Compliance—A Few Words To The Wise

You might call me a Compliance Geek but I feel a responsibility to my company, Jeram Marketing and to our clients to make sure that you are kept informed of the laws and regulations that you are expected to navigate within as you attempt to do right by your customers and your dealership. There was a time when that might take up a half page of paper. Not today—no, today there are more federal agencies involved in your business than ever before. I am not going to attempt to go through the laws that you need to know. I am going to attempt to offer some guidance to understanding the legal environment of the automobile financing industry. All of the information in this article is from the pages of the latest edition of “Carlaw, the F&I Legal Desk Book”, written by Thomas B. Hudson, and Michael A. Benoit, attorneys of Hudson Cook, LLP.

In the spirit of full disclosure I must tell you that I am not an attorney and you should certainly speak with your dealership’s attorney or one that is an expert on automobile and financing laws. Your state automobile agencies all have attorneys at your disposal. I strongly suggest that you contact them and/or attend any seminars they may offer on the laws that affect you.

The threats that surround our business come in a variety of shapes and sizes such as: Class Action Law Suits, Big-Verdict Non-Class Suits, FTC enforcement, CFPB enforcement, the State Attorneys General, Federal and State Legislation, State Consumer Credit Officials, and Public Opinion Battles, to name a few.

For all of those reasons, it’s important to remember: Responsibility for compliance starts with you. You have to kick up your compliance efforts a notch. Here’s why: The dealer is the creditor. It is the dealer that is responsible for making the proper disclosures. You can’t and shouldn’t rely on the finance company, the DMS provider, the vendor, the forms provider, or any other entity.

As the entity responsible for compliance, the dealership is also responsible for the compliance of its employees. In most cases, the dealership will be held responsible for the illegal actions of its employees. The dealership employee simply must comply with applicable state and federal law. The consequences of employee non-compliance are hefty. If you are in the industry long enough you will hear the stories of secret shoppers and sting operations. The FTC (one of the threats identified earlier) packs a punch. Because of its relatively small staff and the number of cases it has to deal with, its style is to hit violators hard to make an example of those who fall short of regulatory requirements.

The dealership can also not rely on vendors to assure compliance. While the companies that provide services and products that are sold out of the finance office have a stake in making certain that the dealer follows the law, the dealership ultimately is responsible for compliant sales, procedures, and forms. Furthermore, the dealership typically will not be able to rely on the forms and advice provided by its vendors as a defense when the regulator comes knocking or when the lawsuit papers are served.

Under the heading of, “You Don’t Always Know What You Don’t Know”, neither ignorance nor intent will shield the dealership from compliance penalties. Of course, how can you fix what you don’t know? Glad you asked...

Treat compliance as an important part of your job, not something to be done when you get the time. There are many resources that you have at your disposal. The Association of Finance and Insurance Professionals has certifications available that can be completed on-line. As mentioned earlier, state and local auto dealer associations or independent auto dealers associations often have helpful training and compliance materials for free or at a nominal cost. The NADA and NIADA both provide great resources for dealers. Also, the Federal Trade Commission’s website at www.ftc.gov, has materials on the Federal Used Car Rule, the federal “Do-Not-Call” compliance, the FTC Privacy Rule, etc. The CFPB also has a website, which is www.consumerfinance.gov. While it so far has limited information, the CFPB is developing useful compliance resources that will be available on their site. Beyond that, you should know your state’s laws. Use the websites of your state’s Attorney General, consumer protection agency and motor vehicle administration—they have information and classes that are either free or low cost.

Yes, it’s a lot of work; yes, it’s tedious; yes, sometimes it’s easier to make money when you don’t know what you can’t do. But is it worth the risk? We have clients who work very hard at being compliant yet still have a very profitable F&I department. Every line of work has its code of ethics, its sets of standards, its rules and regulations. Our business is no different.

As always, Jeram Marketing will assist you in any way that we can. Call, email, or speak directly to your representative.