Ethics and compliance in F&I go hand in hand

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Editor's note: this story will be part of a special section on ethics in the F & I departments of dealers, which will be published in the printed edition of Automotive News on 10 December.

When a dealer learned that his lucrative financial and insurance department earned a portion of his customers paying $ 3,000 in cash for a year of free car washes – a price that was exorbitantly higher than the $ 199 sales price – he asked F & I trainer Ron Reahard if that a problem.

It was.

"It's just not ethical," said Reahard, president of F & I training company Reahard & Associates in Soddy Daisy, Tenn. "That's where dealers get themselves into trouble, put too much pressure on & # 39; How do I make more money?" And focus on the dollars without paying attention to how those dollars are made. "

F & I staff are trained on compliance, but what about ethics? Although compliance is tied to a set of hard rules that are enforced, ethics is usually related to values ‚Äč‚Äčthat are declared or at least implied by dealer management to employees, with varying degrees of success.

The relationship between compliance and ethics is particularly acute at the F & I department, where regulatory obstacles are common, but the possibility to earn more money is often a central issue.

Reahard said that dealers should pay attention to where the money comes from and limit how much profit is made on F & I product sales and dealer reserves.

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& # 39; A fairly large spectrum & # 39;

Too often, dealers do not stay within a healthy limit. "Unfortunately, a scammer will be a scammer," he said. "Some of the best people I've ever met are in the automotive industry, and some of the worst people I've ever met are in the auto business, unfortunately we have a fairly large spectrum."

Rebecca Chernek, an F & I trainer at Chernek Consulting in Cumming, Georgia, said that when it comes to compliance and ethics, dealers are often more reactive than proactive.

"I see that dealers are almost evolving to where we used to be," she said. "When we talk about digital menus, I see dealers who use step-sale methods that do not reveal basic payments."

The Association of Finance & Insurance Professionals has a list with & # 39; Seven Deadly Sins or F & I & # 39; who mention some of the bad practices that can allow dealers to land in hot water with regulatory officials, lawsuits or the media.

For example, the association advises dealers to never use the word & # 39; best & # 39; to use when mentioning financing costs, because there is usually an upgrade above the purchase price.

Instead, it instructs dealers to say that the rate is "competitive".

The layout must be within acceptable margins, says the group, and recommends implementing the NADA Fair Credit Compliance Policy & Program.

It also warns against more obvious bad practices, such as forging signatures, overstating customers' income and packing payments.

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-Culture driven

Rob Warmack, CEO of Compli in Portland, Oregon, said that a dealer's ethics or lack of it usually starts with how his culture is based. Compli, which has been active in the dealers' sector for 12 years, works together with approximately 400 dealers in the USA who manage the workforce in all departments of the stores.

Ethical training, although not specifically broken down, can be found in the training for various departments, such as personnel, as well as in the codes of conduct of dealers.

"Compliance is an important part of what we do, of course, but it's really establishing the culture," Warmack said.

Compli starts with example content on which dealers can build. The content is rooted in legal compliance. The F & I content is written with a current legal framework by Hudson Cook, a law firm that focuses on financial consumer services.

Dealerships can also adjust the non-regulatory sample content, such as the code of conduct, to adjust it for their activities, "and we encourage that," said Warmack.

Reahard also has a code of conduct that most dealers use and some modify. "It sets a clear line in the sand that we want to do things the right way at this dealer."

Warmack said that regulatory compliance can often be rolled up together with ethics. As an example, he points to the Equal Credit Opportunity Act, which prohibits dealers from discriminating against customers on the basis of their race, religion, national origin, gender, marital status or age.

"So the ethics behind it is that you treat everyone fairly," said Warmack. And the dealer's set of rules or code of conduct must reflect that. "There is ethical behavior and there are rules to ensure ethical behavior," he said.

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They go hand in hand, said Warmack. "If you operate ethically, you do not have to worry about the regulations."