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How to Stay Out of the Courtroom

September 2006, F&I and Showroom - Feature

by Ron Reahard

Whenever the topic of compliance comes up, many dealers and even some experienced F&I managers sound like MAD magazine’s Alfred E. Neuman, “What, me worry?” Their typical response is “We’ve never had a problem. Besides, we always disclose everything on the contract before the customer signs it.”

My advice to every dealer, and every F&I manager, is worry. Every day, every deal, every customer — worry. Worry as to whether the payments quoted by the sales department were accurate, and they included the amount financed, the APR and the term. Worry as to whether the customer was promised the “best rate” by a salesperson in an effort to sell the car. Worry that every menu is properly and completely filled out, and there is one in every deal jacket. Worry that every product is being offered to every customer every time. Worry whether the information on “customer statement” is accurate, and it’s been verified by an F&I manager prior to submission to a lender. Worry about whether the customer’s information is being safeguarded.

Worry that customers are who they say they are. Worry about whether they might be a terrorist or drug dealer. Worry that the “i’s” were dotted and the “t’s” were crossed, and that everyone involved in the sale has complied with all the laws and regulations that impact F&I on a daily basis. Worry about attorneys obtaining the new car registration lists, and sending out postcards to customers who recently bought a car in an effort to get them to sue you!

Worried yet?

Because if you are, maybe you’ll decide you need to implement a process to ensure compliance in the F&I office. A major part of an F&I professional’s job today is helping protect the dealership from potential litigation. While this is by no means a complete list, the following are some of the things your F&I managers need to confirm on every deal as they review and complete the customer’s paperwork.

VERIFY ALL INFORMATION ON BUYER’S ORDER

On the write up, worksheet or buyer’s order when it comes into the F&I office, it’s critical that your employees confirm:

The buyer(s) shown is the actual buyer. A straw purchaser is someone who fronts for an undisclosed person whose credit standing or insurability may not be acceptable to a lender.

The year, make and model of vehicle they are buying is correct, and has all equipment listed. Any additional accessories or equipment to be added to the vehicle being purchased must be shown on the buyer’s order or on a separate “We Owe” document.

The owner’s name(s), year, make, model and VIN shown on title or registration of trade in correspond to vehicle being traded in.

There is a photocopy of the buyer’s driver’s license(s) and the photo matches the appearance (and age!) of the person buying the vehicle. Identity theft and true name fraud is a huge problem today.

The price of vehicle being purchased was not increased to offset negative equity in trade in. According to Regulation Z, negative equity can be disclosed in one of two ways: a) applying a customer’s down payment toward any negative equity, and disclosing any remaining difference on line 4 of the installment sales contract, or b) disclosing the full amount of the negative eq uity on line 4 of the installment sales contract.

What you cannot do is inflate the price of the car they’re buying and the trade in allowance to hide the negative equity!

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