The Way to Compliance

February 18, 2021

Voluminous regulations, mostly federal in origin, present auto dealers with an intimidating challenge:  in order to be fully compliant and protect against financial penalties for violations, the job of monitoring advertising, negotiating credit terms, contracting, and record-keeping must be delegated and closely supervised.  Just as dealership employees, who, as agents of the dealer (principal), can no longer be shielded from prosecution, neither can the dealer use ignorance of the employee’s negligence, intentionally fraudulent acts, or infractions as a defense against enforcement actions.

Most dealers want to do the right thing but are faced with regs that are not derived from conventional morality or common sense.  Unfortunately, most of them feel frustrated by the obstacles to doing business that these laws and threats of enforcement actions appear to present.  Accepting the reality that the current regulation boom is here to stay, with few exceptions, the only safe course of action is to take the necessary steps to comply.  Here are a few thoughts on how to make that as easy as possible.


First, get everyone up to speed on all the current regulations.  Find a regulatory-competent training agency to do this.  Hold annual seminars for everyone in the dealership.  Consider AFIP Certification for all senior management, sales supervisors and F&I managers; this is an in-depth course on the laws regarding all aspects of their job description.  Subscribe to publications that contain articles about these issues, and insure that they are circulated to all appropriate personnel.


The first line of everyone’s job description should be “to protect the legal and financial welfare of the dealership.” Without delay, delegate full implementation and oversight to one of your managers.  Charge him or her with the creation of an implementation plan, covering all the governing laws, and have it reviewed by the training agency, your legal counsel, and all other members of your management team.  Put the final plan in force immediately.  Review the compliance actions and data weekly or at least monthly with this Compliance Supervisor.  Special attention should be paid to Red Flags, Privacy Notice, OFAC, Safeguards, Risk-Based Pricing (RBP) Notice, Regs Z and M, State Licensing, other State requirements, among others.  Internal audits of deal jackets should be conducted monthly, with results reported to the Dealer and refinements made to the sales and F&I processes as needed.  Keep minutes of all meetings and action plans.


Use all of the available resources to make the implementation as easy as possible.  For example, use a credit reporting provider that not only tracks Red Flags, OFAC and RBP, but permanently maintains digital records that these, and other compliance issues, were addressed by the dealership on each deal;  this information, too, should be reviewed regularly by the Compliance Supervisor.


I can be redundant to make the point:  as the Dealer, you need to embrace your responsibility to provide continually active oversight of the compliance process.  Don’t let yourself be surprised or embarrassed by enforcement actions that could have been prevented by your oversight.


Most of the newer regulations are well-intended, and (surprise!) some are even having a positive effect.  However, it is not enough to acquiesce to the bureaucratic efforts to control your business practices.   Unless you speak out, regulations can become ever-more disruptive, intrusive, and costly.  You need to take responsibility for re-injecting good sense and efficiency into the debates.  Be active in your professional associations, and support political candidates who will be helpful in these matters.

Please share your views and experience in how to make the compliance job easy.