|No matter how large or small, auto dealers today must comply with a complex web of federal and state laws aimed at regulating consumer finance, prohibiting certain sales practices and protecting sensitive customer information. Even inadvertent violations of this maze of rules can be surprisingly costly, in the form of fines (up to $11,000 per day per violation, for example), actual and punitive damages in lawsuits, and possibly irreparable damage to customer goodwill and reputation in the community.|
|To help mitigate these risks, your dealership must do more than have compliance policies in place; it must also enforce them. If it doesn’t, you could end up like a dealer in Ohio who was hit with more than $320,000 in punitive damages for failure to accurately disclose a vehicle’s accident history to the purchaser. The court denied the benefit of a “bona fide error” defense, which would have limited the dealer’s liability because although the dealer had a compliance policy in place, an employee testified that it “was never followed.” A new trial was ordered on a legal technicality, but you can imagine the impact attorney fees must have already had on the dealership’s bottom line.
Unfair or deceptive sales practices are only the tip of the iceberg of potential dealer liability. Among other things, you must verify your customers’ identities, ensure the security of confidential customer data, document credit decisions, send “adverse action” notices, give privacy notices, manage “opt-outs,” and present clear F&I product and pricing information consistently and clearly. And to be on the safe side, you need to be able to prove your dealership does all of the above every time, on every deal. If this sounds like a big burden, that’s because it is, especially when you factor in employee turnover and training.
The good news is, there are a variety of tools available on the market to help your dealership manage every sensitive point in the deal process in a compliant way and document that you’ve done so. The combination of compliance tools to manage all the sensitive points in a vehicle transaction with personnel training and testing tools can help your dealership protect itself.
Just having your F&I manager take “the new guy” under his wing to “show him the ropes” simply doesn’t cut it in today’s fast-paced and litigious world. Not only are both individuals likely to lose track of what they covered, but the dealer won’t be able to document completed training, nor subsequent employee testing over critical laws and regulations applicable to their jobs.
Today, new technology solutions are available, enabling dealership managers to systematically communicate and document their policies and procedures, as well as to train and test their staff on various laws and regulations. Employees are required to read about and take tests on relevant compliance topics, ranging from understanding credit practices and spot deliveries, to information on privacy and safeguards rules.
With some Web-based systems, the entire process is automated, enabling employees to complete the training on their own timetable, while allowing management to monitor their progress and document their completion of all required modules. Dealers can then be certain their employees have both read and understood all the material – and prove the training was completed. This can go a long way towards developing a culture of compliance, showing good faith to a jury and helping to avoid punitive damage liability in litigation.
With better compliance training, dealers are also likely to realize benefits, in terms of both reduced turnover and improved CSI scores. Many insurance companies also offer discounts on dealers’ premiums if they implement a comprehensive training program to reduce compliance risks.
Auto retail veteran and F&I products expert Paul McCarthy has joined AUL Corp. as vice president of national sales.