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First Line of Defense

Karina Grile worked overtime to get Voss Auto Network’s stores in line with the industry’s newest rule — one that experts say could be a blessing in disguise.

January 2011, F&I and Showroom - Feature

by Gregory Arroyo - Also by this author

Compliance might create industries, but it’s also responsible for what is and what will continue to be a critical post inside the dealership: the compliance manager. Such is the case with Karina Grile, who has held that title for much of her 19-year career with the nine-store, Dayton, Ohio-based Voss Auto Network.

Grile assumed her post 15 years ago, shortly after her organization hired a new CFO. He made it abundantly clear that, under his watch, deals would be turned away if they weren’t done right. It was Grile who stepped in to figure out what “right” was, and she continues in that role to this day.

 “I guess I kind of fell into this,” says Grile, who was serving as the assistant to the finance director when she assumed her current position. “I guess if it wasn’t for the CFO and my dealer, I wouldn’t have a job.”

Leading the Charge

Grile has since grown into her position. She leads the dealership’s new-hire training, stays in constant contact with her state dealer association for any regulatory updates and tackles any issues or questions that come up about her compliance procedures. In fact, she’s fielding questions daily from her F&I managers about the dealership’s Red Flags Rule (RFR) procedures, which she established shortly before the Federal Trade Commission (FTC) delayed its enforcement of the rule for the fifth time back in May 2009. The enforcement moratorium was expected to be lifted on Dec. 31.

“I get [Red Flags Rule] calls daily with questions like, ‘This is what I have, what should I do?’ That’s when we start looking at DealerTrack,” she says. “The process itself takes maybe five minutes, but it was yet another step in all the paperwork we have to do.”

The group’s RFR protocol has yet to nab any would-be ID thieves, but Grile says she’s had to turn away one or two deals because customers couldn’t provide the required verification. Because of the way the RFR played out, the compliance manager admits to taking a wait-and-see approach to the new Risk-Based Pricing Rule (RBPR), which was expected to take effect on Jan. 1. In December, she found herself racing to get her group’s procedures in place, signing up for whatever Webinar she could find for guidance. “It’s definitely been a thought this entire year, but I knew it would snowball toward the end of the year,” she says, adding that she’ll once again turn to DealerTrack for a solution.

Lining Up for Battle

Grile says she was a little nervous when she first caught wind of the new rule through the Ohio Automobile Dealers Association (OADA), but was relieved when she found out about the dealer exception. The rule — mandated by the Fair and Accurate Credit Transaction Act of 2003 — requires creditors, including dealers, to provide a specific notice to applicants who, based on their credit report, receive credit terms less favorable than those granted to other consumers. Not factoring in penalties at the state level, noncompliance with the rule can lead to fines of up to $16,000 per violation.

If not for the work of the National Automobile Dealers Association (NADA) in securing an exception, dealers would have been forced to evaluate the rate their finance sources offer on a deal-by-deal basis. That work would include determining the impact of their markup on that rate, then executing a disclosure based on those findings. With the exemption, dealers are merely obligated to hand every customer who applies for financing a credit score disclosure notice, which, among other things, must contain a written description or graphic representation of how the applicant’s credit standing ranks against other consumers in the same scoring pool.

Manas Mohapatra, who serves in the FTC’s Division of Privacy and Identity Protection, says dealers can thank the advent of risk-based pricing — a practice where lenders set or adjust the price and other terms of credit provided to a customer based on his or her credit worthiness — for the rule.

“With the adverse action requirement, people are told information in their credit report probably caused their denial of credit,” Mohapatra says, “However, what had been occurring was that people were not being denied credit, but were getting much worse material terms and weren’t being informed of that fact. This rule is supposed to fill that gap.”

Although the rule is intended to help consumers make an informed credit decision, it’s also intended to help them spot errors in their credit report. That’s why the rule is very specific about when the notices must be issued, requiring that the notice be handed to consumers as soon as “reasonably practical” after the dealership pulls the credit report and before consummation of the deal.

“This is a consumer education rule, so the idea is to try and get that information to the consumer at a meaningful time,” Mohapatra adds.

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