In many dealerships, the thought of putting together a compliance program is similar to contemplating a diet-and-exercise regimen: You know it’s something you
need to do or, eventually, your unhealthy lifestyle will catch up with you.

And like getting in shape, keeping up with regulatory changes can seem like a daunting task — not to mention costly. Many compliance programs on the market are quite expensive and simply out of reach for the average dealership’s budget. As a result, some organizations give up on implementing a compliance program and just hope they can fly under the radar.

The truth is, setting up and maintaining a strong compliance program in your dealership doesn’t have to be difficult or expensive. In fact, here are five steps you can take to dramatically raise the level of compliance in your store without breaking the bank.

1. Get Committed: Ignoring compliance just doesn’t make good business sense. The automotive industry is changing dramatically and it is coming under more scrutiny with the passage of the Dodd-Frank Act. Dealerships that continue to operate without a focus on compliance will invariably struggle. So what are you waiting for? Make a commitment to establishing a culture of compliance and ethics in your dealership.

2. Follow the Leader: The change in culture needs to start at the top, but someone in the organization needs to champion the cause. All too often, dealerships will adopt an “everyone’s-in-charge-thus-no-one’s-in-charge” attitude toward compliance, which tends to fragment a store’s efforts.

You must designate a company compliance officer. Ideally, this will be a senior-level employee who reports directly to company ownership. This person will be responsible for monitoring all aspects of compliance. He or she will also be afforded the resources to learn as much as possible about state and federal regulations.

Don’t forget that two federal requirements that govern your dealership’s sales and F&I processes — the Safeguards and Red Flags rules — require that you designate a compliance officer, so you’ll be killing three birds with one stone here. And it’s not as though appointing an in-house compliance officer requires an additional salary. That being said, it would be wise to consider some compensation for the employee’s additional duties. This is an important position and must be taken seriously. In larger organizations, a compliance committee consisting of department heads may be a better way to go.

3. Assess Your Compliance Level: Dealers should not assume their employees are well-versed in compliance simply because they’ve been in the business for a long time. The “old school” way just doesn’t cut it in today’s regulatory environment. Plus, your veterans may not be aware that the lessons they learned over the years are no longer legal or ethical.

The vast majority of dealership employees are well-meaning, honest people just trying to earn a living. However, if they have never been properly trained in compliance matters, they are likely to rely on doing business the way it has always been done. Bottom line, assuming that your dealership is doing everything right without verification is risky at best.

So, when was the last time you performed a comprehensive risk evaluation? If it’s been a while (or never), you need to get on it. It can be completed by someone on staff who is well-versed in federal and state regulations or by hiring outside compliance professionals. The key is to get a baseline reading and uncover areas where your store is most vulnerable.

Forms, advertising materials and deal jackets should be thoroughly evaluated. Policies related to the Red Flags Rule, information safeguards and privacy should be reviewed. Vehicles should be checked for proper display of buyers guides, Monroney labels, etc., and signs and notices should be verified. Chances are you may be unpleasantly surprised by the results.[PAGEBREAK]

4. Get Everyone on the Same Page: Dealers who send two or three of their top people to a compliance seminar once or twice a year, or send out monthly compliance newsletters to managers should be commended. The problem is neither practice is enough on its own.

In many organizations, management personnel have at least some knowledge of proper legal compliance and ethics. On the other hand, many salespeople don’t have a clue about the laws and regulations that govern our industry. And why should they? Compliance training, if conducted at all, generally occurs only at the management level. And without proper knowledge, it’s very easy to step over the legal line when trying to make a deal.

It’s wonderful to have a well-trained management staff, but there’s a good chance an uninformed salesperson may make a compliance misstep without management’s knowledge. Salespeople can spend hours talking with customers. It’s unlikely that management is going to be privy to all of those conversations. Unfortunately, attorneys and regulators don’t differentiate between job descriptions when pursuing a claim against a dealership.

Some dealers assume the cost involved in training all staff members is just too high, which isn’t true. Training can be accomplished in-house by your compliance officer. If that’s not practical, there are affordable alternatives. While some F&I training programs require a five-figure check to cover the entire staff, there are also outstanding programs available that cost less per employee than a box of business cards. And the training can be completed in a matter of hours.

5. Monitor Your Progress: Once your compliance program is in place and the staff is trained, it is imperative that the compliance officer or committee ensures accountability. Many dealers spend thousands of dollars for compliance audits, only to find the same violations being made after the auditors move on. Employees need to recognize that your compliance program is here to stay and that they will actually be held accountable for their actions. Let everyone know that the organization is serious about compliance and ethical behavior.

Written procedures also are a must, as is ensuring that processes are followed consistently. For instance, everyone should use the same menu and desk deals the same way. In addition, all employees should sign a “code of ethics” agreement upon completion of their training, and mini-audits of deal jackets should be completed on a regular basis.

So, there you have it, the five steps to getting serious about compliance and protecting your dealership. Sure, it will take commitment — and a few bucks — but this plan is certainly achievable for virtually any dealership. It’s just a matter of getting started.

Jim Radogna is president of Dealer Compliance Consultants Inc., a San Diego-based provider of training and compliance solutions. He can be reached at [email protected]

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