F&I isn’t easy. There’s the list of rules and regulations as long as a CVS receipt. There are the many consequences for noncompliance—hefty fines, lost sales, and jail time, to name a few. In the complex and high-stakes world of automotive sales, a dealership’s finance and insurance office is perhaps its greatest source of risk.
And yet F&I departments frequently operate as silos. Dealership owners don’t always have complete awareness of their day-to-day F&I operations. F&I professionals lack visibility into what others in their industry are doing—the baseline compliance numbers necessary to gauge their programs and levels of exposure.
We decided to change that. Earlier this year, KPA launched our F&I Program Grader—a quick, free online tool F&I departments can use to determine their current risk profiles. In addition to showing F&I managers how their offices would be graded in terms of regulatory compliance, the F&I Program Grader also serves as an important industry benchmark.
Today, I’d like to share some of the results we’ve obtained so far.
I’m happy to report that training is happening. The majority of dealership F&I departments are training their employees on critical risk areas such as red flags, customer information security, ethics in the workplace, and cash reporting. By and large, the policies dealers have in place mirror the training they’re conducting. At dealerships where employees are trained on red flags, there’s a red flags policy in place, and so forth. Very rarely can dealerships prove that employees have been properly trained if the corresponding policy is documented. Remember: if employees aren’t told what is expected of them, they’re going to make it up as they go along.
Not every dealership is conducting adequate training, however, and certain risk areas are greater than others. The dealerships we surveyed were especially exposed in terms of compliance with the Federal Trade Commission’s Red Flags Rule.
Of all the areas of exposure we looked at, however, unsecured paper files were the worst offender. Not enough dealerships are locking up their physical documents. Keep in mind that you’re putting your reputation on the line—along with a ton of money—should someone get into your files. Think of the kinds of data you’re storing in your binders, folders, and desk drawers—and think about how much damage theft of that information could cause your customers.
Unsecured paper files amount to violations of the Gramm–Leach–Bliley Act. GLBA penalties can range up to $10,000 per violation for officers and directors who are found personally liable. For the financial institution liable, penalties can reach up to $100,000 per violation—and criminal penalties include additional fines as well as imprisonment for up to 5 years.
A significant number of dealerships out there seem to not understand the risks they face. More than 1 in 10 dealerships haven’t trained employees on critical risk areas across the board.
On top of that, 21% of our respondents couldn’t tell where their exposures lie. If you can’t see who hasn’t been trained or what’s broken, you can’t plug any holes—and the liabilities only start to compound from there.
Take the Assessment
Curious how your F&I department stacks up? Take the Program Grader for yourself and see how you score. It’ll take just a few minutes and give you information you can use to avoid tens of thousands of dollars in fines—or worse.
Take the F&I Program Grader. When you’re done, our compliance experts are on hand to discuss your results. Ask about KPA’s Vera F&I a sales and F&I Compliance Software and Services solution that will limit your liabilty from the first contact to deal close.