How to Do F&I the Right Way

There are no ands, ifs or buts in Robert A. Harkins' finance and insurance training classes on how to avoid shady or unethical practices.

“Dealers run a great risk of being investigated and prosecuted if their F&I and sales personnel fail to comply completely with all — and I do mean all — federal and state regulations,” Harkins warns a class of dealership comptrollers and managers at the Chicago Automobile Trade Assn.'s headquarters in Oakbrook Terrace, IL.

“Packing payments, not reporting all cash deals above $10,000, trying too hard to reach a goal of 90% or 100% service-contract penetration can cause dealers costly problems with law enforcers,” he says.

Harkins, senior vice-president for compliance and dealer relations at Aon Corp's Resource Automotive and First Extended Service division, says his experience as an F&I trainer underscores the value of training and follow-up in getting the compliance message across to dealership staffers.

“It's one thing to instruct F&I classes in how to sell extended service contracts, gap coverage or group life insurance,” he says. “But we have pioneered in dedicated ethics and compliance classes as key to combining how to sell products with how to sell products legally.

“In classes focused strictly on ethics and compliance, we can cover all the violations videos, do's and don'ts lists and deadly sins of F&I rundowns with maximum impact,” he says. “And if there are follow-up visits back at the dealership, it's even more effective because there all the team is on hand — the principal, general manager, CFO, sales people and office staff.”

A typical F&I ethics class run by Harkins, an adjunct professor at Northwood University, runs three hours and is filled with videos and graphics showing TV investigations of dealerships by consumer reporters, National Automobile Dealers Assn. films dramatizing F&I sales violations and admonitions to sales managers about stopping deals that contain illegal violations or unethical practices.

Harkins peppers the session with names of dealers caught, whose staffers were fined and even jailed for F&I transgressions, resulting in negative national and local publicity.

“We believe in telling it like it is; showing all the scars and warning dealer personnel of sting operations and probes by aggressive state attorneys general, as well as the horrific fines dealers can receive if they're caught. It is the best way to make the ethics and compliance course sink in,” says Harkins.

“Not only that, but customer relations scores definitely improve for dealers whose F&I conduct is impeccable — and who have used a dedicated ethics and compliance training session. Customers treated fairly are also a great referral tool.”

A popular feature of the classes is a questionnaire on proper and improper ways to handle cash deals. Sting operations have been reported across the country, and the federal enforcers are “hot to catch dealer cash-rule violators, with fines that can reach six figures for conviction,” Harkins tells a dealership staff attending the Illinois seminar.

The $2,500 fee for attending a Resource Automotive ethics and compliance training session is “peanuts when one considers the stiff expense of being nailed for payment-product packing or failing to report cash payments over $10,000,” says Harkins. “There are lots of lawyers out there anxious to file class-action suits against dealers, not to mention state attorneys general and federal prosecutors who also are eager to pounce.”

He adds: “Dealers are still fair game and should be doubly aware of what unethical and unlawful acts can expose them to.”

He says dealer uncertain if their stores are engaging in spurious practices should review a 6-point “do's-and-don't” list prepared by David N. Robertson, president of the Assn. of F&I Professionals. Here it is: