In many
dealerships, the thought of putting together a compliance program is similar to
contemplating a diet and exercise regimen: you know it’s something you need to
do or eventually it will catch up with you. Like getting in shape, keeping up
with regulatory changes can seem like a daunting task – not to mention costly. Many
compliance programs on the market are quite expensive and simply out of reach
financially for the average dealership. As a result, some organizations end up settling
for trying to fly under the radar and hope for the best.
In
truth, setting up and maintaining a strong compliance program in your
dealership doesn’t have to be difficult or expensive. By following these steps,
you can dramatically raise the level of compliance in your organization without
breaking the bank.
Get Committed
Ignoring
compliance just doesn’t make good business sense. The automotive industry is
changing dramatically and will become even more heavily regulated in the
future. Dealerships who continue to operate without a focus on compliance will
invariably struggle. So what are you waiting for? Make a commitment to establishing
a culture of compliance and ethics in your dealership.
Follow the Leader
The culture
starts at the top but someone in the organization needs to take up the reins. All
too often, an “everyone’s in charge thus no one’s in charge” attitude comes
into play where compliance is concerned. In order to avoid this type of
situation, it’s a good idea to designate a company compliance officer. Ideally,
this will be a senior level employee who reports directly to company
ownership. This person should be made responsible
for monitoring all aspects of compliance, and be allowed the resources to learn
as much as possible about the state and federal regulations that affect the
dealership.
While
appointing an in-house compliance officer generally doesn’t entail adding an
additional salary, it would be wise to consider some compensation for the employee’s
additional duties – this is an important position and must be taken seriously.
In larger organizations, a compliance committee consisting of department heads
may also be useful.
Assess Your Compliance Level
Dealers
should not assume that their employees are well-versed in compliance simply
because they’ve been in the business for a while. At some
point in their career, many automotive professionals were taught the “old
school” way of doing business. Some dealership practices they’ve
learned are not necessarily legal or ethical but the employees have no idea that
they are doing anything wrong. 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. Simply stated, assuming
that your dealership is doing everything right from a compliance standpoint
without verification is risky at best.
When
was the last time you performed a comprehensive risk evaluation? If it’s been a
while (or never), this is a vital step. A risk evaluation can be completed
either by someone on staff who is well-versed in federal and state regulations
or by bringing in outside compliance professionals. The key is to take a
base-line reading of exactly what the areas of vulnerability are in the
dealership. Forms, advertising materials and deal jackets should be thoroughly
evaluated. Policies, such as Red Flags,
information safeguards and privacy should be reviewed. Vehicles for sale should
be checked for proper display of Buyers Guides, Monroney labels, etc., and
facility signs and notices should be verified. Chances are, you may be unpleasantly
surprised by the results.
Get Everyone on the Same Page
Many
dealers will send two or three of their top people to a seminar or two each
year and hand out the monthly compliance newsletter for the managers to read.
While these are great resources, there’s quite a bit more that needs to be done
to ensure that the dealership is not at risk.
In many
organizations, 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. Without proper knowledge, it’s
very easy to step over the line legally when trying to make a deal. 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. Unfortunately,
attorneys and regulators don’t differentiate between job descriptions when
pursuing a claim against a dealership.
Some
dealers assume that the cost involved in training all staff members is
just too high. That is not necessarily the case. Training can be accomplished
in-house by your compliance officer or, if that is not practical from a time
and preparation standpoint, there are affordable alternatives. While some
F&I training programs would require writing a five-figure check to cover
the entire staff, there are also outstanding programs available that cost less
per employee than a box of business cards and can be completed in a matter of
hours.
Monitor your Progress
Once your
compliance program is in place and the staff is trained, it is imperative that
the compliance officer or committee ensure accountability. Many dealers spend
thousands of dollars for compliance audits only to find that the same
violations continue to occur shortly after the auditors move on. Employees need
to recognize that your compliance program is here to stay and that they will
actually be held accountable for their actions. Let everyone know that the
organization is serious about compliance and ethical behavior.
Written
procedures should be put in place and consistent processes should be mandatory.
For instance, everyone should use the same menu; desk deals the same way, etc. In
addition, all employees should sign a Code of Ethics upon completion of their
training, and mini-audits of deal jackets should be completed on a regular
basis.
There
you have it - five steps to getting serious about compliance and protecting
your dealership. Sure, it will take commitment and a few bucks, but this plan
is certainly achievable for virtually any dealership. It’s just a matter of
getting started.
Thank you, appreciate the kind words!
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