I have been in the auto compliance business for 17 years. Over the years, I have seen how the car business has evolved, but one thing remains constant: the importance of compliance. Dealers have an overwhelming responsibility to en sure they have policies and procedures i n place for red flags, OFAC, Safeguards, fair- lending policies, desking policies, and the list goes on and on. Along with the policies come the mounds of paperwork required in each deal.

Because of all the areas of compliance and the paperwork that goes along with it, I strongly recommend that all of our clients use a compliance checklist. The checklist is a valuable tool because it identifies potential issues within a deal and demonstrates that your dealership is committed to transparency and vigilance around compliance.

There are several key areas a dealership should include on its compliance checklist. Here are some examples:

Credit Application – A dealer wants to ensure that source credit application and the submitted credit application are consistent when comparing the five key credit determinants: time on job, time at residence, occupation, income, and housing expense. If there are any alterations, the customer must acknowledge the change with initials. Finally, the credit applications must be signed by all parties.

Identity Confirmation – All parties on the deal must provide a valid U.S. or state issued ID, and the dealer must retain a legible copy of the ID. The dealer must follow their red flags and OFAC policies, and if he or she comes across a discrepancy, alert or OFAC hit, take the proper steps to clear it. It is very important to document steps taken to clear the objection and retain documentation.

Finally, if you have a third-party privy to the deal, run an OFAC on the third-party participant.

The next area of concentration is the Paper Trail. The paper trail can be broken down into four subcategories: sales worksheets, F&I menu, contracts, and F&I forms. A consistent paper trail in a standard transaction will be the dealership’s defense against claims of deceptive practices.

Sales Worksheets – The deal should include a first-pencil desking worksheet, and that first payment quote must follow the desking policy set forth in the dealership. If the dealer deviated from their policy, the reason for deviating should be documented. The final desking worksheet should be signed and retained in the file.

F&I Menu – A menu that discloses the base terms and includes all the products offered, as well as an accept/ decline, must be signed and included in every deal. The final terms on the accept/ decline should match the terms on the RISC/lease agreement.

Contracts – Contracts include the final buyers order, lease order, RISC and lease agreement. The amount due must match the amount financed on the contract. As always, the documents are to be completed and signed by the customer and the dealer.

F&I Forms – Voluntary Protection Product enrollment forms fall into this category. The dealer must verify all products were sold in compliance with the dealership’s pricing guidelines. The product price must be disclosed on the enrollment form, and the forms must be signed by all parties. When disclosing the products on the contract, the product vendor and price should be consistent with the enrollment forms.

Money Down – The dealer should retain a copy of the receipt, and verify that the amount down matches what is disclosed on the buyers order, RISC/lease agreement. In addition, if an 8300 was applicable, ensure it was filed.

A dealer may also include an “Other Compliance Documents” section in the checklist. Documentation under this section would include additional forms required to be presented and, in some cases, signed by the customer. Just to name a few: used-car buyers guide, privacy notice, credit score disclosure, Carfax.

Let me offer one last piece of advice when adopting a compliance checklist: Require that the list be completed and signed by two dealership personnel, the F&I manager who completed the deal, and accounting personnel who reviewed the deal. It is holding the F&I manager accountable for appropriately completing the deal, and the accounting personnel is assisting with the compliance deal-control initiatives.

Penelope Bell is an associate at Automotive Compliance Education.