Tag Archive | "ACE"

How to Formalize a CMS


In the beginning, there was General Motors Acceptance Corporation (GMAC) and the emergence of indirect auto finance. The Treaty of Versailles was signed around the same time, ending World War I. A typical GMAC deal file was the title and a contract too small to fit in today’s standard printer tray.

That innocuous beginning ultimately begat numerous federal regulations to oversee the dealerships who funnel installment sales contract to GMAC’s successor and other finance sources. As the genesis of the Federal Trade Commission (FTC) pre-dates GMAC by five years, it ultimately became the primary overseer of dealership business practices. Ergo the FTC Used Car Rule, the FTC Safeguards Rule, etc.

Jump ahead nearly a century and witness the birth of the FTC’s little brother, the Consumer Financial Protection Bureau (CFPB). The CFPB jumped into our consciousness in 2011 as a reaction to the mortgage lending meltdown. Its charter is similar to the FTC’s charter — to be the consumer’s watchdog.

Sibling Rivalry

Just like a little brother, the CFPB wants to prove it belongs in the same conversation as its big brother. An aggressive compiler of consumer complaints of all thing financial, it recently logged its millionth consumer complaint in a short five years.

And although the CFPB was unable to wrestle oversight of car dealerships away from the FTC, there is no questioning the agency’s intent to regulate dealerships though the wormhole known as the finance sources that dealers sell contracts to.

The CFPB has awakened its big brother with a series of headline-grabbing actions. For example, the FTC recently announced payment packing and yo-yo charges against nine California dealerships, its first such charge levied against an auto dealer for yo-yo transactions. Unconfirmed rumors have the first yo-yo transaction taking place in California in about, oh, 1920.

This is an important development for agents and dealers to pay attention to. It signals the willingness of the FTC to accept and adopt some of the CFPB’s methods and processes and ideologies.

One potential, very significant future event is the development and implementation of a compliance management system (CMS). The CFPB requires the finance sources it regulates to have a formalized, documented CMS in place.

My prediction is the FTC will require auto dealerships to have a formalized, documented CMS in all areas of the dealership’s operations in the next handful of years. As an agent, you have the opportunity to put your dealer clients on the path to compliance today. Let’s take a closer look at the components of a CMS and how to formalize the system.

Components, Audits and Procedures

A compliance management system is the method by which a dealer manages the entire consumer compliance process. It includes both the compliance program and the compliance audit function.

The compliance program consists of the policies and procedures which guide employees’ compliance with laws, regulations and potential litigation defense.

The compliance audit function is an independent testing of the dealer’s transactions and processes to determine its level of compliance with consumer protection laws and internal policies and procedures.

The process to develop and implement a CMS is consistent with the required components outlined by the FTC in its guidance with the Safeguards Rule and the Red Flags Rule. These components are:

  1. Appoint a compliance officer
  2. Conduct a risk assessment to gauge current practices vis-à-vis requirements
  3. Develop a policy and procedure to address the compliance requirements
  4. Provide and document employee training on the policy and procedure manual
  5. Perform periodic audits to confirm compliance with the policy and procedure manual

Let’s use the Monroney Rule, a rather simple federal requirement, as an example of how the CMS compliance model would work at a dealership. The first task is to understand the compliance requirement. The Monroney Rule requires that all new vehicles offered for sale have a Monroney label affixed to a window.

Now that the requirement is understood, a dealer must conduct an assessment to see how the dealership is complying with this requirement. The logical approach would be to do a lot walk and review the placement of the Monroney label on each vehicle.

Next, the dealer would create a written procedure that explains how the dealership will comply with the requirement to have a Monroney label on every new vehicle offered for sale.

Once the procedure is written, it becomes a policy. The fourth step in implementing a CMS is to train the employees on the policy and instruction on the procedures required to implement the policy.

The final step to implementing a CMS is to schedule periodic inspections of the vehicles available for sale to ensure that each one has a Monroney label affixed to a window.

Most successful dealers intuitively use the CMS model to manager the processes in the dealership, but they may not be documenting the approach. The day may be coming soon when documenting will be as important as doing.

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Automotive Compliance Leaders gvo3 And DSGSS Collaborate To Deliver Industry’s First Comprehensive Front End Compliance Platform


Two of the industry’s compliance leaders, gvo3 & Associates (gvo3) and DealerSafeGuardSolutions (DSGSS), have collaborated to deliver the first comprehensive front end compliance platform. This effort provides the first end to end solution, incorporating education, certification, execution, inspection and remediation. As dealers continue to struggle balancing the regulatory demands of consistency and perfection with the market demands of speed from the consumer, manufacturers, and sales force, shortcuts and errors are a fact of life. These missteps can cripple a business. This platform mitigates these risks.

Doug Fusco, CEO of DSGSS says “Gil and gvo3 have been the gold standard for years. Their compliance consulting, auditing and training continue to be best in class. Now with this new platform, dealers will be able to leverage these benefits to enhance and most importantly, “maintain” their compliance standards. For years dealers have searched for the “glue” to hold their policies and procedures together in a consistent manner.

Even after best efforts to enforce their investments in strong training and education, there is no guarantee employees consistently behave as instructed, creating this ongoing liability for the dealer. This platform will eliminate these risks”.

Mike Brosin, Managing Partner for Crest Auto group and a client of both gvo3 and DSGSS, states “We take our gvo3 audits very seriously, as they provide us valuable insight and direction into how we can improve and protect our business and our clients. We hold the record for the highest gvo3 score in the group, and DSGSS is the driving force behind that success”.

Steve Goodman of RML Automotive Group says “After we installed DSGSS, our next gvo3 audit score increased by 38 points”.

“One of the frustrations our clients share is the challenge with their staff consistently behaving as instructed after training, or after our audit review and consultation. With turnover, today’s competitive market, and the typical chaotic environment we operate under, this continues to become a growing challenge and liability to the dealer. With DSGSS in place those frustrations are eliminated, and the training leads to more consistent results” says Gil Van Over, President of gvo3.

Gil is also the Executive Director of Automotive Compliance Education (ACE). This firm provides compliance training and industry certification for everyone who touches a deal, from the Sales Person to the Sales, F&I and Office Managers. Certification curricula are also available for Office Clerks and Compliance Officers. “A dealer needs to certify more than just the F&I Manager and the training must be topical. ACE provides that topical training and industry certification.” according to Van Over.

This collaborative partnership will be officially unveiled at this year’s NADA convention. Experts from both companies will be available daily at the DSGSS booth # 5839. Please stop by to learn more about this unique platform. Sign up at the show and DSGSS will have your Compliance Officer ACE certified for FREE!

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Certified for the Future


If I could predict the future, I’d be at the nearest 7-11 buying one (and only one) lottery ticket. But here I am writing this article, which tells you all you need to know about my powers of prognostication. Still, I can’t help but occasionally peer into my crystal ball and try to interpret what I see. And what I see is a little scary — at least for those who aren’t prepared.

Here’s what I believe: First, the Federal Trade Commission (directly) and the Consumer Financial Protection Bureau (indirectly) issue regulations that affect the retail automotive world. But when it comes to actually impacting a dealership financially, neither the FTC nor the CFPB are as tough as they think.

I also believe the local plaintiff’s bar does more to affect dealership behavior than distant federal authorities. Consumer lawyers have a direct economic stake in finding, exposing and exploiting dealership violations. And trust me, it is very lucrative.

I also believe that technology, particularly social media, will eventually supplant consumer lawyers as the most effective factor in regulating dealership behavior.

Lastly, I believe no one trusts what dealerships say about themselves. However, consumers tend to believe what total strangers say about dealerships, especially if those strangers just bought a car or had one serviced at a dealership. And that’s the power of social media.

Facebook may not seem like a big threat, as scathing reviews posted there are only read by people connected to the reviewer who care or are in the market for a car. But people who go to DealerRater.com or Cars.com are almost all in the market for a car. Get blasted on those or similar sites and your topline revenue will take a hit.

In short, a herd of ticked-off customers with Internet access will have more power to influence dealership behavior than the FTC or CFPB. That’s not just the future; it increasingly describes our present.

If the fair, ethical and legally-compliant treatment of customers, as broadcast across social media, is the future of dealership regulation, how should dealers respond? The answer is obvious: Create a process that ensures customers are treated fairly, ethically, and in a legally compliant manner.

At the end of the day, most federal consumer-protection laws are designed to do just that. So doing right by regulators will also satisfy the real regulators: your customers.

The process must include a consistent, verifiable training program that includes the legal requirements for each job description at a dealership, not just F&I personnel. Per the National Automobile Dealers Association, the average dealership has 67 employees, of whom three or four are F&I managers. That means a program that only trains 4% of the workforce is going to fall short 96% of the time.

To address this need, Compliance Summit, in cooperation with Automotive Compliance Education, offered the ACE-certified Compliance Specialist program to attendees at no additional charge. Certification candidates will have access to online, interactive, video-based training on a broad range of dealership compliance topics. On Tuesday, Aug. 30, leading industry compliance experts (and yours truly) provided live test preparation, followed by the certification exam after lunch. Those who passed will receive the ACE Certified Compliance Specialist designation.

ACE is designed to assure continuous proficiency. Certified Compliance Specialists will be required to recertify annually by reviewing a current “Annual Update” module that focuses on developments relevant to their certification level over the preceding year, and passing the recertification exam.

Making the certification more meaningful is the program’s emphasis on processes that apply the theoretical aspects of regulatory language to real-life situations.

ACE is spearheaded by Gil Van Over III, founder and president of compliance auditing firm gvo3 & Associates. The idea spawned from the constant violations he came across while reviewing dealership operations, infractions that could have been prevented with proper training. “I created ACE to fill that need,” he says.

In addition to launching Compliance Specialist certification at Compliance Summit, ACE will provide certifications tailored to F&I personnel, sales associates, sales managers, business office personnel, and compliance officers. Each program will be offered online at www.AceCert.org, which will go live following the conclusion of Compliance Summit. Live review and test sessions are also expected to be part of future Compliance Summits.

The programs are designed to provide the basis for customer experiences that satisfy both the federal regulators and the real regulators: customers. That’s how smart dealers will face the future.

 

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An Interview with Gil Van Over III


On Tuesday, Aug. 30, at Paris Las Vegas, 83 industry professionals sat for the Certified Automotive Compliance Professional exam, offered for no charge to Compliance Summit attendees by Automotive Compliance Education (ACE). The following week, Agent Entrepreneur met with Gil Van Over III, the organization’s executive director, to learn more about the program and Van Over’s career in auto finance, training and consulting.

AE: Gil, where are you from?

Van Over: I’m proud to say I’m an Air Force brat. I’ve lived everywhere from the Orient to Europe to the United States. I went to high school in Hawaii and Dayton, Ohio, if you can believe that.

AE: What was your favorite stop?

Van Over: My favorite was Hawaii, but I finished high school in Dayton and then went to Ohio State for a couple years. Then I decided to join the business world. I went to work for a finance company and then went to one of the captives. From there, I was hired as the COO of Premier Auto Finance, which was a Pat Ryan or Aon company. Finally, I started gvo3 & Associates in 2001.

AE: What spurred the move from finance to compliance?

Van Over: At Premier, we were struggling with the manufacturers offering zero percent financing. It was hard to compete anymore. So we decided to shut it down and I decided to go into business for myself, offering compliance solutions, including training.

AE: Compliance was not the hot-button issue in 2001 that it is today.

Van Over: I kind of grew with the times. The timing was fortunate.

AE: How do you keep up with changes to rules and regulations at the state and federal levels?

Van Over: I read a lot of industry publications and I keep track of pending legislation and court decisions that require a dealer to have a plan in place. From that, I apply the methodologies I learned at the captive to incorporate those types of things as processes. We’re a process-improvement company. We use audits as a core competency to deliver consulting. That’s driven by processes, processes, processes. If they’re doing it right, they’re doing it right consistently. If they’re doing it wrong, they’re doing it wrong consistently.

AE: Are dealers and F&I professionals more receptive to change now than they were when you started?

Van Over: There has been a huge growth in awareness around the industry over the past 15 years. In the beginning, I had to spell “compliance.” Now, most people have a better understanding of what it is. The problem is that it’s so voluminous, they don’t know how to manage it.

AE: So you leave it to the experts.

Van Over: Exactly. I can tell you, for example, that the CFPB is focused on this aspect of your business and this is how you can demonstrate you are in compliance. It’s transitioning what you have to do into how to do it. That’s been the biggest key to our success.

AE: Do you still encounter F&I managers who play ball while you’re in their dealership and then go back to what they were doing when you leave?

Van Over: You run the gamut. You’ve got the people who think they’re too small or too isolated or insulated to have to worry about it. You run into the people that are saying, “Well, I’ve been at 17 dealerships in the last seven years, so whatever I’m doing, I won’t be here when the bad news comes.” And you do have the people that are just waiting for you to leave. They know you’re not coming back for six months or a year and they can go back to doing what they’ve always done.

But for the most part, the people working in the industry today understand that it’s the right thing to do for the customer, and it’s simply good business. You can keep the products you’ve sold because they’re not going to be canceled. You will have a higher degree of return customers. I think most people want to do the right thing. They need help understanding what the right thing is.

AE: Will your job get easier as the industry gets younger?

Van Over: That’s a good question. I’ll say there are a lot of urban myths out there and there always have been. Only now, what once was communicated by fax or phone is now on social media, and everyone’s opinion can be heard. You can’t just take a 144-character tweet as gospel, but many younger people do.

AE: We keep hearing about banks and finance companies knocking on dealers’ doors to perform surprise audits, but I have yet to speak to a dealer who has been through one. Is that actually happening?

Van Over: It’s not necessarily your finance company coming into your dealership and doing an audit but statistically reviewing portfolios. Most finance companies will have basically the same escalation process followed by HR professionals: First, you identify the issue and come to an agreement. If the offender doesn’t stick to the agreement, you follow with a written notice. If it still doesn’t correct itself, after determining the level of risk is too high, your finance source will say they can no longer do business with you. It’s not an overnight thing.

AE: Speaking of overnight, we’re fresh off Compliance Summit, where you and Jim Ganther and Michael Tuno presented the review session and proctored the exam for ACE certification. Ganther hinted that you pulled a few all-nighters to get the materials done in time for the show.

Van Over: He’s right about that, but I wouldn’t want anyone to think we threw that curriculum together in a few days. This idea first germinated in my mind about five years ago. I told Jim that there’s an opportunity for us to provide a certification for the industry that would leverage a lot of factors and, more importantly, provide some best-in-class certification that would rival what other professions get.

Think about doctors, nurses and teachers. They all have a requirement to not only get their degree and license but participate in continuing education to make sure they stay current. We didn’t see any offerings in the industry that met that standard.

So we had everything in place, but we still had to finalize some of the details, and that part happened fast. But we had the opportunity to introduce it to a great audience at a great venue.

AE: To use your own word, compliance is a “voluminous” topic. How did you lasso all aspects of dealer compliance into four hours of review and a 200-question exam?

Van Over: First, we understand what we’re good at. We’re good at compliance with all of the rules, regulations and statutes for best practices that revolve around sales and F&I. Dealerships also have parts and service departments, but we don’t pretend to be good at OSHA. What we’re good at is the departments that square off with the customer.

I do a lot of litigation support, so I see the arguments for unfair and deceptive practices. We have developed best practices. We generate the documentation that shows you were not deceptive in the way you sold anything.

We talked about continuing education for the practitioners in the dealership. We certify all of them because they all have a role in compliance. Just as they need to stay on top of the situation, we do as well. Continuing education is the key.

AE: Now that I’m certified, how do I get recertified?

Van Over: Every year, on the anniversary of your certification, you will receive a notification from ACE that you need to log in and take a smaller number of modules to stay certified. There are five we have identified that should be done annually: Safeguards Rule, Red Flags, sexual harassment, discrimination and ethics. Additionally, every year, we will add any modules that have been added to your discipline’s curriculum.

Finally, if you’re a gvo3 client, you are getting regular periodic reviews, and we will include areas where we see the highest area of noncompliance. If we find the highest percentage in the completion of credit applications, for example, we’ll include that module and do it again.

This demonstrates that, not only are we keeping you current on recent changes, we are also reviewing deal files, identifying failure points and retraining on that. With that documentation, the dealer has a strong case if someone leaves and blows the whistle. Sorry, but you were trained. We showed you how to do it the right way.

AE: Is it possible to be fully compliant and still be unethical?

Van Over: You can have paperwork in the deal that suggests you did things the right way. But, yes, you can still be unethical. And if you are, eventually, it’s going to catch up with you. We have a philosophy we share with dealers in our recap meetings: If you’ve made mistakes, it’s one of two things: You are naïve or you’re a kink. I can fix naivety. If you’re a kink, and you’re forging signatures and packing payments, and you think that’s acceptable, your moral compass is off. I can’t fix that.

AE: How often have you had to recommend that a dealer fire a bad actor?

Van Over: It happens occasionally. But it’s happening less and less, and we’ve moved along further into the progression of the company. When we develop a policy and procedure manual for our clients, we include a list of eight or nine non-negotiables. If you violate even one, you’re terminated. If you forge a document, you’ve got to go. If you steal money, adios.

However, we make absolutely certain we’re an independent contractor. We are not making decisions on behalf of the company. We might point out that it looks like someone else signed this document, and the dealer will investigate that. Many times, if they can get someone to admit to it, they do terminate them.

AE: Our readership is agents, so let me ask you: What responsibility do agents bear for keeping dealers in compliance?

Van Over: Agents do not want to be the dealer’s compliance cop. We’ve made that very clear. We work with more than a few agents, either on a referral basis or when we have been retained to be the compliance cop. We tell them to be sure their processes are compliant. Train on the menu from both the sales and compliance perspectives.

But you don’t want to be the guy reviewing deals. Focus on production. If your dealer needs a compliance expert, there are a number of us out there, and some of us do a very good job. Get somebody to be your compliance cop. Agents are there to help dealers make money. That’s what they’ve got to focus on.

For more information about ACE certification, visit AceCert.org. For more information about gvo3 & Associates, visit gvo3.com.

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Developing Effective Leadership: Training the Mid-level Manager


When looking at ways to make improvements in automotive dealerships today, a couple of topics always stand out. One topic is sales training and the other is finance training. Having over ten years of experience teaching in formal classroom settings, in both sales and finance, I have seen how things are usually done and know they have changed over time. However, there is one topic that is far too often overlooked: training of the mid-level manager.

Training the mid-level manager can provide many benefits to the dealership, such as growth and consistency. I have watched over many years as managers are born off the sales floor or come from other industries without any formal training. In these cases, management training boils down to being the classic baptism by fire – let the challenge begin!

So, let’s remove the word “manager,” for this discussion, and replace it with the word “leader.” I want to identify some elements of good leadership and the value it can bring to the dealership. The strength of an effective leader is the ability to bring out the most in their team. There are certain things you can do to find the right people, help them become proficient and keep them. Here are some key areas to observe when focusing on leadership training.

The first part is recruiting and hiring people; where do you find qualified candidates and how do you hire them? Now days, there are plenty of websites you can use for hiring, but I still believe in the value of prospecting for people. Good leaders teach their sales team to prospect for customers and likewise, good leaders should also prospect to build a good sales team. Remember (ABH) “Always Be Hiring.” If you don’t have room for additions, be willing to make room for the right person.

When hiring, don’t oversell the job. Set realistic expectations and ask professional and clear questions. Set up a second interview – don’t be desperate for the hire. Be sure they really want the job and that they are not just taking any job they can find. Take your time during this step and you will build a strong foundation that will lead to better success. Build a strong team – the stronger the team and the stronger the leader, the stronger the whole dealership will be.

Training is another area that is sometimes started at the dealership but is not always continued by the managers. The reasons could be that the managers just got busy or that they lack the content needed in a good training program to continue the development of the sales team. Ongoing training, also known as income development, should be done daily – training at every opportunity available to do business. By doing ongoing training we show our people that we care and that we are committed to their success. If we can strengthen the manager’s ability to provide quality training and development, then the whole sales team and dealership will be more successful.

Training sales teams should not only be about how to meet and negotiate with customers, but should also include teaching how to prospect for new business. There are constant training opportunities that are overlooked far too often, and unfortunately, this leads to regret at the end of the month.

Another area that is vital to the success of the mid-level manager is their ability to motivate their sales people. One topic we look at with leaders is: Do they really know their people and do they understand what motivates them? If you don’t understand your sales team – who they are and what matters to them – then how can you possibly motivate them? I have often found that people following a leader don’t always care how much the leader knows, but they do want to know how much the leader actually cares.

Finally, the big one: The ability to retain good people. Over many years of helping hire and place people, I have seen a constant need for sales people. I always ask the same question when I am told someone needs salespeople – “Why?” Why did you lose the salespeople you already had? If we work so hard to find and hire salespeople, and then, each time we go through the process of training them, why would we let them get away? That is why focusing on training the mid-level manager can help in finding better people – hiring, training, motivating and retaining them. By doing these things dealerships will achieve more profitable and consistent monthly outcomes.

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