Illegal finance and insurance activity at U.S. dealerships is decreasing. It's not gone, but it has been greatly reduced over the last decade or so.
This positive development has been driven by a combination of carrot and stick.
Regulations at all levels have gotten tougher and keep tightening.
Law enforcement is more rigorous. For dealers, the penalties for noncompliance are rising, including not just civil penalties and legal costs but the indirect impact of damaged reputations.
Certainly, nobody wants to repeat the 2003 experience of Sonic Automotive, in which NBC's "Dateline" program alleged racial discrimination in sales operations at some Sonic stores.
Sonic's fix of the sales process included installing an F&I compliance program that it rigorously enforces today. But it took the dealership group years to shake the negative fallout.
The carrot is growth potential. As profit margins on vehicles sag, F&I is becoming a bigger part of the dealership business. It makes sense to protect that revenue by ensuring compliance.
Compliance takes time, is expensive and requires management attention. But dealerships have best practices to emulate: screening F&I employees, training them well, establishing clear F&I policies, conducting periodic audits, staying current on regulations and checking out vendors and their products.
Many dealers have discovered offering well-priced and well-presented F&I products increases customer satisfaction and purchase rates, which in turn leads to more repeat sales and enhancing dealership reputation.
Making money by serving customers and boosting volume and profit margins is good.
But every dealership must be vigilant in rooting out and preventing any hint of unethical behavior in its F&I department.
It's not just the right thing to do for each store and its customers. The reputation of the entire auto industry depends on it.