Mar. 31, 2008 – Covering your F&I tracks

By Karin Gelschus
Associate Editor
As most dealers know, it’s illegal to withhold any available F&I option that’s a benefit or protection to the consumer. To avoid getting sued for such an infringement, dealerships are creating proof that they’re offering all available products by filming their F&I sales.
Although this practice is fairly common in the auto industry, only a handful of powersports dealers are filming their F&I offices for legal and/or training purposes. That number, however, could be increasing.
While the number of powersports dealers who film is small, the percentage is rising, according to Gart Sutton & Associates. Most of the filming occurring in powersports dealerships is happening in the Harley-Davidson dealer network.
Innovative Aftermarket Systems, an aftermarket warranty company, provides the service to about 750 auto dealerships and a small group of powersports dealerships. Bob Corbin, president of the company, says they introduced the service in 2001. They had some takers right away, but the service grew slowly until a couple years ago.
“We probably had 300 installations in the last 24 months,” Corbin said.
Why the sudden increase?
“It’s effective (training and legal-wise), and there’s some word of mouth that’s going around,” Corbin said. “You’ve got a dealer who puts the cameras in; his (F&I) profitability goes up; he goes to a 20 group meeting, and they say, ‘Wow your profits have gone up. What are you doing differently?’ Maybe one guy out of that 20 group is going to try it. It happens again, and you start to get this snowballing effect.”
While the filming used to be popular in the auto industry, it might have been just a craze, says Curtis Sloan, general manager of Sloan’s Motorcycle/ATV Supercenter in Murfreesboro, Tenn.
“Two-three years ago, this was the rage in the auto industry,” Sloan said. “It might be one of those things that was a fad, and the two-three vendors providing the service apparently folded because I don’t see any advertisements to offer this any more.”
While Peter Jones, president of IBSG, a provider of F&I products and training, can’t say filming is increasing, vendors are still in existence.
“I can’t say we’ve put (a camera) in, in a couple years. We do training consulting groups, but if a client asks, we suggest it,” Jones said. “If they put one in, from a training perspective, it allows me to train their F&I manager without having to be in the store.”

FILMING PROCEDURE
The cameras are digital, so all the video and audio is written directly to the hard drive of a F&I computer, notes Corbin. Every night, the machine uploads all the videos to the central and service farm Aftermarket Information Systems has in Austin, Texas. There the company has a warehouse that’s directly hooked up to the backbone of the Internet. Corbin says they have high security and diesel power generators for back up.
“We get 99.9 percent reliability,” he said. “Once it’s on the SmartEye servers, it’s available for anyone the dealer authorizes to have a login and password to view those videos.”
While it varies between vendors, dealers have options as far as how involved they want the vendor/training consultant, i.e. having the vendor archive the data for a fee.
For an additional charge, dealers can have the company spot review the videos and train their F&I staff, which is what Corbin says is most beneficial.
“That’s usually around $150 a month per F&I person,” he noted. “We guarantee we’ll review at least 10 percent of the transactions per F&I person. They have to be yes or no type questions because we’re not in a position to be judgmental about what happens. One person’s good is another person’s bad. We have a laundry list of questions we catalogued over time from dealers, and dealers will pick six or seven questions off the list. It gives them a chance to go through and verify that those things are done.”

BENEFITS AND CONCERNS
Sloan of Sloan’s Motorcycle/ATV Supercenter says he had a camera installed at his dealershup and liked the legal protection it brought.
“We actually had two or three cases where people accused us of something,” Sloan said. “I said, ‘Let’s go back; this is one of the reasons we videotape.’ It cleared the [conflicts] right up. No. 1, I like it for the liability protection. No. 2, I like the accountability it puts on your F&I people to keep them honest.”
Dealer principals might encounter unethical or illegal practices their F&I managers are doing. Jones says one of his dealers faced just that.
“There was a client of ours who had a F&I manager who pushed the envelope too far,” Jones said. “After watching the video, the ownership terminated the F&I manager on the spot.”
In most cases, however, Corbin says the conflicts are between the consumer and dealer.
“Nine times out of 10 his employee is exonerated and not at fault,” Corbin said of dealers. “There’s a lot going on when consumers buy a $10,000 motorcycle or $30,000 automobile, and there’s an excitement level and sometimes [the consumers] don’t hear everything that was said. This really does a good job of memorializing exactly what went on.”
He adds dealers use the filming for legal protection, but in his experience, the benefit is the profit side of it. “In virtually every dealership we install the cameras,” he noted, “the F&I profitability goes up immediately.”
Jones of IBSG agrees the filming can be a great training tool.
“Yes, there’s a legal benefit to it, but it’s just a much better training tool. It’s invaluable for that,” Jones said. “If you think about it, all pro sports (players) review tapes to try and improve their performance. Well you can do the same thing in the business office. When I go to train someone, role playing is great, but there is nothing like reviewing what they actually do with real live customers.”
The digital camera and software allow the F&I manager and vendor to review the videos and do the training online.
“It’s an $80 camera, and we (IBSG) provide the software free for it,” Jones said. “It’s so inexpensive, and the ramifications are so positive.”

CONSENT LAWS
Filming, however, creates added recording laws dealers must follow, which differ from state to state. Thirty-eight states and the District of Columbia permit the one-party consent law: Individuals are allowed to record conversations without informing the other parties, according to the Reporter’s Committee for Freedom of the Press Web site.
The other 12 states require, under most circumstances, the consent of all parties to a conversation. The states include California, Connecticut, Florida, Illinois, Maryland, Massachusetts, Michigan, Montana, Nevada, New Hampshire, Pennsylvania and Washington. If there are more than two people involved in the conversation, all must consent to the taping.
There is a catch though. If the camera is in plain view, it’s always legal to film a face-to-face interview, and that’s because the consent is presumed. If any filming is done without the proper consent, the injured party can file civil suit, and the offender is subject to criminal prosecution.
Jones recommends the dealership check with an attorney to make sure there are no state laws against the filming. Although he hasn’t run across any, Sloan says Oregon, Washington and California gave some push back on the filming a couple years ago, and there are restrictions.
For further precautions, Corbin says Innovative Aftermarket Systems recommends the dealer post a sign that says, “All transactions in this office are video taped for protection or customer satisfaction purposes.” The company also has a short script the F&I people say to the consumer and point out the camera before the presentation begins. He added, “If the dealer really wants to know what’s going on in the F&I department after the customer sits down and the guy closes the door, this is really the only way to know.”