During our exit conferences with dealers, we can categorize the issues we found into one of three types: naïve, sloppy or kinky. “Naïve” issues that are caused by being so naïve as to not understand what the compliance requirements are. “Sloppy” issues arise when the dealer and the managers know what the requirements are — and have policies and procedures in place to comply — but they don’t execute them consistently.
Being naïve or being sloppy can be corrected through training or motivation. The final category is caused by being kinky. Once a kink, usually always a kink. The only cure is to kick kink from the organization.
Being Naïve, Lax, Lazy, Sloppy
Being naïve, being lax, being lazy or being sloppy creates its own special set of issues.
For example, when a deal is started in the dealership’s computer system, it is assigned that day’s date. If the vehicle is delivered on a subsequent date, or the deal is recontracted at a later date, the DMS does not always update the date. If the F&I manager does not change the date on the deal, all the documents are effectively backdated. This can cause potential Truth in Lending violations or possible incentive qualification issues.
The reasons for these potential issues is that that the F&I manager either did not know to change the date (naïve), was in a rush to get the deal completed (lax) or just didn’t feel like doing it (lazy). Being lax or lazy constitutes being sloppy.
The fixes are to either provide training so that the F&I manager knows better, or provide motivation so that the F&I manager knows better.
Being a Kink
Similarly, being a kink creates its own special set of issues. A kink will sign a customer’s name to a document when he neglected to get it signed while spinning the deal and does not want to get the customer back in. Forgery is a crime. Dealers have had to face the local “News on Your Side” camera when their employees were accused of forgery or cringed at their name in the local paper’s headline next to the word “forgery.” The market backlash can be extensive and the locals’ trust shot.
A kink will give the customer a raise or a promotion when transferring the credit application information from the handwritten credit application to RouteOne or Dealertrack. A kink will lie to the bank about how the subcompact car grew a moonroof. A kink will falsify the amount of cash down payment on the contract so that the transaction fits within the lender’s underwriting guidelines. A kink will knowingly orchestrate a straw purchase.
Bank fraud is a crime. When an employee commits (or tries to commit) bank fraud, the dealership’s name is listed on a secret Suspicious Activity Report that the finance source is required to file with the Federales.
A kink will tell your customer that the lender required a GAP policy. By requiring an F&I product, a kinky F&I manager is violating the federal Truth in Lending Act if she does not include the premium in the APR calculation. Too many of these situations could create a class-action lawsuit against the dealership.
All of these things that a kink will do can put the dealer and dealership in harm’s way.
A kink has a faulty moral compass. You just can’t fix kink.
