James Carville famously scrawled “It’s the economy, stupid” on a blackboard during President Bill Clinton’s 1992 campaign, reminding directors and staffers of that election season’s linchpin...

James Carville famously scrawled “It’s the economy, stupid” on a blackboard during President Bill Clinton’s 1992 campaign, reminding directors and staffers of that election season’s linchpin issue.

Photo by Gage Skidmore via Flickr

We try to get a gauge on the dealer’s processes and culture before and during a compliance review. While this approach is not foolproof, it does play out more often than not.

For example, a look at the dealer’s compliance score in Dealertrack, RouteOne, or 700Credit can give us some potential red flags of noncompliance to be alert for. When a dealer’s compliance score is at 100%, it sometimes means the dealer is managing the score, not the process.

An employee is usually assigned to review the compliance tracking tool and clears any missing items (such as incomplete Red Flags or OFAC) without obtaining any documentation necessary to properly clear these potential issues.

This approach is really telling if the Red Flags and OFAC clearances are at 100%, even on unsold vehicles. Those compliance tasks are not necessary if the dealer did not sell a vehicle.

Conversely, if the score is significantly below industry standard, this can mean either a total disregard for the compliance requirement, a lack of understanding on how to use the tool, or both.

Requirement Disregarded

As the sign hanging in some controllers’ offices says, “A lack of planning on your part does not constitute an emergency on my part.”

When we look at the sales data, we note the range in dates. While there are generally more sales toward the second half of the month than the first half, the contract date should represent when the vehicle was finally sold and delivered.

When 60% of sales are made in the last two weeks of the month and 80% of deals are delivered to the accounting office in the last few days of the month, that’s a problem. This failed process means the compliance checklists are powerchecked just to clear the backlog and some deals get through that shouldn’t.

A final telling sign involves the meeting in which we share our findings. More importantly, we discuss ways to improve the process and assign accountability. Sometimes it devolves into a series of excuses for the findings instead.

The Proof Is in the Process

Some managers defend their compliance shortcomings by saying, “We sell so many cars.”

Yet one of our clients consistently sells 900 vehicles a month with 12 F&I managers spinning the deals. They consistently achieve compliance scores of 85 and above. They are strong believers in process. The more vehicles they deliver, the better they get with compliance.

As the partner and general manager likes to say, “If you don’t have the time to do it right, where do you find the time to do it over?”

Red Flags as an Example

A process is a series of actions you take in order to achieve a desired result. The Red Flags compliance requirement provides a great example of how the process of properly vetting and documenting alerts should work.

Your Red Flags vendor pings hundreds of databases looking to confirm the customer’s address, Social Security number, potential credit bureau alerts, and other data. When the vendor can verify the data the dealer provides, it returns a complete or passing score.

When there are issues confirming the data provided, the vendor alerts the dealer to the issue and shares which datapoint requires further follow-up. Sometimes the address provided is different. Other times it’s the Social Security number. Or it could be a credit bureau alert.

The incomplete or varied findings must be further vetted and cleared before the vehicle is delivered.

The correct process is to determine what the variance is, obtain acceptable documentation to confirm the customer is not an identity thief, copy the documentation for the file, then update the vendor’s software with a very short story of how the Red Flag was cleared — before the deal is sent to F&I.

The incorrect approach is to disregard the notification, deliver the vehicle, then either ignore the incomplete Red Flag in the vendor’s software or update it to manually clear it days after the vehicle is busting bugs.

And yes, good luck and good selling!

About the author
Gil Van Over

Gil Van Over


Gil Van Over is the executive director of Automotive Compliance Education (ACE), the founder and president of gvo3 & Associates, and author of “Automotive Compliance in a Digital World.” Email him at [email protected].

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