How is your 2014 compliance plan shaping up?

By Peter Jones

As we begin 2014, I wanted to review important items that every dealership should not only be aware of, but also should have implemented into their dealership operations. As an industry-level member of the Association of Finance and Insurance Professionals (AFIP) and a Certified Compliance Expert, I thought it would be a great idea to spend a few moments with AFIP’s executive director, David Robertson.

AFIP was started in 1989 as a way to educate F&I professionals on the rules and regulations that affect their profession. Since its inception, AFIP has certified more than 40,000 F&I professionals. Only one certified F&I manager is known to have gotten their dealership in trouble with regards to compliance since certification began.

One of the biggest factors affecting our industry, and still relatively new, is the CFPB (Consumer Financial Protection Bureau). The expectations of the CFPB are fairly simple — employers who have employees who must be cognizant of state and federal regulations are required to train those employees and ensure that they use this knowledge in their daily job functions. These same dealerships also must ensure that they have someone in charge of all of their compliance requirements.

This individual must monitor the dealership’s compliance programs as well as enforce them. As regulations change or new employees join the team, current and new employees also must be trained. This training should be documented and continually updated. So, too, must this individual enforce penalties when proper policies and procedures are not followed. This is only fair as the penalties for non-compliance can be as high as $11,000 per violation. (An example of a violation would be a facility that leaves a single credit application out on a desk or table or in any area that is not a noted “Secure Document” area and is at that moment not secured from public view.)

It’s important for dealers to realize that while this all may seem very intimidating, it’s actually fairly simple. You can look at it this way: First, in the course of your business, whether sales or service, your dealership and employees have access to and must secure non-public personal information. These secure areas have to be documented and there must be signs noting this to the public. Only those employees that must have access to the information to complete their jobs can be allowed access.

Employees who will be working with the information must be trained, as we mentioned earlier, and sign an acknowledgement of their training and responsibilities. Rules and technology change often, therefore, you should have someone in charge of your compliance to monitor this and ensure that your dealership is always in compliance.

We both agreed that there are two key areas in which dealerships should immediately ensure they are in compliance:

1. You must follow the regulations for consumer protection, which include Regulations Z, V, B and M. To ensure you are doing this, your F&I manager (or anyone performing this function) must be fully trained in those regulations. I recommend having those team members become AFIP certified.

2. Dealers must be concerned with meeting the requisites of the Red Flags and Safeguards Rule. These entail dealerships that have and maintain a customer identity safeguards program. While I have heard from many smaller stores that because of their size or remote location they don’t feel they are a risk, the Internet has increased their exposure to theft.

Not too long ago I was working with a dealership in the eastern United States. During my store evaluation, I noticed 15-20 banker boxes stacked in a hallway off the showroom floor. These boxes contained deal jackets from the previous few years of business. Remember, each single piece of paper left unsecured with nonpublic personal information can be fined up to $11,000. (I explained to the dealer if anyone had walked in from the IRS, FTC or a state agency, the fines could have easily reached several million dollars.) Ironically, the boxes were stacked outside of an empty office with a locking door where they could have easily been stored and been in compliance. The dealer quickly remedied the situation and avoided a potentially costly mistake.

Compliance is a very important topic for any dealership in our industry, not only in 2014, but beyond as well. While it may seem very daunting to bring your store in compliance, it really should not be that difficult. Look at your operation and identify your weak areas. If someone wanted to steal your customer’s information, where could they easily obtain it? Begin asking your employees how familiar they are with the rules. Do they know what the Red Flags Rule is? Do they know the requirements of the Safeguards Rule? Are they providing Risk Based Pricing notices to your customers when it is applicable?

These are more steps that will help your dealership obtain compliance in 2014.

Peter Jones is an industry trainer and consultant as well as founder of Peter Jones Powersports and can be reached at or 904/742-3080.


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