Every auto retailer knows the axiom: Offer 100 percent of your products to 100 percent of your customers 100 percent of the time. And many dealerships follow it faithfully. But do they really comprehend the legal responsibility that goes with it?
Dealerships looking to avoid trouble know they need to be as diligent in complying with the state and federal regulations that impact F&I as they are in following F&I sales protocols. Some stores are tapping outside F&I auditors for help.
“Several dealers I’ve spoken with routinely contract for outside audits,” said David Kelleher, president of David Chrysler-Dodge-Jeep-Ram in Glen Mills, Pa. “They feel it’s a great way to catch any mistakes and add a level of compliance. ...Other dealers have their compliance officers routinely pulling jackets and auditing. We are looking at the pros and cons of both systems.”
For now, Kelleher is using a hybrid approach. He supplements regular internal audits with biweekly audits by an outside law firm with which his wife is associated. The system works well, he said, noting errors are almost immediately discovered. Still, he continually watches what other dealerships do.
“We are always looking for new ideas,” he said. “In my opinion, too many dealers are blind to their liabilities until it’s too late.”
‘Each quarter, we learn’
Wilson Hudgins, compliance and finance director at Findlay Automotive, of Henderson, Nev., said the dealership group, consisting of 28 stores in five states, began to supplement internal audits with routine outside audits about five years ago.
The struggle was finding a compliance company that reviewed all aspects of dealership operations. Findlay Automotive now uses Automotive Compliance Consultants of Chicago.
“ACC visits our stores quarterly and audits random deal jackets for compliance effectiveness,” Hudgins said. “In addition, ACC reviews the dealership processes, forms and facilities, looking for compliance and safety concerns. They provide us with quarterly reports that are uploaded to a dashboard so group management, dealership management and department heads can see the results. It’s a collaborative effort."
The reports include photographs, explanations and regulatory references, where applicable, surrounding their findings so managers can see areas that need bolstering.
As a part of the compliance package, employees are required to complete continuous online training annually. Modules include compliance, safety and human resource content and are tailored to one’s role in the dealership operations. Several of these courses are designed specifically for Findlay Automotive. Employees are required to complete 100 percent of the modules with 100 percent accuracy.
“We feel this has been very successful. When you have an industry that is subject to federal, state and local regulation, this type of outside audit is helpful,” Hudgins said, noting the ever-changing legal and regulatory landscape. “Each quarter, we learn from the previous quarter.”
Findlay Automotive reviews auditors’ recommendations and makes adjustments to processes and policies as needed. But it doesn’t blindly follow auditors’ recommendations. Hudgins reviews the reports with consultants, legal advisers, managers and also measures them against major competitors’ best practices.
“It’s better to hear this as constructive criticism than through a regulator. This is for all of us to be better,” he said. “It’s important to have outside eyes examine the processes and activities.”
Audits are a ‘tool’
Not all dealers are convinced that outside auditors are needed for top compliance.
Paul Tickle, compliance officer for Sheehy Auto Group, of Fairfax, Va., said he and colleagues continually audit the 23 dealerships in Maryland and Virginia.
“We strive to do monthly audits but at least do quarterly audits [of each store],” he said of the program that has been in place for about 12 years. “Every two or three years we have outside auditors [at the stores] because it’s always helpful to have outsiders look at what you do.”
Tickle credited constant training, store manager buy-in, and an outside management team for what he said is top compliance.
“I don’t know that a lot of dealers are set up like us. We have a management team [of about 45 members, 20 of whom are support staff] that doesn’t work at the stores so when we come in, we look at things [with fresh perspectives],” he said. “We let them know we aren’t the bad guys coming in to slow them down or change their processes. We use our audits as a tool for all of us to excel.”
Whether a dealership chooses to work with an outside auditing firm, rely solely on internal compliance reviews or design their own combination, leadership must underscore there is intolerance for noncompliance.
“This sets a tone from the top,” said Findlay Automotive CFO Tyler Corder. “We are going to be ethical, honest, and follow the letter of the law. [Our outside audits] put even more power behind that policy.”