In many dealerships, the thought of putting together a compliance program is similar to contemplating a diet or exercise regimen: you know it’s something you need to do or eventually it will catch up with you. Like getting in shape, keeping up with regulatory changes can seem like a daunting task – not to mention costly. Many compliance programs are expensive and are not financially realistic for the average dealership. As a result, some organizations end up settling for trying to fly under the radar and hope for the best.
In truth, initiating and maintaining a strong compliance program in your dealership doesn’t have to be difficult or expensive. Follow these steps, and dramatically raise the level of compliance in your organization without breaking the bank.
Ignoring compliance just doesn’t make good business sense. The automotive industry is rapidly changing and will become even more heavily regulated in the future. Dealerships who ignore regulation and do not put a focus on compliance will invariably struggle. What are you waiting for? Take action now and make a commitment to establishing a culture of compliance and ethics in your dealership.
Follow the Leader
Culture starts at the top, but someone in the organization needs to take up the reins. All too often, where compliance is concerned, an “everyone’s in charge thus no one’s in charge” attitude comes into play. In order to avoid this type of situation, it’s a good idea to designate a company compliance officer. Ideally, this will be a senior level employee who reports directly to ownership. This person should be responsible for monitoring all aspects of compliance, and be given the resources to learn as much as possible about the state and federal regulations currently affecting the regulations.
While appointing an in-house compliance officer generally doesn’t entail adding an additional salary, it would be smart to consider some compensation for the employee’s additional responsible – this is an important position and must be taken seriously. In larger organizations, a compliance committee consisting of department heads may also be advantageous.
Assess Your Compliance Level
Dealers should not presume their employees are well-versed in compliance simply because they’ve been in the business for a few years. At some point in their career, many automotive professionals were taught the “old school” way of doing business. While some practices at dealerships might not be illegal, or even unethical, most employees still don’t know they are doing anything wrong. The vast majority of dealership employees are well-meaning, honest people trying to earn a living. However, if they have never been properly trained in compliance matters, they may simply rely on their roots and doing business the way it’s always been done. Simply stated, it is very risky to assume that your dealership is doing everything right from a compliance standpoint.
When was the last time you performed a comprehensive risk evaluation?
If the answer to that question is, “it’s been a while,” (or never), this is a vital step. A risk evaluation can be completed either by someone on staff who is well-versed in federal and state regulations or by bringing in outside regulation professionals. The key is to take a base-line reading of exactly what the areas of vulnerability are in the dealership. Forms, advertising materials, and deal jackets should be thoroughly evaluated. Policies, such as Red Flags, information safeguards and privacy should be reviewed meticulously. Vehicles for sale should be checked for proper display of Buyers Guides, Monroney labels, etc., and facility signs and notices should be verified. Chances are, you may be unpleasantly surprised by the results.
Get Everyone on the Same Page
Many dealers will send two or three of their top people to a seminar each year and hand out the monthly compliance newsletter for the managers to read. While these are great resources and good proactive things to do, there’s quite a bit more that needs to be done to ensure that the dealership is not at risk.
In many organizations, management personnel have at least some knowledge of proper legal compliance and ethics, either through training or osmosis. On the other hand, many salespeople haven’t a clue about the laws and regulations that affect the industry they work in every day. Why should they? Compliance training only takes place at the managerial level, if at all. Without informative training, it’s very easy to step over the line legally when making a deal. It’s wonderful to have a well-trained management staff, but there’s a good possibility that an uninformed salesperson may make compliance missteps without the management team’s knowledge. After all, salespeople typically spend hours talking with their customers and it’s unlikely that management is going to be privy to all of those conversations. Unfortunately, attorneys and regulators don’t differentiate between job descriptions when pursuing a claim against a dealership.
Some dealers think the cost to train all staff members is simply too high. That is not necessarily the case. Training can be accomplished in-house by your compliance officer or, if that is not practical from a time and preparation standpoint, there are affordable alternatives. While some F&I training programs would require writing a five-figure check, there are also outstanding programs available that are more than price sensitive.
Monitor Your Progress
Once your compliance program is in place and the staff is trained, it is imperative that the compliance officer or committee ensure accountability. Many dealers spend thousands of dollars for compliance audits only to find that the same violations continue to occur shortly after the auditors move on. Employees need to recognize that your compliance program is going to be a part of the company, and that they will be held accountable for their actions from that point on. Make sure everyone knows the organization is serious about compliance and ethical behavior.
Written procedures should be put in place and consistent processes should be mandatory. For instance, everyone should use the same menu; desk deals the same way, etc. In addition, all employees should sign a “Code of Ethics” after completing their training, as well as mini-audits of deal jackets should be completed on a regular basis.
There you have it! Five steps to getting serious about compliance and protecting your dealership. Sure, it takes some work, commitment and a few bucks, but certainly achievable for any dealership. It’s just a matter of getting started. Have any questions on how to move ahead with your dealership compliance program? Contact KPA at [email protected]