Compliance can be a costly part of doing business as a dealership. In a 2014 study conducted for the National Automobile Dealers Association (NADA), the Center for Automotive Research (CAR) discovered that the average dealership spends nearly $200,000 per year to address regulatory compliance.
The study found that, “regulatory costs comprised 21.7 percent of the average dealership’s 2012 before-tax net profits…or nearly $2,400 per dealership employee” and that “…dealership financial burden is greatest for the regulations included in the vehicle financing category (which includes items such as Equal Credit Opportunity, Fair Credit Reporting, and Truth in Lending rules).”
Fortunately, dealers can address F&I compliance affordably by integrating a robust program throughout the sales and F&I workflow. This starts with effective document storage and includes the ability to monitor deal activity.
Here are five questions to ask to make sure your compliance program is operating at full efficiency and effectiveness:
1. Have you created a culture of compliance and security?
It’s important to train employees on spotting unfair, deceptive, and abusive acts and practices. Training should also emphasize honesty and transparency in all customer interactions. And make sure you have a compliance dashboard that allows you to monitor activity from a single screen.
2. Is the FTC Red Flags Rule fully integrated into your workflow?
Your sales workflow should include checkpoints throughout the deal process to verify that you’re meeting FTC and OFAC requirements and mitigating fraud. Always stay audit-ready by documenting everything you do and keeping copies of all documents related to identify in the deal jacket. Finally, be sure that you follow your identity theft policies and procedures (ITPP) process with every customer.
3. Does your compliance workflow include your menu selling?
Cox Automotive research has found that customers who are aware of F&I product options before they go to the dealership are more likely to buy. As these product introductions become more prevalent online, it’s vital to make sure they are fully consistent with the in-store presentations and include the same full disclosure. Your electronic menu product should help ensure consistency and legal compliance with your state laws and regulations.
4. Do you have full visibility to all deal activity?
Your compliance program should give you the power to track, report, and audit activity as needed, and from a single screen. Today’s dealership management must be prepared and proactive, with comprehensive training and real-time monitoring. For example, electronic databases should give you the ability to track employee access, and oversight of operations should include a compliance dashboard.
5. Are you consistently managing all documentation?
Regulations demand that you store a wide range of documents, including credit applications, privacy notices, credit reports, contracts, and menus, in secure electronic deal jackets. It’s about more than just convenience. Being consistent in storage and security provides peace of mind and creates efficiencies just in case auditors do come calling.
For more compliance tips, get the Dealertrack 2019 Compliance Guide. It’s a useful resource for safeguarding your dealership.