The potential fines astounded him. Stacked neatly in their banker boxes, the customer credit applications lined a back hallway of a dealership.
But Peter Jones didn’t see the display as effective use of space. Instead, Jones saw the incredulous pattern for what it really was — a federal compliance violation of the highest order.
“The fines could have been over $3-4 million dollars based on all the information that was out in the open,” said Jones, who will present a dealer educational seminar entitled “The New Rules of F&I” at Profit Xcelerator Conference and Expo Sept. 25-27 in Las Vegas. ProfitX, hosted by Powersports Business, includes a bevy of similar dealer-oriented seminars that focus on expert tips, best practices and strategies.
And, in cases like the aforementioned dealer who didn’t know that documents such as credit applications need to be secured, the knowledge to be gained by speakers like Jones at ProfitX is only the start.
“That particular dealer said he just wasn’t aware,” Jones said.
“[The credit applications] were sitting out in the open air, in boxes stacked up in the hallway — anyone could walk by and open them.”
Attendees at ProfitX can expect to learn all about the Safeguard Rule, which targets compliance issues such as the one Jones encountered at a dealership.
“The Safeguard Rule means that the dealership has to protect any kind of documentation that has any kind of customer information on it that would not be found in the phone book,” Jones said. “The fine for non-compliance is $11,000 per piece of paper, per incident.”
Suffice to say Jones knows his way around a dealership, and in particular he knows the ways of its F&I department. During the six years he spent as a consultant for a nationwide powersports dealership, Jones was often targeted to take over a store’s operations. In fact, his compliance insights have landed him in front of dealer audiences at OEM and 20-group meetings and twice now at ProfitX.
“I think every dealer should attend ProfitX,” said Jones, director of business development at Galt Enterprises, Inc. “ProfitX is the only event in the industry that’s dedicated to dealer education. And ProfitX is a great success because of the types of education a dealer can get there in so many different areas.”
Knowing the success that JM&A Group had witnessed in the auto industry with menu selling, Jones brought his knowledge to the powersports business. In fact, Jones introduced menu selling to the powersports business, first at individual dealerships, then with 20-groups. The original concept came from the fast-food restaurant business.
“Instead of ordering a Big Mac, fries and a Coke, you order No. 1,” Jones said. “It increased their sales and made it faster for the customer. I realized the powersports industry was years behind the others. It works well, presenting one item that has one payment.”
Jones claims it’s “very difficult” to find a dealership that’s not using menu selling.
“From a compliance side, menu selling is beneficial because by law you have to offer every product,” he said.
The Red Flag Rules, about which Jones will speak at Profit X, provide dealers with a host of potential fines.
“Most dealers are not in compliance, and they may or may not be aware of it,” Jones said. “The issue right now, the severity, is that we all know the government is hungry for money. Tax revenues are down. The fastest way for the government to collect additional revenue is through fines. Just like any police department does when they need more money, they start writing more tickets.”
Jones describes a case in which an IRS agent went into a dealership to purchase an ATV for his child.
“The guy had come in strictly as a consumer. But he noticed two credit applications left out on the desk, and fined the dealership $22,000,” Jones said. “It wasn’t even an official visit. The guy was there trying to buy his kid an ATV. It’s federal compliance, and F&I is the one that is really the Achilles heel for the dealership.”
Not to mention to the dealership’s bottom line. A new addition to the Red Flag Rules imposes a $10 million fine and 30 years in prison to dealership violators. It’s the exact reason that dealership owners should ensure that their employees receive the training needed to stay abreast of such compliance issues.
“Most stores don’t realize the importance of training,” Jones said. “They should sit down and ask themselves ‘Why do big successful companies have training departments that constantly make their people go through training?’ Whereas dealers say, ‘Well, my guys have been doing it a long time, there’s nothing they can learn.’”
Not so, Jones counters.
Make sure your dealership doesn’t let compliance issues sabotage your bottom line. Head to ProfitX and join hundreds like you who want to hear more of what Jones has to offer.Click here for reuse options!
Copyright 2011 Powersports Business