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Naïve, Sloppy or Kinky?

There isn’t much the magazine’s compliance pro hasn’t seen. In fact, he’s got a category for every type of issue he’s come across in his more than 15 years auditing deal jackets.

January 2017, F&I and Showroom - Feature

by Gil Van Over - Also by this author

For compliance auditors like myself, the exit conference is always a lot of fun. That’s when we get to report to the dealer exactly what we found from all the deals we audited. And, well, we can typically categorize our findings into one of three buckets: naïve, sloppy or kinky.

The first category is pretty obvious, as it involves issues that are obviously the result of compliance requirements not being well understood. The second usually involves dealers and managers who know the requirements and have policies and procedures to ensure compliance, but they just don’t know how to execute them consistently. 

Being naïve or sloppy can be corrected through training or motivation. The last category, however, will require much more. In fact, the kink will need to be kicked out of the organization, as once a kink, always a kink.

Whether an issue is the result of an individual being naïve, lazy or sloppy, each creates a special set of issues. For example, when a deal is started in the dealership’s computer system, it is assigned that day’s date. If the vehicle is delivered on a subsequent date or the deal is recontracted on a later date, the DMS will not always update the date. And if the F&I manager doesn’t change the date on the deal, all the documents are effectively backdated. This can cause potential Truth in Lending Act (TILA) violations or possible incentive qualification issues.

There are several reasons why the F&I manager might have failed to change the date. Maybe he didn’t know (naïve), was in a rush to get the deal completed (lax), or maybe he just didn’t feel like doing it (lazy). The F&I manager may simply need training so he or she knows better, or the producer may need motivation so it doesn’t happen again.

Being a kink also creates its own special set of issues. For instance, a kink will sign a customer’s name to a document when she neglected to get it signed while spinning the deal. Hey, no one likes having to bring the customer back in to correct the problem, but forgery is a crime. And no dealer wants to face the local “News on Your Side” camera or be the subject of nasty headlines because his or her employees are being accused of forgery.

A kink, on the other hand, will give the customer a raise or a promotion when transferring information from the customer’s handwritten application into RouteOne or Dealertrack. A kink will also lie to the bank about how the subcompact car grew a moonroof, and will falsify the down payment amount on the contract so the transaction fits within the finance source’s underwriting guidelines. A kink will also knowingly orchestrate a straw purchase.

Bank fraud is a crime. When an employee commits (or attempts to commit) bank fraud, the dealership’s name lands on a secret “Suspicious Activity Report” finance sources must file with the federales.

A kink will also tell your customer that the finance source required a GAP policy. By requiring an F&I product, a kinky F&I manager is violating the TILA if he or she does not include the premium in the APR calculation. And too many of these situations could be setting the dealership up for a class action lawsuit.

I’m no human resources expert, but I really don’t see any other way to fix the kink than brooming him or her out of the organization (just make sure you consult with your HR person before you do). There have been numerous instances where my firm uncovered a kink for a client, and the dealer rid his operation of the cancerous kink. Afterward, we’d conduct a review for another client in the same city and discover the same issues committed by the same kink the other dealer fired.

A kink has a faulty moral compass. In other words, you just can’t fix a kink.

Gil Van Over is the executive director of Automotive Compliance Education (ACE) and the founder and president of gvo3 & Associates. Email him at gvo@bobit.com.

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