Contributing Author: Karen Klees, Certified Consumer Credit Compliance Professional, EFG Companies
2015 is here and the CFPB is keeping up the pressure on compliance regulation. Everyone is wondering what the year will look like. Will more lenders implement flat rates? Will the CFPB find a way to extend their influence into the F&I space? Will Congress step in and impose restrictions on the CFPB? With so much up in the air, dealerships and lenders alike are waiting with baited breath to see what 2015 has in store.
Instead of waiting, it’s time to focus on and hone your operations. While many dealers have already begun decreasing their reliance on finance reserve and pushing for more product sales, you can bet that the CFPB is looking into how to branch into that area. In fact, in 2014, the CFPB reached a consent agreement with an F&I vendor and a lender, where each entity was required to issue reimbursements to contract holders for using ambiguous language in the product sales process, such as “This product will only add a few dollars to your monthly payment.” The CFPB stipulated that the exact price of the product is necessary in the product presentation, not generalities.
While the CFPB’s influence lies primarily with the lending community, they have been clear that lenders are also responsible for the actions of the vendors and partners with whom they choose to do business. This applies to who they use to service and collect their loans, as well as who originates them. So far, they have focused for the most part on rate administration as it relates to origination, but as we saw in 2014, they also took issue with the sales practices of ancillary products. To protect your dealership and keep operations running smoothly, take a deep look at your F&I product presentation with your legal team and address any issues that may arise.
With product sales increasing in importance, it’s easy for F&I managers to fall into the trap of making as much money as possible on each product. While the bottom line is important, consistent pricing is key during this time of heavy scrutiny. Take a look at how much you typically make on each product and create a reasonable, predictable and consistent range in which your F&I managers can the markup the product.
Train your managers on how to employ their selling techniques to demonstrate the value of a product while also providing accurate pricing information. It’s also important to review all state and federal regulations surrounding the F&I space and work to implement a completely transparent selling process. A great compliance training resource is AFIP certification, which helps to ensure F&I teams have the appropriate processes and controls in place to navigate the plethora of federal, state and local laws that impact their operations.
However, many dealerships now feel like they are caught between a rock and a hard place with the increased pressure from government oversight to implement more compliance processes, and the pressure from consumers to shorten the sales process. While there is no hard-and-fast solution to shortening the sales process, look carefully at your sales process and find ways to make good use of each minute the customer is there.
With more informed consumers walking into dealerships, your sales force has the unique opportunity to quickly address a customer’s vehicle needs and move on to discussing the value of purchasing at your dealership as well as endorsing the products provided in the F&I office. By including the sales team in the product presentation, the manager can focus on answering questions, overcoming objections and finalizing the purchase. Implementing a process like this can allow the dealership the leeway to ensure compliance measures are met, while also utilizing the consumer’s time in the most efficient manner.
With almost 40 years of experience in developing and delivering compliant consumer protection solutions and go-to-market strategies, EFG Companies knows how to maximize your opportunity for profit in the most compliant and efficient manner. Contact us today to find out how.