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Compliance

The Current Climate for Regulatory Compliance

The retail automotive market has found itself in an interesting situation. On one hand, retail sales are rebounding nicely, with strong price pressure coupled with continued low interest rates. On the other hand, all signs are pointing to an increased environment for regulatory scrutiny from an  hyper-focused Consumer Finance Protection Bureau (CFPB), Federal Trade Commission (FTC), and various local officials.

New leadership within the CFPB has signaled through their rulemaking agenda that automotive lending practices will garner increased scrutiny. New legislative bodies within state and local governments in many areas have followed suit to respond to discriminatory lending practices and perceived predatory consumer behavior.

Couple this renewed regulatory interest and sales environment, with a host of new fraud and cybersecurity schemes that can trip up any company, no matter how big, and the situation gets even more convoluted.

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Compliance

Documenting Processes: More than Just Compliance

Contributing Author: Steve Roennau Vice President Compliance EFG Companies
Contributing Author:
Steve Roennau
Vice President
Compliance
EFG Companies

Over the past few years, you’ve probably heard a lot about the importance of documenting your processes. Even with the changes at the CFPB, this importance is not diminished. Remember, the CFPB does not have jurisdiction over most dealerships (except Buy Here Pay Here). State Attorney Generals, the DOJ, and the FTC do. And, these government bodies haven’t undergone significant changes.

Therefore, if you haven’t already begun the process of documenting your processes, it’s time to get that project started. I’ve spoken with a lot of dealers who thought documenting processes would take an investment of thousands of dollars and a legal team. This does not have to be the case. It simply starts with taking a process that your team completes every day and writing down the steps.

Of course, with the numerous, ongoing processes in a dealership, not everyone knows where to begin. This is especially true for those processes that are simply just part of the routine. Many dealers haven’t even conceptualized how to define them beyond, “just do it”.

Just like with any big project, think about tackling this project one bite at a time. Start with the checklist on your deal jackets. Define and write down the process behind each item on the list. Each process should consist of three components:

  • What you do
  • Why you do it
  • How you do it
Categories
Compliance

Protecting Your Dealership with Compliance

Contributing Author: Jason Hash Training Manager EFG Companies
Contributing Author:
Jason Hash
Training Manager
EFG Companies

In the wake of large natural disasters like Hurricanes Harvey, Irma and Maria, car sales typically go up in the affected areas, along with identity theft and fraud. Criminals need cars too, and a car-buying surge that has dealers scrambling to accommodate the increased traffic gives them the perfect time to slip in without anyone being the wiser. Think about it for a minute.

Your dealership has more people in it now than it has in the last three months. With so many customers ready to buy now, your sales and F&I teams are struggling to move the buying process along to capture the business of as many customers as possible. With that sense of urgency, it’s all too easy to let compliance processes slip just to keep the process moving. And, in comes a customer with a fake ID or social security card.

The good news is that most dealerships have well-trained staff when it comes to fraud prevention through their compliance processes of checking Red Flags and the Specially Designated Nationals List (SDNL) published by the Office of Foreign Asset Control (OFAC). After all, the penalty for violating the Red Flags rule is a $3,500 fine per violation along with injunctions, and the criminal penalty for failing to comply with OFAC is 30 years in prison, a $10 million fine for corporations, and a $5 million fine for individuals.

The fines alone should be incentive enough for dealership staff to keep up with those compliance procedures. But, when people get busy, it’s all too easy to just focus on getting the deal done. And, it’s during those busy times that dealerships are the most vulnerable to fraud. Here’s the other good news. The post-disaster car buying surge normally has a lag time as consumers wait to get their insurance payouts. This gives dealers the opportunity to train their staff on how to be on the lookout for fraudulent behavior and to reinforce their compliance procedures.