FI showroom red and grey logo
MenuMENU
SearchSEARCH

Dealer Fines and How to Avoid Them

Compliance guru outlines the simple steps every dealer must take to avoid violations of federal OFAC, Used Car, Red Flags, and IRS standards — and the steep fines that accompany them.

March 12, 2018
Dealer Fines and How to Avoid Them
4 min to read


There are times when I overhear industry conference participants moan about a presentation they just attended. “All gloom, doom, and scare tactics, but no solutions.” Sometimes that speaker was me.

Because of that, I made a New Year’s resolution to be certain I offer solutions when I point out a potential risk and liability. With that said, below are some of the federal regulations dealers are required to comply with and the potential fines and jail time associated with each regulation. Sticking with my New Year’s resolution, I’ve also include best practices solutions to hopefully avoid those penalties.

Ad Loading...

• Office of Foreign Assets Control (OFAC): This is the grand poobah of all potential fines. The OFAC is the agency within the U.S. Treasury that compiles a list of Specially Designated Nationals (SDN). All U.S. citizens are required to check the OFAC list of these suspected despots prior to entering into a business arrangement.

Depending on the program, criminal penalties can include fines ranging from $50,000 to $10 million and imprisonment ranging from 10 to 30 years for willful violations. Civil penalties range from $250,000 or twice the amount of each underlying transaction to $1.075 million for each violation, according to the Treasury.

Solution: Arrange with your credit bureau provider to automatically check OFAC with each credit report. Train your sales and F&I managers to confirm the OFAC check is clean or to clear any potential hit. Also establish a process to check OFAC on any third-party contributions to a contract, whether it is the trade or down payment gifts.

• Used Car Rule: This rule has been around since 1967, yet many still struggle with the proper disclosures — even with the recently revised Used Car Buyer’s Guide. This struggle is not necessarily from a willful desire to defraud a consumer, but rather a view that this is just one more piece of paper to complete the deal jacket. Dealers who violate the rule may be subject to penalties of up to $40,654 per violation.

Solution: If a vendor is responsible for posting the guides, check the guides for correctness. Whether posted by a vendor or a lot porter, conduct regular lot walks to ensure a guide is prominently displayed on each used vehicle and demonstrator available for sale.

Ad Loading...

• Red Flags Rule: The latest attempt at deputizing car dealers in the fight against identity theft has been the law for a few years now. The Federal Trade Commission (FTC) can seek both monetary civil penalties and injunctive relief for violations. Currently, the law sets $3,500 as the maximum civil penalty per violation. And each instance in which a company has violated the rule is considered a separate ­violation.

Solution: Contract with your credit bureau provider’s automated Red Flags solution. These offerings will alert the sales and F&I managers to any potential red flags of identity theft. Develop and implement a robust identity theft prevention program as required by law. Train every manager on the proper clearing actions of any identified red flags.

• Internal Revenue Service (IRS): Ah, the venerable IRS. It has been rumored to be out actively auditing businesses for compliance with the FinCEN 8300 report.

Dealers may be subject to penalties if they fail to file a correct and complete Form 8300 on time and cannot show that the failure was due to reasonable cause, according to the IRS. They may also be subject to penalties if they fail to furnish a correct and complete statement to each person named in a required report in a timely manner.

“A minimum penalty of $25,000 may be imposed if the failure is due to an intentional or willful disregard of the cash reporting requirements,” the IRS notes.

Ad Loading...

Solution: Train all managers on the various requirements under the 8300 reporting rule. Some dealers have purchased software designed to sort through transactions in the DMS to identify any potential filing requirement.

The lesson here is it truly is all about the processes. Dealers must have written policies in place that lay out the steps for handling each compliance procedure. They must also periodically train all employees in the approved process. Finally, you must have checks and balances in place to be sure your employees are properly following the approved policies. These checks and balances include checklists and a monthly audit of a sample of deals.

Without these processes in place, a dealer really is taking a huge chance with complying with these regulations.

Good luck and good selling!

Gil Van Over is the executive director of Automotive Compliance Education (ACE) and the founder and president of gvo3 & Associates. Email him at gvo@bobit.com.

Subscribe to Our Newsletter

More F&I

Photo of notepad and pen next to computer keyboard on desktop
F&IApril 13, 2026

Control in Sales Is an Illusion

Some of it should be given to the customer, but that doesn’t mean the F&I office relinquishes the process. In fact, a different approach both builds trust and boosts sales.

Read More →
Photo of external keyboard on office deak next to window
F&IApril 7, 2026

The Limited Warranty Game

Bringing it in-house benefits the dealership and its customers.

Read More →
Woman in casual clothing sitting at a desk
F&Iby Rick McCormickMarch 31, 2026

Curb The Confusion

Talk to F&I customers like you’d talk to a friend, without industry lingo or sales-like questions, and use hard proof to show, not tell, them about a need.

Read More →
Ad Loading...
Photo of man's hand on laptop computer keyboard with blank screen
F&IMarch 16, 2026

There Is Always one More Product

Helping F&I customers understand complementary offerings is likely to lead to more sales, based on the success of a high-performing practitioner of the philosophy.

Read More →
REGISTER FOR EFI 2026
F&Iby Kate SpataforaMarch 16, 2026

EFI Conference Extends Early Bird Discount as Room Block Nears Capacity

Ethical F&I Manager's Conference will take place at The Cosmopolitan Las Vegas on April 13–15, 2026.

Read More →
Industryby StaffMarch 6, 2026

Explore the 12 Rules for an F&I Life at EFI

EFI 2026 will take place April 13–15 at The Cosmopolitan Las Vegas.

Read More →
Ad Loading...
F&IMarch 4, 2026

Creating Your Own Economy

In this video, Reese Dailey explains how effective follow-up drives better results across the dealership, including increased sales, higher F&I penetration, and stronger customer retention.

Read More →
Industryby StaffMarch 2, 2026

Prove You Can Do F&I at EFI

‘So You Think You Can Do F&I’ is a live role-play contest taking place at the 2026 Ethical F&I Managers Conference.

Read More →
Image of two human hands, one holding the word yes, the other the word no
F&Iby Hannah MitchellMarch 1, 2026

Expect Yes in the F&I Office

It may be human nature to back off when a customer seems to say no to a product or service. But experts say F&I managers should operate as though the answer will be the opposite.

Read More →
Ad Loading...
Industryby Lauren LawrenceFebruary 25, 2026

Report Finds Year-End F&I Strength

Deal volume ebbed and flowed throughout 2025, but product performance remained steady, according to automotive technology and data intelligence solutions provider StoneEagle.

Read More →