Anything Can Happen in Car Business

It was eye-opening for Lewis Kuhl when he worked as an attorney specializing in auto retailing in Miami.

“Anything that can happen in the car business has happened in Miami,” he says.

Things can go wrong anywhere in the dealership world. People can act badly, both ethically challenged employees and dishonest customers trying to pull a fast one.

Dealers need to guard against all-around wrongdoing, say Kuhl and fellow panelists during a session entitled “Passing the Compliance Test” at this year’s F&I Industry Summit.

Much of the discussion centers on the need for dealerships to do the right thing amid more government regulations and greater attention from agencies such as the Consumer Financial Protection Bureau.

“Compliance is at the forefront of everyone’s thoughts,” says Damon Weiner, vice president and general counsel for F&I provider Safe-Guard Products International. “I’ve seen less resistance to it in the last few years.”

Accountability runs top to bottom, says David Robertson, president of the Association of Finance & Insurance Professionals. “(Dealers) should hold (employees) personally responsible for what they tell customers.”

Doing the right thing and making money are not mutually exclusive, he says. “Fact is, you can do both.”

On the other side of the transaction, not every dealership customer is a recipient of an award from the American Ethical Union. F&I managers must steer clear of hazardous deals, conference panelists say.

For example, straw purchases won’t happen at Langdale Ford in Valdosta, GA.

“We don’t handle them,” Finance Director Marv Eleazer says of car purchases in which someone acts as an agent for another person who is unable or unwilling to participate directly. The practice is not necessarily illegal, but it can carry risks.

“We don’t recommend doing straw purchases,” says Weiner. “There are problems when different names are on contracts.”

“If something goes bad, if a car is repossessed, the finance company can make you as the dealer buy it back,” says Kuhl, senior counsel and director-regulatory compliance for GSFSGroup, an F&I provider.

Some slim-shady types can use power of attorney to make straw purchases, he says. “The ‘purchaser’ could be a grandmother in a nursing home who is never going to drive a car.”

But situations like that are abnormalities of auto retailing. A typical car purchase, like any business transaction, depends on at least some goodwill, Eleazer says. “Customers come to the table with a certain amount of trust or they wouldn’t be at your dealership in the first place.”

In presenting products and services, F&I managers must maintain a delicate balance of selling persuasively but not overpromising on something such as the extent of an extended-service agreement’s coverage.  

“What I hear all the time is, ‘The dealership told me it covers everything,’” Weiner says. “The last thing you want is a customer filing a claim and discovering something was not covered.”

Robertson’s organization trains F&I managers to know the contents and meaning of legal paperwork related to a vehicle sale. “Some of them haven’t read the documents they are asking the customer to sign,” he says. “You must have a working knowledge of those”

Weiner says he has had some F&I managers tell him things he know are all wrong. “But the explanation is so intriguing I almost start to believe it.” 

F&I remains a person-to-person process, Eleazer says. “It is not going to be improved by jazzing it up.” Nor speeding it up, he adds. “Why rush something that’s so important?”

[email protected]