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No-Look Compliance

Your F&I office should always strive to do the right thing, especially when no one is looking. The magazine’s F&I insider weighs in.

February 2014, F&I and Showroom - Feature

by John Lovin

Legendary UCLA basketball coach John Wooden once said: “The true test of a man’s character is what he does when no one is watching.” That famous quote is especially applicable to the automotive retail industry given the regulatory scrutiny it faces today. Here are a few process tips gleaned from some of the most compliant dealers groups in the country to help make your customers happy and your dealership more compliant:

LESSON 1: Sales-to-Finance
A simple rule to remember is the “math has to work.” And when an outside auditor visits your store, you need to be sure the following items are contained in every deal:

1. Consistent first pencils from the sales desk. That means quoting average interest rates and terms. Using a rate matrix is another great way to avoid allegations of credit discrimination.

2. Final terms from the sales desk need to be disclosed to customers before they are turned over to F&I.

3. Terms discussed on the sales floor must comply with the lender’s guidelines.

4. The top of the menu must match the final terms agreed to on the sales floor.

5. Follow the 300% rule: Present 100% of the products to 100% of customers 100% of the time.

Lesson 2: More Compliance Equals More Money
The large dealer groups have found that every time they add a new consumer-friendly policy, they increase their bottom lines. That’s also true when caps on interest rates and product pricing are employed.

Lesson 3: Be Transparent
Customers know when you’re not being transparent. That’s why you need to operate with a nothing-to-hide attitude. It relaxes your customer, which allows them to trust what you have to say.

Lesson 4: Be the Compliance Leader
The large dealer groups realize that the more they employ systems that drive compliance, the more likely regulators will stay away.

Lesson 5: No Process, No Profits
People perform poorly without a good process in place. That’s why large dealer groups focus on hiring the right people and what I refer to as PDF (practice, drill, rehearse). More importantly, a formalized process ensures that every customer gets the same unbiased presentation.

Lesson 6: Record the Transaction
If a regulator knows a dealership video records transactions in the finance office, they may be less likely to audit the dealership. But the dealership’s compliance officer must routinely review the transactions. The best part of recording transactions is it tends to boost production, because finance managers are more likely to make a better presentation and follow the 300% rule if they know someone is watching.

Lesson 7: Electronic Pencils
The four-square worksheet was once a great tool, but it is a little too barbaric for today’s more educated consumers. An electronic pencil is a more professional approach, as it allows for full disclosure.

Lesson 8: Protecting Consumers
The Safeguards Rule is another key focus area, as protecting your customers’ nonpublic personal information (NPI) is paramount to defending against identity theft. The following are a few process tips to help you do that:

1. Appoint a compliance officer. This individual’s sole purpose is to police the dealership by periodically walking the showroom to ensure that customer NPI isn’t left in unsecured areas.

2. Nonpublic personal information should always be stored in secure locations and never left on unattended desks.

3. Nonpublic personal information should be removed from trade-ins immediately and disposed of properly.

4. Never allow employees to have conversations with finance sources over speakerphone, as you could put customer information at risk should a would-be ID thief be within earshot.

5. Computer screens that may display customer NPI should never face windows, as people outside the dealership could catch a glimpse.

6. Computers should be set to automatically logoff. A five-minute delay is recommended.

7. There should be no group computer logins. Each user should get his or her own login so you can identify the culprit should you face a security breach.

8. Terminated employees should be removed from all systems immediately.

The final tip is this: Don’t put your dealership at risk by not having a proper compliance and safeguards process. Simply follow the tips listed here to get started. And remember to have a qualified attorney review your policies and processes to ensure they meet both state and federal requirements. These steps may not make your store bulletproof, but they will go a long way with regulators.

John Lovin serves as vice president of Chrysler Capital Consulting. Email him at

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