The average dealership must sell over 100 cars a year just to recoup its regulatory compliance costs. That’s according to the Center for Automotive Research (CAR), in a recent study measuring the impact of federal regulations on franchised dealerships. Or think about it this way: Every new or used car on the lot has a regulatory price tag of $100, and while that covers a broad spectrum of rules, the vast majority of the cost – 61 percent – is directly related to automotive sales and financing. Indeed, there are over two dozen rules covering sales and finance regulations.
That’s expensive, time-consuming and perhaps a little frustrating. But it doesn’t have to be a business-buster. Integrating your finance and sales flow compliance functions will help to defray some of the cost and will protect your dealership from the penalty of non-compliance, such as lawsuits, fines, and audits. To do that, your compliance software should offer the following seven features:
1. Visibility into Employee Practices and Transparency into Deal Activity
Make sure you have a compliance dashboard that monitors activity in real-time, and from a single screen.
2. Integrated FTC Red Flags Rule and OFAC Requirements
Meet FTC and OFAC requirements – and mitigate fraud – by including these checkpoints in your current processes. The FTC Red Flags Rule is a requirement designed to help protect against identity theft, while the Office of Foreign Assets Control (OFAC) requires a check of names against the “Specially Designated Nationals” list (SDN), these being people you cannot do business with. Your software should pull Red Flags automatically, make out-of-wallet knowledge-based authentication questions available, and offer up a different set of questions, should the customer not answer enough correctly.
3. Menu Selling as a Part of Compliance
Reduce your compliance risk with consistent presentations and full disclosure built into the sales process. Many industry experts believe that aftermarket products will be the next area in which the FTC focuses for possible unfair and deceptive practice enforcement actions.
4. Have a Document Management Program
Compliance regulations demand that you store a wide range of documents, including credit applications, privacy notices, credit reports, contracts and menus. Doing so in secure electronic deal jackets facilitates access and security and reduces the need for paper storage at your dealership.
5. Ability to Print Risk-Based Pricing Credit Score Disclosure Notices and Privacy Notices
A Credit Score Disclosure Notice is required every time you take a credit application, so your software should make it easy to do as a part of the Customer Archive Summary screen and Submit an Application page. It is a best practice to give the consumer a privacy notice at or before the time the consumer submits a credit application.
6. Reports on Adverse Actions
Get a daily report of consumers who may need an Adverse Action notice.
7. Integrated Checks and Balances
Seamless compliance should be hardwired into your software, so that if a step is missed, employees are notified immediately, on screen and via a dashboard that gauges performance.