prevent legal action against them can only boost agents’ business, he said.

“If you’re knocking on doors, these are questions you have to ask: ‘Why didn’t

your current provider tell you about these things?’ We want to form a long-term relationship.”

Then agents should stay on top of current regulations and any changes to them, plus the areas regulators are specifically targeting so they can inform dealers on the constantly shifting environment, also pointing out any dealer fines they learn about as shared lessons.

“You can save your dealer fines,” Robertson said. “If a dealer gets a pretty good fine, the odds of them keeping their agent aren’t high.”

Don’t Go It Alone

It’s important to remember that agents can’t do everything a dealer needs by themselves, Robertson said. When it comes to compliance, there are legal experts who specialize in automotive industry regulation that agents should familiarize themselves with in order to connect their dealers with them.

“There are four or five of us out there,” he said, pointing out that agents want to avoid the liability that can come with some of the complex issues and cases dealerships can face.

So part of the agent’s task is to draw the line between what to take responsibility for and what to leave to compliance experts. As part of that sifting process, agents should “be in the know,” Robertson said, following regulators, including the Federal Trade Commission and the Consumer Financial Protection Bureau, on LinkedIn to keep up with their latest movements.

“Be in the know.”

CARS Compliance

Since compliance is never fully done because the law is ever shifting, it was appropriate that a question-and-answer session after Robertson’s talk focused on a pending regulation currently tied up in the court system.

Asked by Tony Dupaquier, North American training director for iA American Warranty Group, whether he thinks the FTC’s CARS Rule will survive a court challenge, Robertson said he believes it will.

“What will actually go into effect is the debate. There are some things in the CARS Rule we all agree on,” he said, referring to constraints on deceptive vehicle prices and the like.

“What we’re all hoping doesn’t get passed is all the additional disclosures and requirements that take us six months to a year to be compliant.”

He advised his audience to exercise caution about “anybody who says they are CARS Rule compliant.”

“We don’t know what the final rule’s going to be,” he said, recommending that agents instead seek resources that will keep them up to date on the measure.

When asked by longtime trainer Rick McCormick whether, if CARS takes effect, dealers will need to track complaints for a certain time period, Robertson said they would. He suggested agents go ahead and help them secure technology to help them manage the tracking.

Hannah Mitchell is executive editor of Agent Entrepreneur. A former daily newspaper journalist, her first car was a hand-me-down Chevrolet Nova.