Who Teaches Compliance To Our Special Finance Team

Tenth in a series on the Ten Critical Components of Special Finance Success

It can be overwhelming when it comes to trying to comply with the dizzying number of laws and regulations that auto dealers are faced with, which often which can be contradictory. With new regulations that can appear in a moment’s notice or a precedent-setting opinion being offered by an appellate judge, simply trying to stay abreast of the laws, let alone successfully training your team to be compliant, can be dizzying.

In spite of what is publicized by Dateline, 20/20 or even in Automotive News, I also believe that most all dealers really want to conduct business the correct way. The problem is, many don’t even know what the correct way is, let alone how to ensure that it is being upheld.

I was fortunate to have two great sources throughout my automotive career, who, helped me develop an understanding of the laws and regulations that governed y dealerships. For years, I have said that the firm Hudson Cook LLP, with attorneys Tom Hudson and Emily Beck, is one of the best sources a dealer can turn to in order to seek training, as well as to audit your stores for compliance (particularly with matters regarding the Truth in Lending Act).

The Automotive Group of Stewart & Irwin, an Indianapolis-based law firm that also practices throughout the country was the other that painstakingly worked with me and other dealers (through our state associations) to keep us from running into the many bear traps that lay in wait for dealers.

Sometimes I didn’t like what the new laws and regulations meant for conducting business in our Special Finance department (can you say G-L-B Act and OFAC’s “Bad Guys” list), but at least I was confident that I was staying up to date and keeping my teams up to date.

I am not about to use my layman’s law degree provided to me by Hudson Cook and Stewart & Irwin to discuss compliance issues here. That I will leave that for the real attorneys whose articles appear elsewhere. What I feel compelled to discuss is a more serious issue than not being up to date on the new regulations.

While the expertise of these firms is available to nearly all dealers across the country, so often the real training comes from other sources – many of which are just flat dangerous. Your friendly bank or finance company representatives can get you in trouble so fast your head will spin. Naturally, most representatives are not like this, but the ones that are (and there are a number of them) can be lethal.

While moderating a Special Finance twenty group meeting about two and a half years ago, we did a site visit to a store operated by one of the members in the group. It still sends chills down my spine. That dealer had just finished a big four-day super sale. When I arrived, I saw about 50 raw deal jackets waiting to be processed. Most of the deals had not even been submitted on DealerTrack.

What was so astonishing was that right in the middle of the SF team, which probably numbered six or seven employees who were neck deep in deals, were two field representatives—one from TransSouth (which at the time was already owned by CitiFinancial) and one from Wells Fargo. These reps were going through the deal jackets at break-neck pace, deciding over who was going to get which deals.

It gets better. They were then taking on the task of submitting the deals to their companies in DealerTrack, modifying the data on the customer’s credit statements to the degree necessary to be able to waive proof of income and other deal parameters. Seven-dollar–an-hour incomes became $4,000 a month. Negative equity was dealt with by adding thousands of dollars to the sale price. Throughout the process, they laughed about or ignored the sundry of hold-checks, promissory notes and dealership rebates that were inside the deal jackets.

The team of dealership employees was likely clueless to the fact they were part of mail or bank fraud, not to mention the fact that they were breaching every warranty and representation stated in the dealer agreement with the finance companies. Indeed, the employees thought it was (and certainly appreciated) customer service to the n-th degree.

Talk about on-the-job training. If the banks and finance companies were doing all this, it had to be legal.

A few months later, it all hit the fan. The bank and finance company reps were gone (but probably hired by another unsuspecting company), and to settle the issues, the dealerships had to be sold—a sad statement to what can happen. What’s even sadder is it isn’t what I can call an isolated situation. I have witnessed rogue reps in my own stores as well as in countless other stores while working with my many clients.

I assure you, CitiFinancial and Wells Fargo didn’t intend for this to happen, nor did any of the other well known banks and finance companies that I have seen this happen with. These reps work on incentives just like your dealership employees. If they can help fatten their contract count from their dealers, it generally puts more money in their pockets.

My whole point is, you, as a dealer or even executive-level manager, may have taken the time to learn what regulations must be adhered to by your sales team. You may have even sent your finance team to a training class. However, don’t be naïve and ignore other “training” that could be potentially taking place, and I am talking about a lot more interesting training than even listening to Tom Hudson.

With the ridiculous number of lawsuits and whistle-blowers facing dealers across the country, especially in the sub-prime credit market, you simply cannot make compliance training a once a year effort. Don’t be an ostrich with your head buried in the sand regarding compliance training. If you are, someone else will be training your team  the wrong way. Step up to ensure that your departments are in compliance and that your team is doing business the way you want it done the right way. This is one area where you must be proactive. It may not make your Special Finance department any more profitable, but it will certainly let you sleep better at night.

Until next month, Good Selling!

Vol 4, Issue 10