Yesterday’s Standards Are Today’s Felonies

Somehow, some way, the Beatles were able to sneak past the usually restrictive censors with songs containing messages of admitting to stalking (“No Reply”), reminiscing about domestic abuse (“Getting Better”), and contemplating premeditated murder (“Run For Your Life”). Today’s woke society would surely organize protests and urge boycotts of all thing Beatles.

That’s what happens as we continue to evolve: Yesterday’s standards are now considered verboten.

The same evolution applies to the road to the sale. As dealers and F&I professionals, you must continue to evolve. “I didn’t know” or “Everyone’s doing it” are no longer acceptable defenses. Let’s take a closer look at three past practices that were rampant at the turn of the century and can land you in prison today.

1. Spot Delivery

The Dark Side calls them yo-yos. Dealers call them puppy dog closes. The vehicle is spotted to the customer before an approval is obtained from a finance source. The motive is to have the customer take the vehicle home and show it off to Granny and friends.

A week later, the dealer calls the customer to recontract on terms that she may have walked away from last week. Too embarrassed to return the vehicle, she begrudgingly accepts the new onerous terms.

The Federales believe dealers are experienced with credit decisioning, deal structure, and relationships with finance sources. They believe you should have known that the terms used to close the deal would not be acceptable to any finance source. You are thus deemed to be delivering a vehicle under terms you know will not be funded.

Twenty-five years ago, many of the California dealers I worked with had a puppy dog close metric. They believed they were not aggressive enough and lost potential sales if they didn’t unwind 5% of their spot deliveries.

Technology has dramatically sped up the credit decisioning process. CSI scores can be leveraged to a dealer’s disadvantage. There is not a good reason to use the puppy dog close as a standard business practice.

2. Payment Packing

This deceptive sales practice takes many forms. All have the same motive. A packed (or “protected”) payment does not accurately represent the true payment based on what is contemplated or disclosed at that time in the process.

The intent is to get the customer accepting a higher payment and grease the skids for F&I product sales. Approaches used to pack a payment include but are not limited to:

• Using an APR that is not consistent with the bureau score.
• Showing more than a $5 to $10 payment spread.
• Quoting a payment with an undisclosed short term.
• Including an undisclosed F&I product in the payment quote.
• Adding an arbitrary amount (or “leg”) to the true payment.
• Inflating the sales tax used to calculate the out-the-door amount.
• Using more than 45 days to first payment or fewer than 12 payments per year.

Newly available edesking software can be hard-coded to eliminate some of the methods. Unfortunately, these same systems make it easier to create the sales tax bump, which probably accounts for the resurgence in this practice.

I’ve said it here before, but it bears repeating: If a dealer continues to use a Sharpie and four-square instead of an edesking solution, payments are probably being packed.

3. Bank Fraud

A dealer once told me his job was to put cars over the curb, truth or facts be damned. He thought nothing of kinking credit apps to make the offering look pretty, not ugly.

Today, this dealer would have to be stupid to admit such a thing. Dealers who are committing bank fraud are either going to jail, losing a lifetime of earnings, or both. The reason is simple: Bank fraud is a federal offense.

Straw purchases, powerbooking, and fudged credit applications are in the Federales’ laser sights. These forms of fraud are most often committed in sales or at the desk. The F&I manager is tasked with stopping the transaction. Many simply go along with it.

It takes constant vigilance to eradicate bank fraud. Eradication starts with a message from the top that it will not be tolerated, documented in written policies and procedures, followed up with training on the proper procedures, and finalized with disciplinary action for any offenders.

Good luck and good selling!