Try to Sleep Well Tonight

Stress is a major cause of insomnia and other sleep disorders. Transient and intermittent insomnia are particularly related to lifestyle factors such as increased or unmanageable stress. Good thing late night cable TV is available for car dealers, because with the stress you must have, many of you must be losing sleep. Recent highly visible lawsuits and regulatory scrutiny against large automotive

Stress is a major cause of insomnia and other sleep disorders. Transient and intermittent insomnia are particularly related to lifestyle factors such as increased or unmanageable stress.

Good thing late night cable TV is available for car dealers, because with the stress you must have, many of you must be losing sleep.

Recent highly visible lawsuits and regulatory scrutiny against large automotive dealerships for allegedly violating consumer's rights under the Truth-In-Lending Act (TILA) and Uniform Deceptive Trade Practices Act (UDTPA) have raised dealers' concerns about their business practices and whether their dealerships are in compliance.

Over 500 lawsuits were filed in federal courts during the first quarter of 2002 citing either TILA or UDTPA violations or both. Many of these lawsuits are seeking class certification. The common complaints include:

  • Incomplete disclosure on the retail installment contract of after-market products such as extended service plans and theft protection

  • Payments being packed with after-market products without complete disclosure to the consumer

  • Inconsistent collection of certain fees, including documentary, other supply recovery and hazardous waste disposal fees.

From the conversations that I have had with dealers, they are many times as surprised as their customer at what goes on in their own F&I departments.

While all dealers want to make a profit, most want to do it the right way, but find it difficult to police their own employees. This may be particularly true with the larger dealer groups. Many are turning to digital video recording. Using today's digital technology is relatively inexpensive. The recordings are easily indexed, stored and retrieved. The fact that everyone knows the recording is being made and can be viewed later offers some protection to all parties involved. An added benefit is the use of the recording in personnel training.

Dealers are also turning to third parties to perform on- and off-site F&I compliance reviews. These reviews look not only for rogue employees, but also flawed sales processes. The reviews have discovered various areas of concern including:

  • Lack of a standardized sales tools

  • Inconsistent use of an F&I sales menu

  • Payment packing

  • Illegible driver's licenses

  • Practices that slow processing finance contracts and the resulting cash receipts

  • Missing GAP insurance disclosures.

Additionally, many finance companies, beginning to assert their rights under the dealer-lender agreements, are seeking recoveries from the dealers. Once again, dealers are targets. They are targets of customers, lenders and even the state attorneys general watchdogs.

As you lie awake and ponder what actions you should take, please answer these questions:

  • How much of your money is at risk?

  • How do you check for compliance at your dealership?

  • Do you depend on your managers?

  • Do you depend on an internal auditor or your CPA firm?

  • Are those on whom you depend familiar with current regulatory issues?

  • Do they have (or take) the time?

Dealership profit centers are coming under more scrutiny. While NADA identified 56 such federal regulatory issues in 2000, it's possible for cautious dealers to get both good F&I gross and sleep.

(B)ad (E)mployee (D)isease can be controlled. Now you know why your mom warned you not to let the BED bugs bite. Good night!

Don Ray is a Senior Member of the George B. Jones Dealer Services division of Dixcon Odom, a national accounting and consulting group for dealers. He's at 901-684-5643 and [email protected].

TAGS: Dealers Retail
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