The automotive retail industry is becoming increasingly regulated by both state and federal agencies. Unfortunately with these added regulations comes increased complexity that the average car salesman or dealership manager may find hard to understand. Check the glossary below to understand common compliance terms, or contact Total Dealer Compliance today for more help in building a compliant car dealership.
Falsifying Credit Applications - non-compliant and unethical practice. F&I managers have an ethical and legal obligation to submit only correct and complete information in credit applications. If an F&I manager falsely changes customer financial details to improve lending outcomes, this is a serious compliance violation. Common falsifications including reducing a customer’s rent expense, increasing income, and increasing years on the job.
Powerbooking - non-compliant and unethical practice. F&I managers must accurately describe the value and options of a vehicle in working with lenders. Powerbooking occurs when F&I managers exaggerate the value of a used car they are selling by telling the bank that it has certain options (such as leather interior or a sunroof) to receive a more favorable approval and a larger advance.
Payment Packing - non-compliant and unethical practice. Dealerships must be transparent and consistent in presenting car prices to customers. Payment packing occurs when F&I managers or sales managers present an inflated car loan payment during the negotiation process instead of basing the payment on the sale price of the car, sales tax, and a reasonable interest rate.
Jamming F&I Products - non-compliant and unethical practice. Dealerships must be transparent and open about what F&I products are included with the car purchase and how they are priced. Jamming occurs when managers insert F&I products into the inflated car loan payment with customers' knowledge or consent.
Physical Security - mandatory compliance procedure. All businesses that deal with consumer credit and financial information must take serious precautions to prevent theft and misuse. Physical security of customer data means that files must not be left out in the open, but rather secured in locking cabinets or other secure storage, and incorporated with sensible access control.
Computer Security - mandatory compliance procedure. Electronic theft of customer data is becoming more common and more problematic across many industries. Auto dealers must take computer security seriously especially as it applies to customer data. This includes using updated security programs, training employees on effective computer security measures, and hiring an expert consultant if needed.
ITTP, Identity Theft Prevention Program - industry regulation. The ITTP mandates that auto dealers must safeguard consumers against the risks of identity theft. Lender agreements have clauses that require the dealership to repurchase loans if the car was sold to an identity thief. In addition, the FTC can issue a $3500 per occurrence fine if the dealership has an ineffective identity theft protection program.
Compliance Officer - compliance strategy. A dealership’s compliance officer is a part-time or full-time employee who is responsible and accountable for enforcing corporate policies and procedures, compliance training, and instilling a culture of compliance throughout the organization. Hiring or appointing a compliance officer is one of the most effective and important strategies a dealership can implement to ensure that compliance procedures are followed.