“Compliance” Has Become a Buzzword

Fresh off the buzzing floors of NADA 2024, it’s crystal clear: “Compliance” has become the Kardashian of the automotive world—everywhere you turn, but with substance thinner than rice paper wrap. A disconcerting trend has emerged:  dealerships often fall prey to solutions marketed as panaceas for regulatory adherence, only to discover their inadequacy when faced with real-world challenges.

Here are some glaring issues we’ve unearthed:

Software Solutions For Submitting Credit Applications.

98% of these tools do not allow the customer to edit submitted applications.

Why is that a Problem?

Often, staff members alter the income on the credit application to the bank (because of errors on the original customer application or other reasons. Wink Wink!). The unedited original application can serve as evidence of income falsifications, leading dealerships to buy vehicles back from the bank if challenged. This software can serve as evidence of wrongdoing on the dealership side.

Software That Sends Consumers Texts.

Why is that a problem?

Texting consumers requires “Explicit Previous Written Consent,” which nobody at the dealership captures before sending them that link or the text. I observed CRM systems sending initial texts to consumers with messages like “Reply ‘Yes’ to receive texts from XYZ dealership.” But who authorized these texts in the first place? When I questioned a representative from one of the companies, they confessed that it fell upon the dealership to obtain consent from customers before initiating such communication.

The same can be said about solutions that text consumer links.

Misleading Compliance Indicators.

Numerous vendors tout compliance indicators on their dashboards, falsely signaling adherence to regulations. However, these indicators often merely signify document generation rather than actual consumer delivery, creating a false sense of security for dealer principals.

Why is that a problem?

The regulations stipulate that dealers must “provide” Privacy Notices, Risk-Based Pricing Notices, etc., to consumers, not simply “print” or “generate” them. In the event of a challenge, it raises the question: where is the evidence that the dealer staff actually handed these documents to the consumer? The concern arises because dealer staff could easily print these documents long after the consumer has left the premises, creating a façade of compliance on their dashboard without ensuring genuine consumer receipt.

Incomplete Compliance Measures.

This one is my personal favorite. Dealers Are “Compliant” Because They Clear Red Flags and OFAC.

Why is this a problem?

Some dealerships erroneously believe that clearing select compliance checkpoints, such as Red Flags and OFAC, equates to overall compliance. However, compliance is a multifaceted endeavor that cannot be achieved through piecemeal efforts, leaving dealer principals exposed to unforeseen risks.

And this is just a short list of the problems I discovered during the convention. 

Conclusion.

Isn’t it just the epitome of irony? Dealerships are getting flak for false advertising, yet their own top dogs are falling hook, line, and sinker for the same old song and dance when it comes to compliance solutions.

The unfortunate reality is that dealer principals, entrusting in good faith, are blindsided by the shortcomings of these purported compliance solutions, only realizing their ineffectiveness when confronted with regulatory scrutiny or legal ramifications.

Amidst the myriad responsibilities that dealer principals juggle on a daily basis, from sales quotas to payroll management, the allure of turnkey compliance solutions is understandably enticing. However, it is crucial for dealer principals to exercise due diligence and skepticism when evaluating such offerings, ensuring they align with the nuanced realities of regulatory compliance.

04/03/2024

Author

Chris Tsiropoulos,

CEO The Dealer`s Concierge