Government requirements vary, so it pays to adopt industry standards.
A recent caller asked about federal laws on menu disclosures, product pricing and more. It is difficult to find a document in the paper trail that helps a dealership with its compliance story Amore than the menu.When a menu is properly executed, it affirms the agreement in sales, clearly sets out that the products selected in F&I are optional, fully discloses the payment walk, and closes t he F&I sale. All in two pages – one process.
However, a menu falls under dealer law or industry best practices. There is not a federal law requiring a menu during the F&I process.
From a state law perspective, California and Minnesota require a precontract disclosure on retail deals that is the closest statutory requirement we have for anything resembling a menu. The precontract disclosure does not disclose the annual percentage rate and is only required on retail financing, leaving leasing, outside lien deals, and cash deals without a requirement to provide the disclosure.
The precontract disclosure does require the base and final payment, the products selected, and the price for products. One of our clients successfully petitioned Minnesota to accept the Accept Declination page from its menu process as a substitute for the precontract disclosure.
In the other 48 states, there is not a statutory requirement for a menu. Most retailers have adapted the use of a menu as a best practice, both as a sales tool and a compliance tool.
Through the years of evolving menus and menu presentations, a few best practices have evolved as industry standard.
Here is my list of industry standards as it applies to menus:
- The preferred process is two steps. The sale is closed, and the F&I product’s features and benefits are completed on the first page, or presentation page.
- The second page is the accept declination page, and it has two columns. One column is the list of products the customer accepted. The second column is the list of products the customer declined.
- The base payment on the presentation page is initialed by the customer. This affirms that the customer knew what she could take delivery of the vehicle with approved credit, making every product purchased optional.
- The products selected on the Accept Declination page have prices that match all the other documents in the paper trail.
- The base and final payments are on the Accept Declination, confirming the payment walk.
- Disclosures regarding products being optional can be purchased separately, are not required to obtain financing, and do not affect interest rate.
E-MENU OR PAPER MENU
An e-menu in the F&I process to document customer decisions and sell products is preferable over a paper menu.
Unfortunately, either through kinkiness or naivete, an improperly completed menu – usually a paper one with Sharpie assistance – can document a litany of declared deceptive practices. These can include payment packing or confirming the packed payment from sales, stuffing products, and trading rate for product.
The kinks, though, can still manipulate an e-menu, either through the set-up or other nefarious methods.
For example, one e-menu provider uses a kiosk to share the menu story. In one of my visits, I discovered that an F&I manager (who I documented in the file review process was a bad apple) had a sticky note on the screen of his kiosk. The note said, “Call your wife” and had an illegible signature.
Turns out the guy wasn’t married. Turns out the sticky note was strategically placed on the screen where the base payment disclosure sits. Turns out he was spinning a lot of deals without properly disclosing the base payment. Kinks will be kinks.
Another risk to be wary of is the menu setup. Some systems permit a user an unlimited number of days to first payment. This will pack the base payment.
Other systems will allow a user to pick and choose which Accept Declination to print, sometimes suppressing the product price, the base payment or the final payment terms. Turn those options off so that a user does not accidentally print the wrong version.
Continued Good Health, Good Luck, and Good Selling.
Gil Van Over is executive director of Automotive Compliance Education (ACE), founder and president of gvo3 & Associates, and author of “Automotive Compliance in a Digital World.”