Top Ten Ways an Employee Can Ruin Your Day

Question: Where are compliance lapses likely to occur in most dealerships?

1. The F&I office

2. The sales managers’ office

3. The lot

4. The showroom

5. All of the above

In my humble opinion, the answer is a qualified all of the above. The reason I say “qualified” is because in many organizations the answer may be skewed towards the lot and the showroom. Here’s why: it’s been my experience that in most dealerships, management personnel have at least some knowledge of proper legal compliance and ethics, either through training or osmosis. On the other hand, many salespeople haven’t a clue about the laws and regulations that affect our industry. Why should they? Compliance training, if conducted at all, generally occurs only at the management level. Unfortunately, attorneys and regulators don’t differentiate between job descriptions when pursuing a claim against a dealership.

So, here’s my top ten list of ways an employee can ruin your day:

1. “Low-balling” or lying to a customer about the true selling price of a vehicle

2. Intentionally misrepresenting a vehicle’s prior history

3. Intentionally misrepresenting the true advertised price of a vehicle

4. Making promises to a customer with no intention to honor them

5. Aiding a customer in structuring a transaction to prevent a Form 8300 from being filed with the IRS

6. Accessing a credit report without the consumer’s permission or a legitimate business reason

7. Intentionally misrepresenting a vehicle’s warranty coverage

8. Intentionally misrepresenting prior damage to a vehicle

9. Encouraging a customer to participate in a straw purchase

10. Falsifying, or encouraging a customer to falsify, a credit application

Oh, and did I forget to mention workplace harassment and discrimination?

Now it’s not my intention to pick on salespeople. I spent many years selling cars myself and I truly believe that sales consultants have the toughest job in the dealership, bar none. But let’s face it, salespeople are naturally aggressive (at least we hope so). Without proper knowledge, it’s very easy to step over the line legally when trying to make a deal. I know I certainly did many times before I learned the rules. It’s wonderful to have a well-trained management staff, but there’s a good possibility that an uninformed salesperson may make compliance missteps without the management team’s knowledge. After all, salespeople typically spend hours talking with their customers and it’s unlikely that management is going to be privy to all of those conversations.

Here are some recommendations for avoiding a really bad day:

• Train your F&I personnel.

• Train your sales managers.

• Train your salespeople.

• Train anyone in your dealership who regularly talks with customers about buying or leasing a car.

• Train EVERYONE in harassment prevention. Anyone can create a hostile work environment, not just a supervisor.

• Once their training is completed, have each employee sign a compliance Code of Ethics and Anti-Harassment Policy.

Give your entire staff the tools they need to do their job properly and ethically. Chances are, you’ll be glad you did, and so will your customers.


Jim Radogna is the President of Dealer Compliance Consultants, Inc., a San Diego, California training and consulting firm.

Legal Compliance - Who Taught You the Rules?

Back when I was a green-pea salesman, I listened carefully to everything the closers and sales managers said. These guys were good! It seemed that no matter what the customer said, they had an answer. So I listened and learned. When I got my shot and became a closer, I carefully followed my sales manager’s lead. Same thing as I moved up through the ranks – I listened and learned from the old timers. By the time I became a GM, I knew it all, right? Well, not exactly. Any of this sound familiar?

Sales manager to salesperson: “Your customer has great credit but the bank is going to need more income. I don’t think they’ll ask for proof”. (falsifying credit information)

Sales manager to finance manager: “Listen, these folks are in a hurry. Let’s make them mental owners. Just have them sign a contract real quick and we’ll get the rest of the paperwork done another time. If they leave without signing something, they won’t be back”. (improper disclosure)

Sales manager to salespeople: “Guys, that ad car is a big loser. Switch your customers to something else unless we can make a ton on the back end”. (bait and switch)

Sales manager to finance manager: “Joe’s got this guy committed at $30 a month more then we need. Let’s make some money!” (payment packing)

Sales manager to salesperson: “We can probably get this guy done, but there’s going to be a big bank fee. If he wants that Sentra, don’t mention the ad price. We need to sell it for a few grand more for the deal to make sense. He’ll be happy we can get him done”. (hidden finance charge and failure to sell at advertised price)

Sales manger to sales person: “It looks like the negative equity is her hot button. Here’s what we’ll do: Tell her that we’ll pay off her trade and get her committed at $379 a month. I’ll just add the negative equity to the price.” (failure to properly disclose negative equity)

Finance manager to salesperson: “Let your customer know that the bank may call her and ask some questions. Make sure she tells them that the car is for her and not her brother!” (straw purchase)

Finance manager to sales manager: “I don’t care if you take a hold check for the downpayment, but the bank isn’t going to go for a deferred down, so we need to show it as cash on the contract.” (failure to disclose deferred downpayment)

Finance manager to used car manager: “We’re over-advanced on that Tahoe deal. I need a book sheet for $15,500. Doesn’t it have premium wheels or something?” (power booking)

Many long-standing dealership practices are not necessarily legal or ethical but often times staff members have no idea they are breaking the law. The vast majority of dealership employees are well-meaning, honest people just trying to earn a living. However, if they have never been properly trained in compliance matters, they may simply rely on doing business the way it’s always been done. Dealers should not assume that employees know all the rules. Education is the first and most vital step towards building an ethical organization. After all, if employees don’t know or understand the rules, how can they be expected to follow them?

Jim Radogna is the President of Dealer Compliance Consultants, Inc., a San Diego, California training and consulting firm.