Category: Dealership Training

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Dealership Training EFG Companies F&I

CFPB Crackdown – What You Need to be Compliant

Contributing Author: John StephensIn December 2013, the Consumer Protection Financial Bureau’s first blow to the automotive financing industry hit – and it hit hard. After an in-depth investigation, the CFPB ordered Ally Financial to pay $80 million in consumer restitution and another $18 million in civil penalties for having practices that made discrimination possible in their partner dealerships.

According to some consumer advocates, those dealership partners could now be sued by the same consumer’s receiving a refund check from Ally Financial. Why? Consider this situation.

Sally checks the mail one day and receives a letter stating that the lender backing her auto loan was forced to reimburse her and others who were discriminated against when purchasing their vehicle. She now has proof that the dealership where she purchased her vehicle employed discriminatory practices against her. With hard proof in the form of a check from Ally Financial, she contacts a lawyer and puts together a class action with all the other consumers the dealership allegedly discriminated against.

Now, another blow is about to hit. A consumer advocacy group in California is trying to place a proposal on the state’s November 2014 ballot that would prohibit dealerships from marking up interest rates on their auto loans. If this bill passes, it could provide the tipping point for lenders to change their policies and disallow dealerships from increasing their interest rates.

With the industry avidly watching to see how this will play out, now is the time to ensure the highest standard of compliance practices in your dealership. So ask yourself:

Do you have a compliance officer at your dealership? A compliance officer takes ownership of dealership compliance. They are responsible for the compliance strategy or business plan, determining holes, and the best and most efficient way to plug those holes.

How often do you provide compliance training? Automotive retail has always been a high turnover industry. Compliance training needs to be at the forefront as you add new employees, promote, and add new rooftops, etc. If your people don’t know the ever-fluctuating rules, how can they ensure they are abiding by them?

Do you perform regular compliance audits? By performing regular audits, you can be on top off inconsistencies within your dealership and address them before they get out of hand.

With this highly regulated industry, compliance is nothing new. However, the vague guidelines from the CFPB leave a lot to be desired in forming hard- and-fast rules. The best thing to do is consult with your legal counsel to ensure that your compliance strategy incorporates practices relative to the CFPB and general discriminatory laws. Some examples of these practices include:

  • Establish a published internal and external audit process that includes specific guidelines on the consequences of compliance violation.
  • Publish a schedule of training for both new and veteran employees to ensure all personnel are aware of the established guidelines.
  • Provide evidence of proper consumer disclosure.
  • Establish a “code of ethics” reviewing the policies and procedures signed off by all employees and new hires.

In addition, it is equally important to conduct thorough due diligence that all service providers, not just lenders, understand and are capable of complying with all state and federal laws by:

  • requesting and reviewing the service provider’s policies, procedures, internal controls, and training materials to ensure that the service provider conducts appropriate training and oversight of employees or agents who have consumer contact or compliance responsibilities;
  • ensuring the contract with the service provider includes clear expectations about compliance, as well as appropriate and enforceable consequences for violating any compliance-related responsibilities;
  • establishing internal controls and on-going monitoring to determine whether the service provider is in compliance; and,
  • taking prompt action to address any problems identified through the monitoring process.

With over 36 years in innovating and implementing proven go-to-market strategies in the dealership space, EFG Companies has made compliance a core facet of their business, influencing everything from product development to claims and client support.

Find out how compliance training from EFG can fortify your business to thrive while remaining compliant with current and future regulations.

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Dealership Training EFG Companies F&I

Increase Profit and Remain CFPB Compliant

Contributing Author: John PappanastosWith the Consumer Financial Protection Bureau (CFPB) threatening to crackdown on what they deem as predatory auto loan practices, everyone is scrambling to make sure they are compliant with the fair lending requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The CFPB was created in July 2010 in an effort to consolidate most Federal consumer financial protection authority in one place.  To-date, the thrust of the CFPB’s oversight has been on rooting out deceptive advertising and sales practices, including misrepresentation of products or product costs, and enrolling customers in products or programs without their consent.   In general, the laws prohibiting these practices are not new; however, the CFPB has also stepped up efforts to eliminate discriminatory practices.  Take the following example:

Sally, a subprime borrower, walks into a dealership to purchase a car. Her F&I manager submits the paperwork to several lending institutions, who then decide to extend a rate on the loan. The interest rate offered by the lender to Sally reflects the higher risk in a loan to an individual of Sally’s credit worthiness.  The F&I manager presents Bank ABC’s rate to Sally, but what she doesn’t know is that, after getting the bank’s rate, her F&I manager increased it with the intention of the dealership participating in the lending profit.  No problem so far.

However, a discriminatory practice occurs if the F&I manager marks up Sally’s interest rate by a greater amount than the dealership typically marks up the bank’s “buy rate” for other customers, even if Sally has few other options to finance her vehicle purchase and is willing to accept the interest rate presented by the dealership.  The fact is that the bank’s buy rate already appropriately reflects the risk in a loan to Sally and the cost to the dealership associated with financing Sally’s purchase is no different than that associated with every other customer.   If the F&I manager increased the rate more for Sally than he would have for another customer because of her race, gender, ethnicity, or any other protected class, then his actions could be deemed discriminatory and the dealership could be held liable.

In addition to discriminatory F&I practices, dealers are concerned as to whether the sale of F&I products, such as extended vehicle service contracts, could increase their liability.  As the CFPB is expected to eventually monitor dealership practices more closely, it makes sense for dealers to double check every process and procedure to ensure compliance.

With respect to F&I products, dealers who partner with third party administrators that understand the depths of their business and the regulation that goes with it don’t have to worry.  Organizations like EFG Companies (EFG), that hold administrative licenses in every state for the sale of F&I products, have made compliance a core facet of their business, influencing everything from product development to claims and client support.

For example, the sale of vehicle service contracts and GAP policies are some of the most highly regulated products by the states.  However, dealers who abide by sound advertising and sales practices cannot be held liable. Rather, the contract administrator becomes liable for any issues relating to the VSC. For this reason, dealerships already had significant reason to abide by discrimination laws before CFPB decided to crack down.

Dealerships found that when partnering with organizations like EFG, their training prepared the F&I managers to remain in compliance with all laws surrounding the sales of F&I products. Companies like EFG take liability very seriously, and, as extensions of the dealership, they verse themselves in the entire F&I process and the laws surrounding it to adequately train dealership personnel.

With engagement from F&I product providers that embody dependability and integrity, dealers can rest assured that their F&I department is sufficiently trained to remain in compliance with all laws surrounding the F&I process.

EFG goes above and beyond to mitigate liability by developing customized go-to-market execution plans for each client.  This effort begins with a comprehensive review of the dealership’s existing processes and leads to joint agreement with the dealer with respect to a well-defined blueprint for compliant – and profitable – implementation.  EFG then creates customized training curriculum and conducts interactive training with dealership personnel, supported by ongoing monthly audits, to ensure that compliance pitfalls are avoided.

Dealerships have an excellent opportunity of increasing profit with F&I products. However, they should keep these considerations top of mind when selecting their product administrative partners:  their operating history and customer service brand recognition in the marketplace, their compliance focus and capabilities, and their liability structure.  Whomever they choose as their partner must be strong in all three areas to provide the level of service and compliance expected from a trusted partner.

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Dealership Training EFG Companies Featured

Leasing is Booming. Is Your Team Taking Advantage of It?

Contributing Author: Stephen RoennauAccording to a recent article by the Associated Press, even though interest rates are low, many consumers are still choosing to lease their new car or truck rather than buy.

“Lenders have seen overall stability come back to the market since the recession and leasing has gradually returned as a larger part of many lender strategies,” said Melinda Zabritski, senior director of automotive credit at Experian Automotive.  With leasing on the upswing, the market is predicted to double in the next year.

With OEMs releasing their lease incentives this fall, it’s time to make sure your team is fully prepped for taking advantage of this fast-moving trend and increase future sales opportunities.

While sales business will always remain the backbone of a dealership, you know there is no business Leasing-on-the-rise-Callout lease business, especially with August lease incentives around the corner:

  • Leases keep customers returning to the dealership like clockwork for their service appointments
  • Leases help maintain an inventory of recent-model used cars
  • Leases have the significant opportunity to create customers for life

But, does your team have the knowledge and tools to close a lease?

With over 35 years of insight into the consumer mindset in the auto retail space, EFG’s Transcend Group knows how to train your team to readily position the benefits of leasing while understanding their individual benefits of closing a lease and the bigger picture of dealership profitability.

Find out more about our Lease Training Workshop and register today!