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With Great Leasing Comes Great Responsibility

With Great Leasing Comes Great Responsibility

Leasing is the industry’s rollercoaster. It rattles around the bottom of the track after risk managers pull back on leasing as a result of residual losses. It starts ascending toward the crest again as short-memoried marketing managers and manufacturers begin aggressively leasing as a way to sell vehicles.

Last year’s guidance from the Department of Defense on the Military Lending Act (MLA) is another factor that may assist in increased lease penetration. The guidance requires additional disclosures on the sale of GAP, credit life, and accident-and-health (A&H) insurance, to the point that many finance sources will not purchase retail installment contracts that include those valuable products to anyone who is a covered borrower under the MLA. This additional disclosure requirement does not apply to lease transactions and many dealers are working to convert deals to leases to provide covered borrowers with GAP coverage.

With this increase in leasing penetration comes a risk that the plaintiffs’ bar will become interested in understanding the basics of leasing. After all, the logic goes, if dealers make Truth in Lending disclosure mistakes worthy of class-action litigation because they can’t always program the DMS correctly, can Truth in Leasing disclosure mistakes be as prevalent?

As the trusted advisor to the dealer, agents should understand leasing, the potential compliance pitfalls, and the product sales opportunity with leasing.

A little primer on some common leasing disclosure issues is in order. The two greatest improvement opportunities on a lease agreement are the itemization of gross capitalized cost and the “amount due at signing” sections:

Itemization of Gross Capitalized Cost (IGCC): This section of the lease agreement discloses how the transaction builds from the selling price to the gross capitalized cost. Certain items can be included in the IGCC, including the lessor’s acquisition fee, the dealer’s doc fee, F&I products, prior credit or lease balance, taxes, and fees.

Amount Due at Signing (Lease Starts): This section lists the amounts that the customer must pay to start the lease. It includes such items as the capitalized cost reduction, first payment, security deposit and upfront fees or taxes.

Potential Disclosure Issues

“Prior credit or lease balance” is another way of saying “negative equity.” Just like on a retail deal, the lease disclosure statutes require the proper disclosure of any prior credit or lease balance included in the transaction.

The prior credit (negative equity from a retail trade) or lease (remaining lease payment, mileage, or wear-and-tear amounts to close the prior lease) balance cannot be added to the cash selling price in the IGCC. Instead it is to be an itemized disclosure in the IGCC and labeled correctly.

Some dealers make the mistake of including either negative equity or the last few lease payments from a prior lease in the cash selling price.

The IGCC is an optional disclosure to be contained within the lease agreement. If the lessor opts to omit the disclosure from the lease agreement, it must include an option for the consumer to request a separate IGCC. Some F&I managers are unaware of this requirement and admit they do not have the forms available to provide it to the customer if asked.

The lease starts section itemizes what the customer must pay to start the lease and how that amount is paid. The customer can settle up the lease starts with positive trade equity, manufacturer rebate, dealer non-cash credit or customer cash.

A non-cash credit occurs when a dealer agrees to absorb a portion or the entire lease starts. This can typically happen with a sign and drive lease, where the customer does not pay the first payment.

It is a common miscue to disclose that the customer paid cash for the amount of the non-cash credit. Essentially, the amount disclosed as cash collected in the lease starts section must be supported with a receipt in the file.

We Had an Agreement

The third most recurring issue with leasing is not with the lease agreement itself. Rather, it’s the lack of an “order for leased vehicle” agreement. Dealers outside of California generally have a buyer’s order executed during the retail process. This order contains a number of reps and warrants and possible state required disclosures that are not necessarily contained within the retail installment sales contract. Many times, an arbitration provision is contained within and agreed to on a buyer’s order.

Many dealers continue to either try to fit a lease transaction on a buyer’s order or do not have any order executed. Based on the potential 25% leasing penetration, this means that a dealer may not have the protection outlined in a buyer’s order in one-quarter of all new-vehicle sales.

These three disclosure issues are as easily resolved as Truth in Lending disclosure issues on retail transactions. It just takes a little time and programming.

Continued good luck and good selling.

Posted in F&I0 Comments

Compliance Isn’t Solely F&I’s Responsibility

Compliance Isn’t Solely F&I’s Responsibility

Just as many in the industry operate under the mistaken impression that compliance is just an “F&I thing,” many also operate under a similar mistaken impression that agents only help with training and assistance in the F&I office. I know many agents who spend a fair amount of time with sales managers on “road-to-the-sale” processes that affect compliance. If your agency offers sales process training, there are some compliance issues that either start or germinate in sales that you should be aware of.

The findings in our compliance consulting practice confirm that the majority of compliance concerns either start in sales or germinate during the sales process. Somehow, some way, the idea that compliance in the variable process has been pegged as “F&I compliance” is prevalent and misleading.

The fact that a majority of compliance issues are sales-related should not shock your system. Only one of the 10 steps on the road to the sale process takes place in F&I. Steps One through Eight are sales responsibilities. Step Nine is the F&I turnover, then back to sales for delivery.

Many touchpoints along the road to the sale with the consumer present a potential requirement to conform to a state or federal law or statute. Many other touchpoints require an employee to subscribe to dealer law to avoid a
deceptive practice.

Let’s look at the sales touchpoints in a 10-step “Road to the Sale” process:

1. Meet and greet: Not much here from a compliance perspective. Granted, it is bad business to greet a consumer with bad breath, matted hair and wrinkled clothes, but these are certainly not compliance concerns. In fact, there probably will not be any compliance concerns if the consumer walks away immediately.

However, consumer questions about the advertised price, a price quoted in a website, or factory incentivized financing may creep into the discussion.

2. Interview: This is the needs-assessment step. Most dealers want to discover the consumer’s desires, so there should not be any gathering of nonpublic personal information (NPI), credit applications or trade-in specifics.

Some consumers may offer up information about a bad credit history or being upside down in a trade. Some veteran salespeople may then skip some of the “road to the sale” steps. They figure out that this consumer cannot buy or finance a vehicle and send them packing. The consumer must be given a privacy notice if this wily old dog has gathered NPI. Or, if the consumer signed a five-liner to pull credit, an adverse action notice is required.

What if the wily old dog figured out quickly that the consumer is a subprime candidate and moves to step three? The consumer is led to a used vehicle with a potential fee added to the sale price.

3. Vehicle selection: Potential compliance pop-ups inherent to this step including handling a subprime fee, CPO warranty or fees, and advertised price.

4. Walkaround: After the consumer selects a vehicle, the salesperson walks the consumer around the vehicle, pointing out the features, benefits and differences from competitive makes. During this walkaround, there may be questions about labeling on new vehicles such as the Monroney label or dealer addendum.

On a used vehicle or prior demonstrator, the used car buyer’s guide must be prominently displayed. A used vehicle may also be plastered with a “Certified” sticker, which may raise questions about CPO warranties or — heaven forbid — adding a CPO fee to a non-CPO vehicle.

If the discussion between salesperson and consumer for a used vehicle in Steps One through Four have been in Spanish, a Spanish-language buyer’s guide is required.

5. Test drive: A salesperson is usually instructed to gather up driver’s license and insurance information before the consumer is permitted to get behind the wheel. Gathering and copying the driver’s license is usually the first piece of NPI obtained by the salesperson. This triggers the federal requirement to provide the consumer with the dealership’s privacy notice.

Some dealers prefer to wait until the consumer becomes a customer and deliver the privacy notice in F&I. Assuming a 25% closing ratio, this means that three-quarters of required privacy notices are not provided.

6. Trade evaluation: Part of the trade evaluation must take current recalls, prior use, prior damage and branded titles into account. While pulling Carfax, AutoCheck, NMVTIS and SaferCar.gov searches are not a compliance requirement on a trade-in, they can certainly provide much-needed information on the value of the trade.

7. Present numbers and ask for the sale: This is the where the compliance concerns heat up. Potential pitfalls include accepting credit applications, pulling credit bureau reports, desking deals, powerbooking, providing credit score disclosure notices, running OFAC, dealer doc fees, factory incentives, and making a copy of a military ID.

8. Close: The close is where creative sales managers can revert to “Wizard of Oz” mode, sitting at the tower instead of behind a curtain. Sometimes, to close deals, a sales manager will resort to old-school tricks such as developing a deferred down payment plan, incorporating cash back to the customer, structuring a straw purchase, or requiring a backup contract be executed with a different down payment.

9. F&I turn: The F&I manager firms up the paper trail execution — including final pencil, menu, buyer’s order, RISC or lease, and product enrollment forms — and acts as the backup checker to make sure sales did everything it was supposed to do.

10. Delivery and service drive intro: Most of the dealer’s compliance requirements have been met with their newest customer. Potentially, though, the salesperson may start mining this new customer for prospects. Armed with the neighbor’s or relative’s name, address, phone, fax and cell numbers, the salesperson may ignore do-not-call lists or CAN-SPAM requirements.

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Five Critical Annual Training Requirements

Five Critical Annual Training Requirements

“Dec. 7, 1941 a date which will live in infamy.” — Franklin Roosevelt

“Dec. 7, 2017 a watershed moment in American culture.” Me.

Pearl Harbor was bombed in 1941, effectively bringing America into World War II. Former Sen. Al Franken (D-Minn.) resigned his seat on Dec. 7 of this year, joining a list of 100 or so men (to this point) who have been publicly accused of sexual harassment. The revelations of sexual harassment charges have hit a broad spectrum of professions, including politics, entertainment and news.

Some of the accused in Congress are facing ethics hearings. Men in other professions are facing public humiliation and the loss of business or careers.

This is not an article about the politics of sexual harassment. Nor am I taking any side about accuser and accused. Rather, it is an article about one of the very real requirements for businesses, including your dealers and your agency, to annually provide ongoing training in five critical areas: sexual harassment, ethics, discrimination, Safeguards and Red Flags.

Sexual Harassment

Sexual harassment is against the law. It has no place in a dealership or an agency. Employees, managers, customers and vendors could be victims of sexual harassment.

The two specific types of sexual harassment are “quid pro quo” and “hostile environment.”

Quid pro quo is the type of sexual harassment that is generating today’s headlines. It simply means that someone in a position of power over another person engages in unwelcome sexual advances, requests for sexual favors, and other sexually related conduct in exchange for a job or other benefits. It can be man on woman, man on man, woman on man, or woman on woman.

Sexual harassment also exists if the conduct creates a hostile work environment or intolerable working conditions. Examples include posters, jokes, suggestive music and wolf whistles.

Engaging in sexual harassment can result in discipline, public embarrassment, or termination, and expose a dealership or agency to legal liability. If you become aware of, or even suspect, any form of sexual harassment at a dealership or your agency, it should immediately be reported to management or owners.

To provide the underpinnings of a potential defense against charges of sexual harassment, your agency or a dealership should document that initial and annual sexual harassment training has been completed for all employees.

Ethics

Ethics really boils down to the Golden Rule: Do unto others as you would have them do unto you. For example, if you would be comfortable with a sales manager packing the payment on your grandma’s next vehicle purchase, you might have a problem with your moral compass. Or Grandma can’t cook.

Just like sexual harassment, ethics seems so simple, yet is very complex. Documentation of annual training on ethics may help provide a defense against potential claims.

Discrimination

The law prohibits not only intentional discrimination (disparate treatment), but also neutral job policies that disproportionately affect persons of a protected class and that are not related to the job and the needs of the business (disparate impact).

The law also prohibits employment decisions based on stereotypes and assumptions about abilities, traits or the performance of individuals of certain groups.

It’s illegal to discriminate against any individual regarding employment. Agencies and dealerships should adopt policies to reduce the likelihood of discrimination, such as:

  • If racial information is needed, to simultaneously guard against discriminatory selection, use separate forms or otherwise keep the information about an applicant’s race separate from the application.
  • Hostile work environments or harassment on the job are prohibited.
  • Agencies and dealerships are required to take appropriate steps to prevent and correct unlawful harassment.
  • Those who witness it are responsible for reporting harassment at an early stage to prevent its escalation.

As with sexual harassment, documentation of annual training of all employees on the agency’s or dealer’s discrimination policy could help defend or deflect charges of employee discrimination.

Safeguards Rule

The federal Safeguards Rule is all about treating customers’ nonpublic personal information (NPI) as if it were your own information. Chances are, with all the recent security breaches, your information is already on the Dark Web. As an agency, you have lists and other consumer NPI from dealers that you are responsible for safeguarding.

You dealer customers must have an active Safeguards program. To prove it is a robust program, a dealer must be able to prove that they have:

  • Designated a program coordinator (a.k.a. compliance officer).
  • Conducted a risk assessment.
  • Designed and implemented safeguards to control the identified risks.
  • Overseen service providers.
  • Periodically reevaluated the program.

Agencies are considered service providers and, as such, you could be called upon by your dealer clients to demonstrate that your agency has a robust program to safeguard consumer information supplied by the dealer.

An annual training program for all employees in the agency’s and dealer’s Safeguards programs should be part of the program’s guidelines.

Red Flags Rule

According to the Federales, a Red Flag is a pattern, practice or activity which signals the potential risk of identity theft. Some examples include:

  • Altered or forged identification documents
  • Address discrepancies
  • Social Security discrepancies
  • Alerts in credit bureaus
  • Driver license descriptions that don’t match the appearance of the person presenting it

The Red Flags Rule requires the similar components outlined in the Safeguards Rule discussion above. It requires an annual report to the owner of the business regarding the sufficiency of the business’ Red Flags program. Part of that annual report should be certification that annual training has been provided to all employees on the business’ Red Flags Program.

Many human resource managers are aware of the need to provide annual training in these critical areas. We believe that it is so critical to a dealer’s or agency’s defense against potential claims that these five components are required modules in the ACE certified practitioner’s annual recertification.

Good luck and good selling.

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Modernists vs. Traditionalists: Morphing Into an Edealership

Modernists vs. Traditionalists: Morphing Into an Edealership

As the sales and F&I processes are morphing from a traditionalist (paper) documentation of the processes to a modernist (digital) documentation, it is helpful to step back to see where the change is taking place.

The battle between a modernist and a traditionalist is evident in the world outside of automotive retailing. For example, the modernist is more likely to be a fan of UFC where a traditionalist still watches the boxing matches on HBO.

Benefits and Risks

Each process has its own benefits over the other, and a different set of risks in accepting the approach to use. For the traditionalist, employees are already trained in the paper process, controls are in place and it is easier for an absentee owner to oversee the operations.

The modernists believe they are catching the wave now and are meeting consumer demands while building efficient processes. The modernists also believe a digital process will help flip the consumers’ perception of car dealerships and the dealer will have easier access to data while having the ability to expand its footprint.

On the flip side, staying with the traditionalist approach means the industry can pass you by, that the consumers’ negative perception continues to perpetuate, ignoring that millennials prefer digital to pulp and a larger data storage and safeguards risk. Pursuing the modernist processes can border on the bleeding edge of technology. It requires staff retraining and trying to convert old timers on the new approach. The modernist has to review its controls, backup retention of data and a risk of a large data breach.

The Hybrid Edition

Daryl Hall of Hall and Oates may have said it best when he wrote this classic line in one of their songs: “If two can be one, who is the one two becomes?” My belief is that, ultimately, the dealership sales and F&I model may be a hybrid of the modernist view and the traditionalist preference.

Some dealerships may have customers who prefer a paper process while other dealers have customers who may insist on a digital approach. This may drive the dealer’s ultimate decision.

Further, some processes are better executed using pulp and other processes lend themselves to electrons. Here is a look at some of the processes under review by dealerships in their decision between traditionalist or modernist:

  • Credit applications: Two critical compliance concerns related to credit applications help drive the decision between paper and digital: First, a dealer must show consent to pull a credit report. While a signature is not required, it is the best evidence to prove permission if the customer signed a credit application. Therefore, in a compliance review, you should review the timing of a signed credit application versus the timing of the credit pull.

The second compliance concern is the ability to prove to a finance source that the credit information you provided is consistent with the credit information provided to you by the consumer. A signed source credit application to compare to the submitted credit application serves as this evidence.

Some dealers are obtaining and retaining a paper credit app signed by the customer while other dealers are accepting an online credit app digitally signed. Other dealers are entering the customer information directly into a kiosk or the CRM and printing a copy for the customer to sign before pulling credit.

All of these approaches are compliant.

  • Desking: Many dealers still using a Sharpie and a four-square will likely have compliance issues with their desking process. These issues can include payment packing or discriminatory pricing. While some edesking solutions can still allow payment packing or discriminatory pricing, it is easier for you to catch in a compliance audit and know whom to hold accountable.
  • Menu: Like desking, many dealers who use a manual menu and a Sharpie may be committing deceptive practices like payment packing or trading rate for product. Using an emenu with industry standards  will help with a compliant menu process. It also documents many of the customer’s purchase decisions and is the most important piece of paper from a compliance perspective in the deal file.
  • Contracting: Truth in Lending Act (TILA) issues flare up when an impact printer is used to print the contract. Leveraging econtracting not only minimizes potential TILA claims, it also helps with contracts in transit funding.
  • Deputy Dawg duties: The Federales require auto dealerships to conduct some vetting on each transaction to help in the fight against terrorism and identity theft. These two problems are certainly on many consumers’ lists of things to worry about in America, and we are required to do our part.

To comply with terrorism vetting (OFAC) and identity theft deterrence (Red Flags Rule), a dealer must check some lists or other data to decide on whether to move forward with the transaction. Trying to manually conduct these reviews is time-consuming and likely fraught with errors or omissions. If there are processes within the sales and F&I processes that truly lend themselves to a digital solution, it is OFAC and Red Flags.

  • Adverse action notices: Under this requirement, a dealer sends an adverse action notice as necessary. Many dealers take the conservative approach and send an adverse action notice to anyone who provides a credit application and the dealer does not sell a vehicle to.

Manually completing and mailing a mass number of letters is inefficient. A digital approach is really the only way to ensure compliance with this process.

  • Out-of-area deliveries: This process ties directly into identity theft. Some dealerships are experiencing identity thefts from rings of nefarious, smart criminals. Many of the identity theft cases I’ve been involved in have some common characteristics and should be considered in your Red Flags process: Customers who are from outside the area, have never done business with the dealership before, may have passed over numerous dealerships for the vehicle, and don’t bother to negotiate the price or products should be regarded with suspicion.

Some dealerships have adapted a rather robust process to help mitigate the likelihood of an identity theft from an out of area customer. Among the additional steps:

  • The dealer will ask the out-of-wallet questions before proceeding with the deal.
  • Use Skype or Facetime to present the F&I products.
  • Run a Google Earth search on the given address.
  • Leverage a notary service or require a notary involvement in the document signing.
  • Send the customer to an affiliated dealership in the customer’s town.
  • Conduct a social media search to see if the pictures match the picture on the driver’s license.
  • Instruct the delivery company to deliver to the address only with no diversions allowed.

Continued good luck and good selling.

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Three Cs, Key Credit Determinants and Urban Legends

Three Cs, Key Credit Determinants and Urban Legends

Quickly advancing in the risk rearview mirror for a dealer is the risk of an investigation for bank fraud.

As the trusted advisor to your dealer, identity theft and the risk it presents to dealers remains a very real and present danger. The threat is usually an external one. Sure, there are instances of inside identity theft jobs in the industry. But most of the time, the agent and their dealers are in a defensive position, fighting off potential identity thieves.

Quickly advancing in the risk rearview mirror for a dealer is the risk of an investigation for bank fraud perpetrated by that inside ring of employees in a dealership. I have worked in litigation support for a dealer accused of bank fraud where we were able to show that the consumer was the one who provided the bogus documentation. And there are fake paystub and fake stips websites that consumers can access to provide fake stips and POI. Again, the agent’s dealer and its employees are in a potential defensive position to ensure the documentation provided is accurate and correct.

The risk that dealers should fear is that the managers of their sales and F&I processes are the ones manipulating the credit application information being provided to the finance sources — under the dealer’s logo.

Three Cs of Credit

Other industries have a cherished “three ‘C’s,” such as the diamond industry (clarity, cut and carat). In the credit industry, the three Cs are character, capacity and collateral. The 3Cs are the three legs of the stool that every finance source leverages to develop its underwriting guidelines.

“Character” refers to stability and measures the intent to repay the debt. It is measured by time on the job, time at the address, occupation and credit history. “Capacity” is the ability to repay the debt. It is measured by payment to income ratio, total debt to income ratio, and disposable income. “Collateral” looks at the potential loss position if the consumer defaults on the debt and the finance source has to liquidate. Loan to value is the common measurement.

Finance sources take different approaches to developing underwriting guidelines. Superprime finance sources tend to focus on character more than the other two. Subprime finance sources usually require a stronger capacity or collateral position to overcome the character shortcoming.

Five Key Credit Determinants

Finance sources are focused on five key credit determinants on the credit application: income, housing expense, time on the job, time at the residence, and what the customer does for a living.

From a three Cs perspective, these five key credit determinants help the finance source to measure character and capacity. Any enhancements or improvements to one or all of these five determinants could be considered credit application fraud.

Urban Legends

Through discussions with many finance sources and some of my consulting competitors, I’ve developed a list of common urban legends that the finance sources consider to be credit application fraud:

Urban legend: “It is acceptable to split the rent or housing expense.”

Finance source rebuttal: “It is not acceptable. We want, and expect the dealer to provide, the amount the consumer is obligated to pay through an agreement, whether a rental agreement or mortgage. The dealer employee can put a note on the credit application that states the consumer has a roommate and only pays half of the rent. It is then on the finance source to make the adjustment. We are required to file a suspicious activity report if we suspect credit application fraud.”

Urban legend: “Everyone manages some part of their job, so we make everyone a manager. For example, a Walmart greeter is really a ‘customer relations manager.’”

Finance source rebuttal: “Nice try, Mr. Wordsmith. Elevating a consumer’s perceived job status by making her or him a manager is credit application fraud.”

Urban legend: “Self-employed people have a trade or manage their business. It is OK to show them as a mechanic or a manager.”

Finance source rebuttal: “The majority of small businesses fail within five years. We want to know if someone is self-employed and will sometimes stip the approval for three months’ bank statements or tax returns. Trying to circumvent that stipulation is credit application fraud.”

If you provide credit application training for your dealers, make sure to clear up these urban legends. Good luck and good selling!

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How to Answer Dealers’ Compliance Questions

How to Answer Dealers’ Compliance Questions

As trusted advisors to dealers and the dealerships they own, they look to us to provide expertise in a number of areas. We are smart enough to know what we know and how to look for help for those things we do not know.

For example, if a dealer asks me to help with OSHA compliance, I know enough to know I don’t know enough to provide the level of expertise the request deserves. I set up a referral.

Likewise, when you are asked to be the compliance cop for a dealer, you suggest that your expertise is in helping to run a profit center profitably. You want to be the compliance monitor, not the compliance cop.

Still, it never hurts to learn a little bit more so you can help with an informed referral. To that extent, here are the hottest compliance concerns dealers face today, who is driving the issue, and what a dealership should do to protect itself.

Identity Theft

We have been saying for the last decade that identity theft is the fastest-growing crime in the United States, and it remains so this year. You would think that, after a decade, the law of mathematics would catch up and slow down annual double-digit growth, but it hasn’t slowed down.

Dealers have a statutory obligation to confirm the identity of the person they are selling a vehicle to. The Red Flags Rule, for example, requires a dealership to have a robust program to vet the identification being used by the purchaser and to document the clearing action used to demonstrate it performed this task.

I am receiving too many calls from attorneys and insurers looking for an expert witness to help defend a dealer in actions brought by consumers whose identity has been stolen and used to finance a vehicle.

If you get the same call, or have a dealer who is not sure if a sufficient identity theft program is in place, review these questions with the dealer:

  • Who is your compliance officer and do the employees know that?
  • Do you have a written identity theft policy?
  • Can you demonstrate you provided training to your employees on the policy?
  • What were the results of your last audit?
  • What changes were enacted to your policy as a result of your last audit and can you document how you shared that with your employees?

Finally, review last month’s Red Flags report in the software used to vet Red Flags, and look for sold units that still show uncleared or incomplete alerts.

Credit Application Fraud

Every day, it seems like there is a new breaking news case of a dealer or a manager or both either accused or convicted of credit application fraud. Yet many people in the industry still believe credit application fraud is a victimless crime.

The Federales are putting pressure on the finance sources we do business with to enforce the representations and warranties of the lender agreements a dealer must sign with every indirect finance source. So to pass their regulator audits, they have to show they are enforcing those agreements.

When your dealer has an epiphany that he doesn’t look good in orange and is concerned about credit application fraud, you are a likely resource to help assuage their fears.

Your conversation with the dealer should include:

  • The finance sources are focused on five key credit determinants on the credit application: Income, housing expense, time on the job, time at the residence and what the customer does for a living.
  • Any enhancements or improvements to one or all of these five determinants could be considered credit application fraud.
  • You need to retain the credit application the customer gave you to show the finance source what you were told.
  • You need to retain the credit application you submitted to the finance source.
  • You need a process to compare a sampling of source to submitted credit applications to ensure the information is consistent or that differences are documented in the file.

Payment Packing

Payment packing has been taking place since payments were first quoted in the sales process. In the late ’90s, the National Association of Attorneys General passed a resolution calling it a “deceptive sales practice.” Essentially, this organization of regulators set the standard that a customer has the right to a payment quote that accurately reflects the deal being contemplated at that time.

This is where your expertise can shine for your client. You know how to desk deals the right way. You simply need to assist your dealer in desking deals in a transparent fashion with no indications of payment packing.

As an aside, it is my experience that deals using old-fashioned four-squares and Sharpies are more likely to exhibit traits of payment packing than those deals desked using an edesking software package.

Discriminatory Pricing

Finally, some of the Federales have been rattling sabers about F&I product pricing. Some states have filed or regulated rates on one or more products. Some dealers go one step further and have established a one-price policy for F&I products.

While I am agnostic to one-pricing, I am a firm believer that a dealer must establish a product pricing guideline if the state it operates in is silent on product pricing. I’ve developed an industry standard for these products based on what I have seen in the marketplace.

If your dealer is asking about a product pricing guideline, feel free to drop me a line and I’ll share my thoughts with you, product by product.

Good luck and good selling!

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