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A Dealer’s Guide to Compliant Paperwork

September 2009, F&I and Showroom - Feature

by Joe Bartolone - Also by this author

It’s a safe assumption that most of you did not become F&I professionals because you had a secret desire to manage overwhelming amounts of paperwork. And it’s probably a safe bet to say that most of you don’t get paid by the number of forms you process each month. What is expected of you is that you generate acceptable levels of product sales and profits, while at the same time ensuring that the sales and F&I department are complying with all state and federal regulations and are operating within established dealership guidelines. Whether we like it or not, an F&I manager’s role is to be the gatekeeper when it comes to paperwork. 

Paperwork tends to be viewed negatively because most think of it as just another series of forms, reports, worksheets, contracts, etc. If we think of paperwork as purposeful documentation that can provide a means to mitigate potential litigation, as an irrefutable defense in a criminal investigation, as a mechanism to avoid violations of state and federal regulations, and as a fair and equitable basis to resolve customer complaints, then paperwork takes on a more positive tone.

Basically, you have two choices to resolve paperwork issues in your dealership. One way is to get the salespeople to think like accountants. Another way is to establish consistent processes in dealing with paperwork. From experience, I believe you will be more successful with the second approach. Let’s take a look at some best practices for developing processes to help streamline the paperwork issues in your dealership.

1. Sales Worksheets

The ability to show a logical flow of the deal terms, from the first pencil to the retail installment sales contract (RISC), is an important part of the deal paperwork. In sales, the two areas of most importance are the first pencil and the final agreed-to sales terms, especially if you quote payments during the sales process.

Dealerships that excel in this area will start the deal with a standard worksheet for finance, cash or lease deals. The point is that you end up with a document that clearly recaps what the customer finally agreed to. At a minimum, this should include the vehicle selling price, dealer add-ons, discounts, agreed-to trade value, cash down, rebates, taxes and fees. If you quoted payments, then you should include the payment amount, the term and the rate. These deal terms should be the same as the deal terms on the top of the first F&I menu. Any included F&I products should be disclosed and priced separately. A preliminary buyer’s order works very well for this purpose.

2. Photocopies of Driver’s Licenses

There still seems to be some confusion as to why a dealer needs to make a photocopy of the customer’s and co-buyer’s driver’s licenses. The reason is due to a provision of the USA PATRIOT Act, which requires a dealer to positively identify the customers with which they do business. The identification must be government issued and not expired. The most commonly used forms of identification are driver’s licenses, passports and military IDs.

Make sure the photocopy is legible, as it will be copied several times throughout the deal process. Don’t make color copies of driver’s licenses and always copy at 200 percent or at the original size.

Also make sure the name on the ID matches the name on the contract. Names that don’t match usually means the individual was recently married. You should get evidence of the marriage, or, at a minimum, check the “AKA” on the credit report and make the proper notations.

Driver’s licenses are also an important first step in identifying potential red flags under the Federal Trade Commission’s Red Flags Rule (RFR). A best practice is to establish a process that requires a salesperson to make a checkmark indicating that the expiration date was reviewed and that the physical and personal characteristics on the license match the customer’s appearance.

3. OFAC Checks

The USA PATRIOT Act also requires a dealer to make sure their customer is not on the government’s list of Specially Designated Nationals. This is done by conducting what is known as an OFAC check. There are generally three methods dealers use to conduct OFAC searches. The most popular method is through the credit report, the second is through a menu function, and the third is through an Internet search.

Regardless of the method you use, you should consider the following best practices. First, make it clear that you reviewed the results of the OFAC search. This can be done by simply placing a check mark or circle around the results. In those rare cases when you do get a match, print the search result, note the date and the steps you took to clear the customer, and retain it in the deal file. If you cannot clear the customer, call the Treasury Department and follow its directions.

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