When Mirt Ramey went to Target in 1999 and spent $3,400 on video cameras and recorders for Red McCombs Automotive in San Antonio, she didn't realize what powerful tools they would become.
Thirteen years later, McCombs' seven dealerships have graduated to more sophisticated digital recorders, but executives still swear by the basic practice. Recording the F&I process has helped the group's compliance measures, reduced fraud and improved customer satisfaction.
"It has just really saved us from a lot of litigation," says Ramey, finance and insurance operations manager at Red McCombs Automotive. "It has given us an opportunity to review the video with the customer and really get down to what the customer is complaining about."
Though compliance is the reason McCombs records, Ramey says, the practice has had the benefit of improving results. Knowing a supervisor may be watching has made F&I managers sticklers for following procedure, such as presenting all products to all customers, she says.
Despite the McCombs experience, video recording is far from the industry norm. Though hard numbers aren't available, some providers of the video systems estimate 10 percent of dealerships or fewer are recording F&I transactions today.
And whether a dealership should record customer transactions in the F&I office remains a matter of debate. On one hand, the practice means everything a finance manager says to a customer will be recorded. And on the other hand, everything a finance manager says to a customer will be recorded. It's an old joke, but it points to a serious concern that many dealers have with video recording: What if a "smoking gun" is preserved on tape?
"Videotaping is a great tool for both training and compliance," says Michael Stellmach, vice president of sales operations for JM&A, which provides F&I products to dealerships. "But dealers need to consider the pros and cons before deciding whether videotaping is right for their store."
The specter of the smoking gun is the reason dealer lawyer Tom Hudson has gone back and forth on the wisdom of recording. "This is all well and good if you're doing it correctly," says Hudson, a partner in Hudson Cook law firm in Hanover, Md. "But if you're doing it incorrectly, all you're doing is creating evidence for a plaintiff."
Such evidence could be used against a dealership in a customer lawsuit. It could even be the launching point for a class-action case. But Hudson isn't aware of any cases in which F&I video was used against a dealership.
And after hearing from the in-house counsel of a dealership group that videotapes, Hudson is now in the pro-recording camp. He was won over by the real-world accounts of how the practice helped training, drove off rogue employees, scared away customers engaged in fraud and reduced litigation.
Compliance consultant Gil Van Over came to the same conclusion after initially opposing recording. He knows of cases in which suspected perpetrators of identity theft made excuses to leave after finding out the dealership would record the transaction.
But dealerships have to handle the recording the right way, both Hudson and Van Over say. That's especially important, Van Over says, given the possibility of enhanced scrutiny of dealerships by the new Consumer Financial Protection Bureau.
According to Hudson, handling it right means:
-- Record all sessions unless the dealership can document a customer's refusal.
-- Train all F&I employees how to record properly.
-- Have the dealership's lawyer script the presentations and review recordings.
-- Comply with all record-keeping requirements.
Those record-keeping requirements can vary by state, Hudson says. The federal Equal Credit Opportunity Act has a 25-month requirement, he says. Dealerships also should find out whether they need written releases from their employees or customers.