In many dealerships, the thought of putting together a compliance program is similar to contemplating a diet and exercise regimen: you know it’s something you need to do or eventually it will catch up with you. Like getting in shape, keeping up with regulatory changes can seem like a daunting task – not to mention costly. Many compliance programs on the market are quite expensive and simply out of reach financially for the average dealership. As a result, some organizations end up settling for trying to fly under the radar and hope for the best.
In truth, setting up and maintaining a strong compliance program in your dealership doesn’t have to be difficult or expensive. By following these steps, you can dramatically raise the level of compliance in your organization without breaking the bank.
Ignoring compliance just doesn’t make good business sense. The automotive industry is changing dramatically and will become even more heavily regulated in the future. Dealerships who continue to operate without a focus on compliance will invariably struggle. So what are you waiting for? Make a commitment to establishing a culture of compliance and ethics in your dealership.
Follow the Leader
The culture starts at the top but someone in the organization needs to take up the reins. All too often, an “everyone’s in charge thus no one’s in charge” attitude comes into play where compliance is concerned. In order to avoid this type of situation, it’s a good idea to designate a company compliance officer. Ideally, this will be a senior level employee who reports directly to company ownership. This person should be made responsible for monitoring all aspects of compliance, and be allowed the resources to learn as much as possible about the state and federal regulations that affect the dealership.
While appointing an in-house compliance officer generally doesn’t entail adding an additional salary, it would be wise to consider some compensation for the employee’s additional duties – this is an important position and must be taken seriously. In larger organizations, a compliance committee consisting of department heads may also be useful.
“The culture starts at the top but someone in the organization needs to take up the reins. All too often, an “everyone’s in charge thus no one’s in charge” attitude comes into play…”
Assess Your Compliance Level
Dealers should not assume that their employees are well-versed in compliance simply because they’ve been in the business for a while. At some point in their career, many automotive professionals were taught the “old school” way of doing business. Some dealership practices they’ve learned are not necessarily legal or ethical but the employees have no idea that they are doing anything wrong. The vast majority of dealership employees are well-meaning, honest people just trying to earn a living. However, if they have never been properly trained in compliance matters, they may simply rely on doing business the way it’s always been done. Simply stated, assuming that your dealership is doing everything right from a compliance standpoint without verification is risky at best.
When was the last time you performed a comprehensive risk evaluation? If it’s been a while (or never), this is a vital step. A risk evaluation can be completed either by someone on staff who is well-versed in federal and state regulations or by bringing in outside compliance professionals. The key is to take a base-line reading of exactly what the areas of vulnerability are in the dealership. Forms, advertising materials and deal jackets should be thoroughly evaluated. Policies, such as Red Flags, information safeguards and privacy should be reviewed. Vehicles for sale should be checked for proper display of Buyers Guides, Monroney labels, etc., and facility signs and notices should be verified. Chances are, you may be unpleasantly surprised by the results.
Get Everyone on the Same Page
Many dealers will send two or three of their top people to a seminar or two each year and hand out the monthly compliance newsletter for the managers to read. While these are great resources, there’s quite a bit more that needs to be done to ensure that the dealership is not at risk.
In many organizations, management personnel have at least some knowledge of proper legal compliance and ethics, either through training or osmosis. On the other hand, many salespeople haven’t a clue about the laws and regulations that affect our industry. Why should they? Compliance training, if conducted at all, generally occurs only at the management level. Without proper knowledge, it’s very easy to step over the line legally when trying to make a deal. It’s wonderful to have a well-trained management staff, but there’s a good possibility that an uninformed salesperson may make compliance missteps without the management team’s knowledge. After all, salespeople typically spend hours talking with their customers and it’s unlikely that management is going to be privy to all of those conversations. Unfortunately, attorneys and regulators don’t differentiate between job descriptions when pursuing a claim against a dealership.
Some dealers assume that the cost involved in training all staff members is just too high. That is not necessarily the case. Training can be accomplished in-house by your compliance officer or, if that is not practical from a time and preparation standpoint, there are affordable alternatives. While some F&I training programs would require writing a five-figure check to cover the entire staff, there are also outstanding programs available that cost less per employee than a box of business cards and can be completed in a matter of hours.
Monitor Your Progress
Once your compliance program is in place and the staff is trained, it is imperative that the compliance officer or committee ensure accountability. Many dealers spend thousands of dollars for compliance audits only to find that the same violations continue to occur shortly after the auditors move on. Employees need to recognize that your compliance program is here to stay and that they will actually be held accountable for their actions. Let everyone know that the organization is serious about compliance and ethical behavior.
Written procedures should be put in place and consistent processes should be mandatory. For instance, everyone should use the same menu; desk deals the same way, etc. In addition, all employees should sign a Code of Ethics upon completion of their training, and mini-audits of deal jackets should be completed on a regular basis.
There you have it – five steps to getting serious about compliance and protecting your dealership. Sure, it will take commitment and a few bucks, but this plan is certainly achievable for virtually any dealership. It’s just a matter of getting started.
Author: Jim Radogna
Jim Radogna is a nationally recognized auto industry consultant specializing in dealership sales and finance department legal compliance. His background includes founding and operating a national compliance consulting firm, Dealer Compliance Consultants, Inc., as well as having spent over 15 years in various dealership management positions .