As Safeguards Rule Approaches, It’s Time to Get Your F&I House in Order

Accuracy is key to keeping customers loyal and regulators away, says Reynolds and Reynolds President Chris Walsh.

Nancy Dunham, Principal Analyst/Retail

March 17, 2023

6 Min Read
Chris Walsh Reynolds_i
“It’s a mistake to think that slip-ups on such paperwork don’t erode trust,” says Reynolds and Reynolds’ Walsh.Reynolds and Reynolds

Chris Walsh, the president of Reynolds and Reynolds, has more than 36 years of experience with the Dayton, OH, firm that develops and supports software for the automotive retail industry.

He spearheads the day-to-day operation of the company and has seen Reynolds develop many innovative products throughout the years. Several things the company is currently focused on involve technology and teams that ensure accurate, streamlined F&I operations, which dealerships might find beneficial just before the FTC Safeguards Rule amendments regarding compliance take effect June 9.

The amendments are designed to strengthen financial and data security for various small businesses, including auto dealerships.

Walsh spoke with Wards about how dealers can begin to prepare for the Safeguards Rule amendments while improving their customer service scores and dealership reputation.

Below is an edited transcript of that conversation.

Wards: The Safeguards Rule is coming up soon. Can you discuss some compliance areas dealers need to prepare for?

Walsh: When we think about compliance in this part of the business, dealerships need to prepare for all aspects of the Safeguards Rule. Some of the key ones to account for are creating a risk-based information-security program guided by a risk assessment; evaluating their vendors’ security; conducting penetration testing and vulnerability assessments; and they must have an incident-response plan. We can provide templates and guidance for required documents and processes they must have in place at their dealership.

Security-awareness training is another area we highly suggest they invest in, because many attacks can be defeated before they even begin by well-trained staff members. We offer our customers a comprehensive security awareness training program. A key point dealers must understand is that documents don’t make a dealership more secure. Effective security, and therefore compliance with the spirit of the rule, is based on a quality technical security program, supported by well-documented and well-implemented processes and a well-trained staff and management team.

Wards: I hear many stories about the problems with forms some dealerships have. That sounds so mundane, but I know they can get in some serious trouble with those. What are people missing about those forms?

Walsh: Some people don’t realize there are many different forms for every single state, typically between 15-25, and they can change when either laws or regulations change. Our experts work with an in-house legal team, Hudson Cook, state dealer associations and local attorneys, monitoring for these changes and updating our forms.

It’s difficult to overstate the importance of making sure all of the dealership’s forms are up to date in both printed and digital formats.

Wards: Well, it would make sense that your teams would look at the documents you supply. But what about the dealers that don’t have Reynolds & Reynolds documents?

Walsh: We believe our LAW documents are subject to more legal and best practice review than any other F&I documents used in automotive retail, but we do have a team that looks at documents a dealership uses, regardless of whether they’re a Reynolds customer or not. When we find something that can potentially leave the dealership open to risk, we make sure they’re aware of it.

Wards: Why don’t dealers do this themselves?

Walsh: There can be a lot of reasons. Many dealers don’t review their forms regularly like we do, and when they do review them it’s not typically done by an attorney with experience in consumer finance law – like we do. And perhaps most importantly, it’s not their area of expertise. They can’t have people sitting there every month, every week, every day, analyzing F&I forms and saying, “Yes, these work for us.” They just don’t have the time. They don’t have the people. Our experts understand where the pitfalls are so that we can report back to them and say, ‘Here’s where you’re good.”

Wards: But they could do it themselves?

Walsh: Ultimately, dealerships are responsible for managing their compliance risks. If it makes sense, a dealer can and should review these types of things. We certainly try to help them manage their risks if needed.

Wards: We know that customers are tech-savvy and know a lot about the cars they consider. Is it true that they tune into this type of paperwork, and missteps can impact their faith in a dealership?

Walsh: Absolutely. It’s a mistake to think that slip-ups on such paperwork don’t erode trust. Online information is easily available, shared and learned so quickly today, people are becoming more savvy in the marketplace.

Wards:  At the most recent NADA Show in Dallas, your company rolled out several new initiatives, plus a new logo. I know you are especially proud of Retail Anywhere. Can you tell me how it connects with these compliance concepts we’ve discussed?

Walsh: Retail Anywhere allows dealers and customers to retail anywhere – online, in-store or, most likely, some combination of the two. It feeds into providing the best customer experience: a single deal from chat to funded.

Wards: Doesn’t everyone have a process that results in a single deal?

Walsh: Some dealerships use one tool for digital retailing that gives a customer one price. Then when the customer goes into the store, the salesperson uses a different tool, with a different calculation engine, and gets a completely different price.

In the customers’ eyes, the presentation of these two different prices erodes the trust that the dealership is treating them fairly. And it makes it difficult for the sales staff as well. Often, they have to rebuild the deal from scratch when the customer arrives in the store, because they can’t move the deal through the DMS without losing information due to integration problems. And, once the salesperson finds out the two prices don’t match, sometimes that paperwork must be completely redone again – just to get the in-store price to match the online quote. And, of course, the dealership likely has to eat the difference between those two prices, which means they’re losing profit on the deal as a result.

Wards: I bet the average customer doesn’t understand why the prices differ.

Walsh: They just expect the numbers to match. From a transparency and ethical standpoint, having those numbers match is important. The only way to do that is to have the same calculation engine for every tool each step of the way. And that’s what we have. We go beyond simple integration; we build our system – including acquired tools – to work as one. For dealerships using Reynolds DMS and Gubagoo Virtual Retailing, that is how we ensure the deals are penny perfect from start to finish. I don’t know of any competitors who go to the lengths we do to provide that level of service to dealerships today.

About the Author(s)

Nancy Dunham

Principal Analyst/Retail, WardsAuto

Nancy Dunham became an auto journalist more than twenty years ago. She has worked as an editor and writer for the National Automobile Dealers Association, US News & World Report, CarFax, and various newspapers in Washington, D.C. and Baltimore. Her work also appears in Costco Connections, AARP, the New York Times, Rolling Stone and other publications.

Before specializing in automotive retail journalism, she was a newspaper reporter, magazine editor and publisher.

She lives in Tucson, Arizona, with her three beloved cats.

Contact her at [email protected] or https://www.linkedin.com/in/nancydwrites/.

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