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Raising the Odds

February 2010, F&I and Showroom - Feature

by Gregory Arroyo - Also by this author

Getting his start in the industry at Ford Credit, Gil Van oVer tells F&I Conference attendees that finance sources know which dealers they can trust and which they can't.

In today’s economic climate, what makes for a good deal isn’t simply about the profit made per deal. It’s about managing the risk the dealership is asking the finance source to take on, and a dealer’s compliance processes is at the heart of achieving that goal.

Last September, Reynolds and Reynolds’ Compliance Director Terry O’Loughlin, gvo3 and Associates President Gil Van Over and HH&O’s Bob Harkins joined Auto Scoop’s Adam Goldfein for a panel discussion on creating your best-chance deal. The group covered a variety of topics, from financial services reform to F&I’s seven deadly sins. The following is an excerpt of that discussion.

Goldfein: With regulations growing at such a tremendous pace, what are the most common risk areas inside the dealership?

Harkins: I think creating your best-chance deal really begins with a commitment to compliance and ethics. I can tell you that on every deal completed, there are 10 core Federal Trade Commission (FTC) regulations that we touch. There are five additional federal laws we also have to worry about on every deal. And if the 10 and five don’t take you down, every state has what is referred to as Unfair and Deceptive Acts and Practices (UDAP). State attorneys general love them, and they’re a gold mine for consumer attorneys.

The reason why they’re a favorite among regulators and consumer attorneys is because the law is broadly written. In fact, there is a UDAP test or a standard of enforcement that was developed by the Florida attorney general. It asks one simple question: Does the activity or practice have the tendency or capacity to mislead a consumer? And if the overwhelming answer is yes, that’s when we get visits from people we probably don’t want visiting our store.

F&I magazine published an article of mine a couple of years back called, The Seven Deadly Sins of F&I. It covered the seven most common areas that make dealers the target of media exposés, class-action lawsuits and high-dollar regulatory fines. The one deadly sin I think most dealers get hung up on is the use of the word ‘best,’ and this happens in two areas. The first is telling customers that this is the best or lowest rate the dealership can get for them. The second is telling customers ‘that this is the best or lowest finance charge available to you.’ There was a dealership in Colorado that was caught doing just that, and their approval included additional products and services. So, using the word “best” is a real recipe for disaster.

Goldfein: Terry, how litigious are attorneys general getting when we’re talking about the seven deadly sins?

O’Loughlin: I would say that car dealers are one of the attorneys general (AG)’s favorite targets, because, sadly, they always look like the good guy when they go after a car dealer. Add to that the fact that automobile-related complaints have been No. 1 for probably 11 or 12 of the last 15 years. And over the past years, there have been 18 different state AGs that have taken action against various dealers. In one case, the remedy amounted to between $2 and $3 million, so it’s a very real concern.

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