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Compliance Summit Heads West


Welcome to the inaugural Las Vegas Compliance Summit! Our series of regional events has made stops in Miami, Chicago, Austin and Tampa, and we can’t wait to share our program with you here at Paris Las Vegas.

Compliance Summit was designed to deliver a crash course in federal regulations and enforcement actions and help you build sustainable sales and F&I processes without sacrificing productivity or profitability. If that sounds like a tall order, it should, but our speakers know how to get it done. Here’s what we have in store:

Welcome Address

Our first speaker is Andy MacKay, executive director of the Nevada Franchised Auto Dealer Association (NFADA). He is a fourth-generation Nevadan who previously served as chairman of the Nevada Transportation Agency and as a partner in several private enterprises. MacKay is charged with protecting the interests of more than 100 new-car dealers in his state, and we are grateful that he has agreed to share his thoughts and kick off our event.

F&I Products, Regulators and the Presidential Election

Attorney and compliance expert Aaron Lunt of The Warranty Group will touch on a number of hot-button issues in his opening keynote address. He believes increased compliance and regulation is the most significant pressure point for dealers today, and he will explain the roles federal agencies and state attorneys general — and, yes, even our next president — will play in shaping the compliance landscape in the years ahead.

The Buck Stops Here: Dealers, Compliance and Enforcement

Few compliance experts command as much respect as Terry O’Loughlin, a former regulator with the Florida attorney general’s office who now serves as director of compliance for Reynolds and Reynolds. He will explain why dealers, not managers nor staff, bear the onus of compliance, and how having the right policies, tools and best practices in place is the best way to protect your operation.

Knowledge Is Power

Our first panel session will be led by compliance expert and attorney Michael Maledon and staffed by Bob Balak of Compli, Alpha Warranty’s Darin Ramos,  Steve Roennau of EFG Companies, and Timbrook Automotive Group’s Dina Wilson. Maledon and his experts will sort through the complex maze of rules and regulations to identify and focus on the best practices dealers are using today to keep up with changes and withstand scrutiny.

Luncheon Address

Our luncheon speaker is Jim Radogna, a San Diego-based compliance expert and trainer. Before founding Dealer Compliance Consultants, he served as compliance officer for a large auto group, the apex of a 15-year retail career that also included roles in F&I and sales management. Radogna will offer his views on the state of dealer preparedness and discuss compliance issues unique to the Western states.

Compliance Traps Your Store MUST Avoid

Attorney Jim Ganther of Mosaic Compliance Services is a dealer advocate and a Compliance Summit mainstay. His address will cover the common mistakes made by dealers in a highly regulated environment, how to avoid them, and how to train managers and staff to ensure your sales and finance processes remain up to code.

Leadership, Teamwork and Accountability

I have the honor of leading our second panel discussion, which will focus on the individual roles owners, managers and staff — and, in particular, your appointed compliance officer — play in protecting your dealership and your customers. I will be joined by Justin Gasman, the award-winning finance director at McCaddon Cadillac Buick GMC in Boulder, Colo., and compliance experts Michael Tuno and Max Zanan of ARMD Resource Group and Total Dealer Compliance, respectively.

The Paper Trail: A Dealer’s Best Defense Witness

Compliance expert and trainer Gil Van Over, founder and president of gvo3 & Associates, will take the stage to discuss your documentation program — or lack thereof. In a sales and finance process that requires the customer to sign their name 80 times or more, you need to establish and enforce a set of rules that can serve as a defense against litigation claims and government inquiries. With your operation on the line, every signature counts, and consistency is the key to your paper trail.

Where the Rubber Meets the Road

Our final panel discussion will be helmed by United Development Systems (UDS)’s Brian Crisorio, who will be joined by Erika Ahern of CNA National, Doug Fusco of Dealer Safeguard Solutions, F&I Express’ Brian Reed, and Iris Spiegel of Miller Automotive Operations. This esteemed group will turn our discussion from the theoretical to the practical, detailing the simple, actionable processes and controls dealers are implementing in F&I offices nationwide.

Is It Compliant? 

Day One ends with a bang as our master of ceremonies, Bob Harkins of American Guardian Warranty Services, will facilitate “Is It Compliant?,” an open-forum discussion among Compliance Summit speakers and attendees. This is your chance to pose your toughest questions to our experts and share the challenges you have faced in your dealership and market. So don’t hold back, and remember: Compliance Summit is your event!

Certified Automotive Compliance Specialist Review and Exam

Day Two brings your opportunity to earn Certified Automotive Compliance Specialist status following the successful completion of a four-hour review session and a satisfactory score on the exam that follows.

The review session is divided into two parts: Part 1 runs from 8:00 a.m. to 9:45 a.m. and will cover such topics as ethics, vocabulary, Reg Z and M, adverse actions, ECOA, FCRA, credit applications and more. After a break, Part 2 starts at 10:00 a.m. and ends at noon; this session will include Magnusson-Moss, the Used Car Rule, Red Flags, Safeguards, OFAC, Unfair, Deceptive or Abusive Acts and Practices (UDAAP) and more.

After a half-hour lunch, the exam itself will begin at 12:30 p.m. and end at 2:00 p.m. But the fun doesn’t end there.

Industry Summit

Your Compliance Summit registration also grants you full access to Industry Summit, the auto retail and finance industry’s premier training event. You can drop in on sessions covering topics ranging from needs discovery and objection-handling to lender relations, the used-car market correction and everything in between. Tour the exhibit hall, take advantage of the free meals and join us for evening receptions.

I am so happy you have decided to join us for Compliance Summit. We take great pride in our event and we have been encouraged by all the positive reviews, phone calls and emails that followed our first four conferences. I hope you take full advantage of everything this week has to offer.

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Crisorio to Helm Processes and Controls Panel at Las Vegas Compliance Summit


LAS VEGAS — Organizers of the upcoming Compliance Summit have announced that United Development Systems Inc. (UDS)’s Brian Crisorio will lead a panel discussion dedicated to “Easy-to-Implement Processes and Controls” at the 2016 event, which will be held Aug. 29–30 at Paris Las Vegas as part of the annual Industry Summit.

“Our industry has really turned the corner on compliance, and now it’s time to hit the gas,” said Crisorio, who serves as vice president of marketing for UDS. “The experts on this panel are going to deliver simple, actionable processes and controls and prove you can be successful and maintain a compliant dealership culture.”

The session, “Where the Rubber Meets the Road,” will begin at 4:45 p.m. on Monday, Aug. 29. Crisorio will be joined by Erika Ahern, general counsel for CNA National Warranty Corp., Doug Fusco, founder and CEO of Dealer Safeguard Solutions, and Brian Reed, president and CEO of F&I Express.

“Brian and his panel are experts at translating the language of compliance into the language spoken online, on the show floor and in the box,” said David Gesualdo, show chair and publisher of Auto Dealer Today and F&I and Showroom. “This panel will serve as a practical guide to applying compliance education to your sales and F&I processes.”

Compliance Summit attendees are also invited to attend any Industry Summit session and sit for the Certified Automotive Compliance Specialist exam, both for no additional charge.

Registration for Compliance Summit is open now. Attendees who register by August 5 will save $100. To inquire about sponsorship and exhibition opportunities, contact David Gesualdo via email hidden; JavaScript is required or at 727-947-4027.

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UDS Wins Two Dealers’ Choice Awards


CLEARWATER, Fla – United Development Systems, Inc. (UDS) has been named the Diamond Award Winner for F&I Training and Gold Award Winner for Compliance Training in the 2016 Dealers’ Choice Awards by Auto Dealer Today.

For the twelfth consecutive year UDS has been ranked tops in the F&I Training category, while placing 1st in eleven out of twelve years surveyed. “UDS is proud to have won this award each and every year the survey has been conducted. We believe that solid F&I Training and Coaching is the foundation of our value proposition to Dealers and to have today’s Dealers validate our efforts is rewarding,” says Randy Crisorio, President and CEO of UDS. “As we launch growth initiatives throughout the Southeastern U.S., our training will continue to evolve with the changing car-buying experience giving our Dealer Partners a step up,” adds Crisorio.

This is the twelfth year Auto Dealer Today has held the Dealer’s Choice Awards, which recognizes the highest rated vendors, suppliers and finance companies in the automotive industry. The awards are based solely on the votes of those who use the products and services every day, namely dealers and dealership management. Respondents rated providers in four areas: 1) the quality of the product or service, 2) customer support and service, 3) the overall value, and 4) whether the dealer would recommend the provider.

UDS is a full service F&I Performance Company based in Clearwater, Florida – recognized over the past twelve years as the best F&I Training and Development Partner, and a top Compliance Trainer, in the industry. For nearly 35 years, UDS has been providing automotive retailers with F&I training and development solutions to complement its full line of quality F&I products. Also available is critical technology solutions in AutoMenu®, the only true F&I selling system, and AutoTracking®, an easy to use online reporting system.

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Agent Summit Announces Agent Principal Giveaways


LAS VEGAS — Organizers of the upcoming Agent Summit announced that attendees of the pre-conference Agent Principals Only Breakfast & Roundtable will be entered into a drawing to win a Gibson electric guitar, a bespoke suit from Chalk Mark Custom Clothing or a $1,000 gift card.

The event will be held May 9–11, 2016, at the Venetian Palazzo Las Vegas, and the Agent Principals Only portion begins at 8:30 a.m. on Monday, May 9.

The first prize is a 2016 Gibson ES-339 semi-hollow body with black satin finish. The guitar, which retails for up to $3,149, is similar to the instrument played by Johnny Rivers in the music video for his 1966 hit, “Secret Agent Man.”

“Don’t miss your chance to be announced as the winner of this memorable Gibson classic during the Agent Principals Roundtable & Breakfast,” said Randy Crisorio, president and CEO of United Development Systems Inc. (UDS) and chair of the Agent Summit advisory board. “This private meeting looks to become a classic as well, as career F&I professionals meet to exchange thoughts on growing our value proposition.”

Second prize is a custom-suit made by famed tailor Greg Smith of Chalk Mark Custom Clothing, valued at $3,000, courtesy of PermaPlate, and third prize is a $1,000 gift card sponsored by Portfolio.

“We are thrilled with how this year’s Agent Principals Only session is shaping up, and these giveaways only sweeten the deal,” said David Gesualdo, show chair and publisher of Agent Entrepreneur and F&I and Showroom.

Registration, hotel and travel information for Agent Summit is available at the event’s website as well as by phone, fax and email. Click here to view the full agenda.

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Whatever Happened to Credit Life?


There was a time when credit life and disability insurance was the No. 1 product sold in the F&I office. In fact, for the better part of the 1970s and ’80s, it was the only product. When John Braganini, principal at Great Lakes Companies in Kalamazoo, Mich., entered the auto retail channel in 1986, credit life was still king.

“At the time, dealers here in Michigan limited their F&I product offerings to credit insurance, service contracts and appearance products such as rustproofing and paint sealant. Some accessories and other related products were offered at various dealerships, but the three mentioned above, along with bank reserve, provided the F&I landscape,” Braganini recalls. “The service contracts and appearance products were often priced and administrated in a manner that led to performance issues, so credit insurance was often the primary income source for F&I.”

Since their inception, credit life policies have been designed to continue making payments on an auto loan if the car buyer dies or becomes disabled or seriously ill. Braganini describes them as a “simple value proposition” for customers. For a modest premium, which can be financed along with the loan amount, customers who opt for credit life coverage, disability coverage or both are relieved of what could be a major financial burden when disaster strikes.

Credit life began to lose its luster at the turn of the 21st century, when regulatory changes limited its income potential in some states and dealers and agents began to see more value in products such as vehicle service contracts, GAP coverage and appearance protection. Several large providers, including Zurich and JM&A, pulled out of the segment.

But many others remained, and advocates say credit life still represents a tremendous value to dealers and end users and deserves a seat at the F&I table.

Licensing and Rates

“As one of our people likes to say, our industry put the ‘I’ in ‘F&I,’” says Richard Kizer, chairman of Central States of Omaha (CSO) in Omaha, Neb. “In the early years, the F&I department would help people secure loans and present them with credit life insurance. They needed to borrow money and needed protection on their loans. So the product was offered a high percentage of the time and our penetrations were very high.”

Today, sellers of credit life and disability insurance must be licensed by the state or states in which they operate. Some states allow the dealer to establish an entity and maintain the license; others mandate that everyone involved in the sale be licensed. Kizer doesn’t take issue with licensing requirements but says they have restricted sales in some states.

“There are a handful of states, including California and New York, where they have made the licensing of that employee in the F&I office very difficult,” he says. “They may have to get fingerprinted or take a test or have continuing education. And we know there is a fair amount of turnover in F&I.”

The commissions dealers earn from selling credit life and disability are determined by “prima facie” rates set at the state level. Sellers can go below the established rate but may not exceed it.

“Back in the ’70s and early ’80s, the rates for credit insurance ranged anywhere from 70 cents up to 90 cents per 100,” says Arden Hetland, president of The Woodlands, Texas-based American Financial & Automotive Services (AFAS). “Louisiana was at 110% for joint life. So the rate was high and commissions were high.”

Things began to tighten up, Braganini says, beginning in the late 1990s and continuing through the early 2000s.

“The landscape changed. One by one, states began reducing the price that could be charged for credit insurance. Many states reduced the price to the point where commissions had to be reduced to 10%.” As a result, and in combination with the emergence of competing F&I products that did not require licensing and could be marked up, Braganini adds, “credit insurance started getting lost in the shuffle.”

At Pekin Insurance in Pekin, Ill., Jay Holloman brings more than 30 years of experience in the credit insurance field to his position as director of financial products. He says credit life’s decline was accelerated by a regulatory change in the housing segment.

“In the early 2000s, the federal government decided to treat single-premium credit insurance as points and fees in its definition,” Holloman says, so banks were no longer able to finance credit life and disability in mortgage-backed loans. “A lot of people were using a second mortgage to buy a vehicle. We couldn’t offer the credit insurance, so our business was greatly reduced.”

Determined to stay in the game, Holloman and his management team decided to expand their geographic footprint. With the help of a network of agents, Pekin rebounded. The company now offers services in 21 states and counting.

“It has been a rocky road,” Holloman admits. “We went from writing as much as $20 million down to $8 million. Last year, we turned $19.2 million. There is a huge need for the product in our society and for our economy.”

Sales and Reinsurance

Not everyone agrees that the arguments listed above are strong enough to make room for credit insurance on the F&I menu. By the time Brian Crisorio, vice president of marketing for United Development Systems Inc. (UDS), joined the company on a full-time basis, the role credit life would play in the company’s future was already in doubt.

“As the young blood in our organization at the time, I was the one pushing to cut ties with credit insurance,” Crisorio says. “It’s a generational shift. I wasn’t around when it was one of two products available and one of the main sellers and profit contributors. When I looked at the total landscape, I saw that we had all these other products that made more sense.”

In Crisorio’s home state of Florida, he adds, the numbers just didn’t add up. He agrees that the product represents a good value to some end users but says the company had to make a business decision based on the needs of its dealers.

“It didn’t seem like the smartest thing to be pushing it for sales. I think what it all came down to was that a lot of our business is done in Florida and the pricing was too high, the profit was too low and there were too many other good options to take up real estate on the menu.”

Kizer points to Texas as one state in which the sale of credit life and disability can produce “substantial” income for dealers. Using a hypothetical loan amount of $25,000 at 6% interest over a 72-month term — and using round numbers — he calculates the cost of credit life at $450 and disability at $950 for a total premium of $1,400, assuming the car buyer opts for both types of coverage. Texas has a “floating cap” on commissions, meaning the selling dealer would earn somewhere between 30% and 45%, depending on the loss ratios they have generated.

“Texas is on the low side as far as rates are concerned,” Kizer says. “They have good penetrations. Some states have hard caps and some have floating caps. It all comes down to loss ratios but it’s still good income for the dealer. What can be so confusing from state to state is regulation. But if a dealer and the folks in the F&I office are committed to presenting the product, then it does generate significant fee income. If a state makes licensing difficult or makes the commission rate extremely low, the dealer loses the incentive to sell it properly.”

He acknowledges that a portion of the income dealers make from credit insurance goes toward the cost of the F&I manager’s time and compliance training, but the more policies sold, the more those per-deal hard costs are defrayed. And then there’s reinsurance.

“Some states, like Nebraska, have a hard cap,” Kizer says. “Our commission cap is 30%. What dealers in such states will frequently do is invest in captive reinsurance companies and take underwriting risk on their product.”

Dealers who elect to offer below-rate credit insurance are following the lead of credit unions, as Kizer and Hetland pointed out, many of which subsidize the sales of the product to protect their own interests as well as their members’ ability to obtain credit in the future.

“It’s a different mindset,” Kizer says of credit unions. “They will sell it at a lower rate and take a lower commission.”

“Despite all the changes, we continue to produce significant sales volume with credit insurance,” Braganini says. “One of the primary reasons is that we are one of the few agencies that have providers, licensed sales executives and a compliance department to fulfill the regulatory requirements. Most of the national F&I providers outsource everything but service contracts, GAP and tire and wheel. As a result, providers that have focused solutions can consolidate their market opportunities.”

“We still provide credit insurance because, if it’s on a menu, that’s a great value,” Hetland says, particularly for car buyers who are 40 and older. Consumers in that age group have a higher risk of death and illness, but the rates set by the state don’t vary with age, and the policies don’t require a physical exam or a lengthy health assessment. “There is very little underwriting. You might have to say you’re not having a heart attack or fighting cancer, and that’s it.”

Kizer points out that, if every car buyer walked into the F&I office with a robust life insurance policy in their back pocket, credit life would be a harder sell. At the moment, on a nationwide basis, that is not typically the case.

“Four out of 10 Americans do not own life insurance,” Kizer says. “Only 35% of low-income households and 54% of middle-income households have whole or term life insurance.” He recalls a story told to him by a banker about a young woman whose recently deceased husband had, unbeknownst to her, added credit life to his auto loan. “The husband was the primary breadwinner and he got in a wreck and died. His wife came in crying to the loan officer, thinking she was still responsible for the loan. The banker told us, ‘I can’t tell you what a great experience it was to tell the widow that the loan was insured.’”

Compliance Issues

If nothing else, our experts said, credit life and disability is a product that has been through the regulatory ringer so many times, it’s practically unassailable.

“When I started, there was no disclosure of any of the F&I products on the buyer’s order, bank contract or vehicle registration documents,” says Braganini. “All incremental products were rolled into the selling price of the car and it was ‘convenient’ to include life and disability into every loan quote. Consumers would get a loan that ‘included protection.’”

Clearly, thanks to the nationwide campaign against payment packing that began more than a decade ago, that is no longer an option. Another challenge was mounted by class-action attorneys who went after dealers for failing to refund the premiums to customers who canceled their credit insurance policy or traded their vehicle.

“A lot of them just didn’t do it,” Hetland says. “The class-action attorneys went after lending institutions and insurance providers. What they found is the lenders would not let the insurance company — because of privacy laws — tell them when cancelation took hold. Now the language has changed to say it is the responsibility of the policyholder to notify the insurance company.”

As indications that the Consumer Financial Protection Bureau (CFPB) will attempt to regulate the sale of F&I products continue to pile up, our experts said, credit insurance — with its state-mandated rates and commissions — stands out as an F&I product with a rock-solid pricing structure.

“You really hedge your bet against the CFPB with credit life on the menu,” Hetland says. “How can they say the state is wrong? And you can justify loss ratios because a lot of the ancillary products don’t have high loss ratios.”

“The way the CFPB is trying to back-door dealers, when you look at most of the products, they’re being insured based on debt protection like GAP. It’s a debt waiver,” Holloman adds. “If a dealer is really worried about compliance and the financing arms of their operations, credit insurance is one of the natural ways they can improve income on each vehicle. With credit life, you have a product that is out of the reach of the CFPB from that standpoint.”

“Price controls may become a reality with other F&I products,” Braganini adds. “If that happens, those who are positioned to execute an effective credit insurance strategy will have an advantage over those who cannot or will not.”

Crisorio remains unconvinced. “Here in Florida, almost all our products are regulated by the state. The only ones that aren’t are paint, GAP and key, which our dealers regulate internally. It’s in the operations manual.”

The Value Proposition

Asked whether demand from dealers would change his mind, Crisorio says he’s simply not aware of any. The only dealer on his roster who sells credit insurance was already doing so when UDS captured the business.

“There are certainly parts of the U.S. where credit insurance is viable, and there may be small pockets where we operate,” Crisorio says. “But it’s not rewarding enough to pursue.”

Those who remain in the credit life and disability business say the rewards are better framed in terms of the dealer’s value proposition than income potential. As Kizer points out, protecting the customer’s financing ensures future business.

“We feel this protection is very important and should be offered. You’re protecting the life and health of your customer,” he says. “Isn’t that more important than key replacement or dent and ding?”

Holloman points to a 2012 study by Thomas Durkin and Thomas Miller that made the case for credit insurance, particularly among older borrowers who are underinsured, and stressed the need to allow consumers to make their own decisions.

“The individual should have the opportunity to decide whether they want to purchase it or not,” Holloman says. “They don’t want it? So be it. But if you look at the Durkin study, they see the value and would purchase if they were offered it.”

“Credit life and disability is an exceptional value to the customer,” Hetland adds. “It’s good underwriting because the dealers are in reinsurance. And it really helps safeguard against the CFPB. We can’t knock that. It’s a good value.”

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Agent Summit Advisory Board Announced


LAS VEGAS — Organizers of the annual Agent Summit have released the names of the advisory board for the 2016 event, which is scheduled for May 9–11 at the Venetian Palazzo Las Vegas.

“The board was assembled utilizing the four past Agent Summit Keynoters and two Provider members that are expected to drive some fresh ideas,” said Randy Crisorio, president and CEO of United Development Systems Inc. (UDS), who will serve as advisory board chair for the fourth consecutive year. “When I reflect on what we’ve been able to accomplish in quality and participation, I’m as excited as ever to get Agent Summit VI in the fast lane.”

Crisorio will be joined by John Braganini, principal of Great Lakes Companies; Larry Dorfman, CEO of EasyCare; Eric Fifield, EFG Companies’ vice president of agency services; Joel Kansanback, president of Automotive Development Group (ADG); and Glen Tuscan, president of Dealer Commitment Services Inc.

In the coming weeks, the board will convene to discuss topics of importance to agents and agency heads and craft an agenda for the three-day event.

“In attempting to meet and exceed the quality of agendas past, Randy and his team have their work cut out for them,” said David Gesualdo, show chair and publisher of Agent Entrepreneur and F&I and Showroom magazines. “Luckily for everyone involved, they are perfectly suited to the task.”

Registration for Agent Summit 2016 is open at the event’s website as well as by phone, fax and email. Attendees who register by April 4 will enjoy a $100 discount. To inquire about sponsorship and exhibition opportunities, contact Eric Gesualdo via email hidden; JavaScript is required or call 727-612-8826.

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