While there's no legal imperative for a dealership to hire a compliance officer, dealers who don't dedicate an employee to monitor compliance are more vulnerable to customer complaints and legal troubles.
But the responsibilities of a compliance officer shouldn't be consolidated into the role of an F&I manager.
As Automotive News reported this week, compliance continues to be crucial to dealerships as both federal and state regulators exercise their oversight. Finding an employee with knowledge of dealership operations whose income is not tethered to car sales can be tricky, but dealerships should work toward creating a compliance officer position that is independent, respected and well-compensated.
Dealers may gripe over the cost of adding another employee, but they could end up paying millions in fines for compliance mishaps that went unnoticed or were swept under the rug.
Compliance officers are most effective when they're objective, according to compliance experts, so their compensation should not be directly dependent on dealership operations.
A compliance officer should also monitor the dealership as a whole — beyond the sales floor and finance office. The dedicated, impartial employee should regularly conduct compliance checks of dealership software, service department bays and finance paperwork to prepare dealerships for audits and compliance sweeps by regulators.
Compliance is key to the role of the F&I manager, which is likely why dealers tend to create a hybrid F&I-compliance position. Liabilities stemming from the finance office tend to have devastating consequences for dealerships, particularly in cases of payment packing, income falsification or deceptive markups of F&I products.
However, F&I managers have operational objectives that compliance officers shouldn't, such as a direct financial reward when the rules are broken. While that does not mean that every hybrid F&I-compliance position is problematic, dealers should think twice about combining the roles.
F&I managers may not have the time to monitor all other departments while also working with customers. They may also lack the leverage a compliance officer would have to give directives to a general sales manager or service manager.
Even with the best intentions, an F&I manager can make mistakes, and the dealership should have firm processes in place to catch errors before they become lawsuits. Leaving the position vacant, or assigning it to someone with divided loyalties, puts the dealership at risk.