A Life Lesson on Compliance

For the past 10 months, I have had the privilege of teaching my two children, all while balancing my work life. Co-workers and clients have been very sympathetic to screaming kids during our Zoom meetings. There are days when I think, “it’s 5:00 somewhere,” but for the most part, we have a day-to-day process in place that works for us. I stress the importance of daily consistency, prepping for class, following directions, and promptly finishing assignments. 

I don’t remember that specific deal, but I can tell you the process I follow on every deal.

Teaching these life lessons takes me back to the advice we give our clients when discussing compliance. One of the most important things a dealership can incorporate is consistent processes, and that includes a defensible paper trail. Dealerships deliver thousands of vehicles each year, and the chances they remember a specific deal are low. As adults, we cannot remember what we ate last Tuesday, let alone what we wore last Thursday. The expectation is not to remember every deal, but to have a process in place and follow that process on every deal. 

There is no argument that a dealer’s best defense is the paperwork. While I agree, paperwork execution is important, the top priority is the process the dealer follows to complete the paperwork. Start by documenting the agreed upon terms and the consumer acknowledges an acceptable payment walk. Next, disclose the reps and warranties stated by the dealer and get commitment from the consumer. Finally, secure the financing for the consumer. 

The Paper Trail Process

A compliant paper trail process begins with an e-Desking worksheet. This worksheet provides the agreed upon terms in which the consumer acknowledges with a signature.

Next, the process moves forward to the menu. The menu reiterates the base terms disclosed on the e-desking worksheet. The menu is used for the sale of products offered and discloses final terms with acknowledgement from the consumer.

After the menu, present the accept/declination (A/D) form, which confirms the acceptance of the products agreed upon on the menu. Product prices should be present on this form, and the final terms should match final terms from the menu.

The final buyer’s order (FBO) is next in line. The purchase price, product prices, down payments, and amount financed should all be in line with all the previous documents in the paper trail.

This leads to the Grand Poobah, the retail installment sales contract (RISC). As with the FBO, all the final numbers should match what was agreed to on the menu/AD Form. 

Finally, complete the transaction with the enrollment forms for the products the consumer agreed to purchase. The product prices should be consistent with the prices printed on the AD form, FBO, and RISC.

Rules of Thumb

While the execution of the paperwork is important, there are some best practices that further assist in defending your processes. Reiterated numerous times above, all numbers must remain consistent between the documents in the paper trail. Any party should be able to look at the documentation from start to finish and see consistency in the numbers.

We are aware a consumer signs his/her name at least 80 times in a standard vehicle transaction. To have a defensible paper trail, ensure the consumer signs every form acknowledging the acceptance of that form.

As dealerships become more digitalize, time and date stamps will become a good defense in their paper trail. Today, most programs track the date and time in which the documents were created and printed. If the date and time stamps are in sequence, you are on the way to a defensible paper trail.

Finally, we know in the business, recontracts are inevitable. If a recontract occurs, treat it like a new deal. If required in your state, complete a recission agreement, void old documents, and have the consumer sign acknowledging the deal is null and void. Then continue down a new paper trail which includes a new menu, AD, FBO, RISC and enrollment forms.

Following these simple guidelines will be the best defense when put to the test in court. The dealer can confidently say, “I don’t remember that specific deal, but I can tell you the process I follow on every deal.”

Penelope Bell is an associate with gvo3 & Associates, a consulting firm that specializes in developing and implementing a compliance management system for dealers around the country.

Read: Salespeople are Compliance Weakest Links