A friendly, aging minister meeting Groucho Marx for the first time, stated, “Mr. Marx, I want to thank you for all the enjoyment you’ve brought into the world.”
Groucho replied, “And I want to thank you for all the enjoyment you’ve taken out of it.”
Some dealership owners or managers may think compliance takes the enjoyment out of their world. And, admittedly, dealership compliance isn’t enjoyable or even interesting, but it needs to be a necessary part of your daily operation.
First, some undeniable truths. There have been many lawsuits in the world of F&I. Some of them the dealers lost, some they won. The universal opinion by all courts, win or lose, has been that the dealer is “the creditor.”
Any time a business quotes a payment, interest rate, or term, they are considered the creditor, and with that come huge responsibilities.
As a creditor, your dealership must be compliant with the guidelines of all Federal lending laws. For example, Regulation Z, (aka Truth in Lending Act), clearly states everything from how payments should be quoted to how you advertise payments on your lot, on the internet, and on TV and radio. This is the granddaddy and foundation of most subsequent lending laws.
A certain percentage of dealers like to “pad” or “pack” their payments at the sales desk, creating an easier path for finance to upsell products. This is more than a little illegal. If you don’t believe it, Google “Payment Packing Lawsuits” and you’ll become a believer. Some dealers even lost their dealerships in the most flagrant examples of this.
Now, to be clear, it is not against the law to quote a payment with a service contract. However, it must be disclosed to that customer, along with the term (and miles if motorized). An even better practice would be to disclose the payment with and without the service contract. Disclosure is the key here.
Next, some of you may be thinking, “Oh, that’s those auto dealers getting sued. That doesn’t happen in our industry.” The next undeniable truth is things that originate in the auto industry, eventually work their way into RV, Marine, and Powersports.
From the dedicated finance department, to the 4-Square worksheet, and even spot deliveries. RV has been influenced and has shown significant growth because of established practices in the auto industry.
Many of you probably have former auto employees working for you. They provide a level of experience and skill previously unknown in this industry. (I am not implying auto people are dishonest. Like all businesses, all but a very small percentage are honest, hard-working people who have been a huge asset to the RV Industry).
On the other side, be aware there are law firms in our great country that do nothing but sue dealerships. I’m certain the lawyers make a good living.
In the words of Frank Burns from the 1970s sitcom M*A*S*H, “I’m not paranoid……it’s just that everybody’s out to get me.” Don’t be paranoid, but do be proactive in making certain your dealership is compliant with these laws.
So, at this point, ask yourself if your sales and finance managers have had training on the myriad of Federal lending laws, including, but not limited to: Reg Z, Equal Credit Opportunity Act, Fair Credit Reporting Act, and Gramm-Leach-Bliley Act, among others.
One of the oversights I frequently see is dealers having the finance department trained, but not the sales desk. The sales desk is the front line of both compliance and misdeeds. If they are quoting payments, they need to know these laws, period!
I truly believe that dealers in our industry want to do things the right way. If there is one area that needs more focus by dealerships, it seems to be compliance.
Third Eye Blind
I had the privilege of speaking to a room full of dealers last November at RVDA on compliance. While giving my presentation and looking out at the crowd, I couldn’t help but notice a good number of them looking at me as if I’d suddenly grown a third eye.
Now, while I’ve been on the receiving end of that look many times over the years, in this case, I was surprised at the volume. Fortunately, there was a spirited Q and A session afterward, which proved far more interesting than my “webinar from Hell.” There were truly great questions and discussions.
Again, this is the perfect example of dealers and their employees wanting to do things the right way.
The next undeniable truth is that we must do a better job in our industry when it comes to compliance; fortunately, there are resources available to get there.
The Association of Finance and Insurance Professionals (AFIP) offers a detailed and comprehensive course. This course is extremely heavy on information. It takes a high level of commitment to get through. Enrollees must achieve an 80 percent score or higher on Federal, state, and ethics questions to become certified. It’s worthwhile, but don’t sign up for it if you don’t have the heart or discipline. This is a highly regarded certification.
ACE is another option for training. Authored by my friend James Ganther Esquire, a nationally renowned authority and attorney for dealership compliance. This course is shorter and more manageable, while still placing emphasis on the most important elements of lending laws. An 80 percent or higher score is required on the final exam for ACE certification.
Brown & Brown of Kentucky also offers several compliance programs for dealers and their staff.
In high school we had a Geometry teacher who used to say, “Geometry is not a spectator sport. You people have to get involved.” The same is true with compliance (and I hope you’re more involved with compliance than I was with the geometric Pythagorean theorem). This is true whether you are the owner, in management, sales or service.
You have to get involved. It’s everyone’s responsibility to be aware of and correct compliance issues within the dealership. Under the Gramm-Leech-Bliley Act, you are required to have a compliance manager on site. In most places, it’s either the CFO or the general manager. Do not make your finance director your compliance officer. In many cases, that’s like telling the elephant to guard the peanuts.
But to “get involved” you have to know what you must enforce. In addition to the previously stated certification courses, some other sources for compliance training include:
- Your F & I provider
- Your state association
- Web-based compliance courses
- RVDA convention seminars
As the dealer you are protecting yourself by taking steps to increase the compliance level with your employees. If push ever came to shove with a compliance related lawsuit (F & I, sales, or even service), you can show your dealerships’ efforts at compliance and how your business does things the right way. In such a case, the employee would be at fault, as they were trained, and chose not to do things as instructed.
By making yourself familiar with these laws and how they apply to your dealership, you’ll go a long way towards making sure your dealership is compliant.
Remember, ignorance of the law is no defense…….unless you can afford a really good lawyer.
Rick Roesel is RV Compliance Director for Brown & Brown Insurance. He has nearly 20 years in compliance training for the auto and RV industries. He is a nationally known speaker and author. He offers compliance webinars on the first and third Tuesdays monthly. For more information, contact Rick.