Karen Klees, certified consumer credit compliance specialist at EFG Cos., advises dealers that finance and insurance compliance starts with them.
Klees, 60, spoke with Staff Reporter Hannah Lutz.
Q: How can dealers ensure they are compliant?
A: Dealers all seem to have an idea of what they would like specifically their F&I managers or their salespeople to do. But what I find missing is having these policies in writing. I talked to a dealer a couple of weeks ago and he rattled off in detail his specific wishes in how he wanted a certain thing handled. When I asked him if he had it in writing, he did not. It leaves a lot of room for error.
How should dealers develop that written process?
Many [F&I] administrators are helping dealers at least outline what they should have in writing. There also needs to be consequences written into the processes in case someone violates the process. Some of those consequences are dictated by law and some can be developed subjectively by the dealer.
Where does enforcement come from?
It has to start from the top down. The dealer has to be the person that is holding his general manager accountable and the general manager needs to be holding his sales managers accountable. Compliance doesn't work if it starts from the bottom up.
How should dealers train their F&I managers on compliance?
Training needs to be ongoing. Our field team comes out and does regular training. But there should be somebody in the dealership who is a designated compliance officer, who is tasked with making sure the staff is repeatedly trained on processes the dealership expects. I would say at least every six months dealerships should review everything they expect. And if something new comes out, there should be training before the regular interval comes.
When regulators look at F&I products, what do they watch for?
The CFPB is the one gathering the data, and while they don't have the enforcement authority over auto dealers, they do have the ability to share that information with people who do have enforcement authority over dealers, such as the FTC.
[Some] of the most active regulators are the states' attorneys general. My best advice is consistent pricing. They are going to have an issue with inconsistency.
How can dealers ensure that pricing and selling are consistent with every customer?
Make sure there is a menu in every deal that shows they've offered 100 percent of the products to 100 percent of customers 100 percent of the time. Then dealers need to cap how much they allow the products to be sold for so there is no gouging. Someone needs to watch the F&I [summary] sheets to make sure there isn't a swing on one particular product.
How should dealers determine a fair cap?
I would cap it based on a certain amount over the cost. I'd cap the profit. The dealership pays X amount of dollars for a service contract. The dealer may say, "I don't want you to make more than $500 or more than $1,000." It could be any number they choose, but it should be capped at a certain amount of profit. I don't think regulators are trying to set what profit can be. They just want to make sure we're not making $100 on one person and $1,500 on another.