A new federal consumer watchdog agency makes it more crucial that car dealership finance and insurance managers adhere to regulations affecting their practices.
So says National Automobile Dealer Assn. Chairman Steve Wade, who is focusing on compliance measures midway through his term.
“Auto retailers will be watched closely by the new agency,” says Wade. “So we are working closely with state associations in spreading the word as to the importance of compliance with the new agency's enforcement rules.”
The new Consumer Financial Protection Bureau is the product of federal finance-reform legislation keeping closer watch on the lending industry.lobbied successfully for legislators to exempt auto dealers from the legislation, but Wade and others note that dealers still are indirectly affected by its regulations.
Among the F&I actions that likely will come under greater scrutiny are payment packing, excessive spot deliveries, online bait-and-switch ads and unfulfilled promises of coverage for wear-and-tear on leased vehicles, says Marvin Eleazer F&I director of Langdalein Valdosta, GA.
Some compliance experts urge dealers to record or videotape F&I meetings with customers to avoid misunderstandings and litigation, but do so only with written permission of customers.
Another area the CFPB is expected to monitor is subprime, with agents likely to delve into whether fees and interest rates are truly below prime levels.
The bureau also indicates it will be on the lookout for a lack of transparency in detailing the terms of gap and credit insurance offerings during F&I product presentations.
Also in the spotlight is the security and confidentiality of customer records. More and more dealers already are equipping F&I office doors with combination locks and using cabinets with automatic locking devices in an effort to comply with stiffer government regulations.
The advent of the consumer protection agency raises the need to enhance the F&I process, says Wade. There is a trend for the F&I manager to be introduced and to ask qualifying questions of the customer during the car-selling process.
This not only has F&I-selling benefits but also avoids “surprises” later on, says Eleazer, who runs a Facebook page for more than 200 F&I managers.
“The federalizing of vehicle-financing procedures calls for dealers to update their F&I departments ASAP,” declares Dave Robertson, chief of the Association of F&I Professionals.
He urges keeping up to date through retraining. “Frequent compliance audits are mandatory, now more than ever.”
Occasional dealership lapses include not notifying the Internal Revenue Service of cash transactions of more than $10,000, he says. Failure to do that violates a regulation aimed at protecting against money laundering.
Another set of regulations that took effect this year is the Federal Trade Commission’s Red Flags Rules aimed at combating identity theft. Auto dealers are among businesses that are required by law to look for and take action against ID thieves.