While auto sales increased in 2016, so did the penalties dealers potentially face for violating government regulations.

The Department of Labor upped penalties levied by its agencies, including the Occupational Safety and Health Admin., which implemented inflation-adjusted increases.

The maximum fine for non-compliance jumped from $70,000 to $124,709, a 78% increase.

The Federal Trade Commission has increased penalties from $16,000 to $40,000, a 150% increase.

What does this mean for dealers? Federal regulators are on the prowl even more so to catch car dealerships that fail to run compliant operations. Car dealers often are viewed as easy targets.

The reality of these increases is alarming considering OSHA typically cites a business with more than one violation. 

The fine increases alone should be enough to make compliance a dealership priority in 2017. But there’s also this: Customers also feel more comfortable doing business with a dealership that adheres to all federal regulations.

Survey results indicate 60% of consumers are more likely to buy a car if there is clearly stated complaint resolution process, while nearly 80% of consumers will refer friends and family to the dealership that makes compliance a priority.

An online public-perception survey says nearly 65% of consumers believe dealership business practices are not ethical. More than 50% of those polled say they more likely would shop at a dealership with a code of ethics clearly displayed.

But less than 25% of dealers employ a compliance officer and 65% of dealers have not had a comprehensive audit in the last 12 months.

Compliance is straightforward, but it starts at the top. Steps taken by the dealer’s leadership team can ensure that the entire operation is fully compliant across all departments.

The first of those steps is to adopt a well-designed compliance program that applies equally to all departments so everyone knows they are held accountable to the same standards. It sends a message to junior staff that the entire organization is fully committed.

Non-compliance costs car dealers an average of $792,000 a year in lost profit. That shows how critical it is to run a reputable and trustworthy business.

As the car-shopping landscape continues to change and compliance issues continue to dog dealers, investing in training and professional development remains essential.

Offering employees career-development opportunities creates loyalty and fosters a team environment as the dealership grows. As the saying goes, “You are the company you keep,” and it’s imperative to hire great people, retain them to create a solid company culture and manage a car dealer’s positive reputation.

Currently, most of those who work inside an auto dealership function primarily as sales staff, with their main focus on moving cars, parts and labor to the consumer. And with good reason. Car dealers are under tremendous pressure due to sales cycles and quotas set by the manufacturers.

Consequently, training not always is treated as a priority and often is set aside to focus on hitting aggressive monthly sales targets.

With government regulators increasing pressure to adhere strictly to federal regulations across all departments, including Sales, the Business-Development Center, F&I, Fixed Ops, Human Resources and IT, it is imperative auto dealers focus on job training and create educational opportunities to retain quality talent.

Auto dealers themselves typically receive little training in compliance. And they may find themselves with a sales staff that has risen through the ranks with increased salaries but very little professional education.

Strategies for professional development and compliance training include:

• Hire a third-party compliance consultant to conduct an audit to either offer suggestions for the current training department or assist in building a compliance program/training with online courses.
• Invest in pre-employment screening to be sure the dealership is adding the right people to the team and avoiding headaches associated with past criminal or fraudulent activity in the workplace. Screening is a proactive and preventive tool in finding great people at the onset.
• Schedule regular employee-performance reviews and set benchmarks for promotions and pay increases.
• Coordinate internal quarterly audits to ensure employees are working well together. Identify issues and optimize online course development and implementation.
• Require online classes, which are a great tool for existing staff and new employees who don’t have time to attend classes in a traditional academic environment. Dealers should ensure the online education program provides certification upon successful completion.
• Make compliance training a dealership requirement. A recent survey indicated 73% of consumers are more comfortable dealing with dealership staff that has completed compliance training and has certificates of completion on display.

Hiring and retaining talent ultimately affects a dealership’s bottom line. Owners and dealers need to focus on ridding the “everyone-can-be-replaced” culture. Shift to positive development of each employee, celebrating success and longevity.

Retaining solid talent will help foster repeat business. Customers appreciate a relationship with their dealer. Working with familiar sales staff help create a pleasant car-buying experience.

Auto dealerships that are not compliant tend to feel the impact directly in their profit, loss and reputation. Without a comprehensive compliance training program, car dealers’ bottom line is truly affected. More than 73% of consumers are more comfortable dealing with dealership staff that has completed compliance training and has certificates of completion on display.

Dealers need to understand that a partial solution is not the answer.  The average dealer is more likely attuned to consumer lawsuits than compliance violations that lead to these lawsuits. However, risk surrounds the entire dealership and less than 25% of dealers employ a Compliance Officer. A complete program will ensure better sales and overall performance as a company.

There are Federal regulations that apply to all departments of the dealership and having a comprehensive approach to compliance is the only way to improve the reputation of the dealership and change organizational culture. Compliance Program should contain written policy, training and activity requirements. These requirements are easily identified and enforced regulations that, if not followed, can result in tremendous fines.

Improving compliance should address the following categories: environmental, health & safety, operational procedures, deployment verification and audits with a solid online paper trail.

Compliance is becoming an increasingly important issue. More than 80% of dealers think that compliance training and implementation will improve their dealership’s reputation in the community and relationships with customers. Below are suggestions on what dealers need to do to get up to speed.

Employee Training

Dealerships should provide employees with online classes to better understand compliance rules and key factors that affect their career growth. These online courses are designed to educate those on Federal Compliance Regulations, Best practices, as well as corresponding policies and procedure. Training instills a culture of compliance and keeps employees accountable.

Operational Procedures 
One example of Operational Procedures is the Identity Theft Prevention Program. It is imperative for a car dealership to implement an Identity Theft Prevention Program (ITPP). By the time an identity thief walks onto the showroom floor, the identity theft has already occurred. A dealer should be prepared in advance if an investigator or plaintiff’s lawyer asks to see a copy of your ITPP. Dealers must train employees on the dealership’s operational policy, which must cover the dealership’s processes to detect and mitigate identity theft.

With online training programs, dealers are able to identify which employees are trained and their understanding of identity theft. Having an electronic paper trail regarding identity theft and updated ITPP report will not only showcase a high level of operational procedure but will help customers feel safe when handing over their confidential financial information.

Deployment Verification 
Every dealership should have an employee handbook setting forth the dealership’s internal policies and procedures. A dealership may even have specialized, job-specific policy manuals (F&I, sales, etc.). Having these materials available on the dealership intranet is a great way to help employees stay current with policy and again, helps consumers feel confident about their dealership

Audits and Paper Trails
Another example is the The Safeguards Rule, which requires that dealerships develop a written Information Security Program (ISP) requires a risk assessment, oversight of service providers, and regular reviews of the ISP’s effectiveness. This provides a paper trail should your dealership get audited. Hiring a third-party audit company is extremely beneficial to assess dealership needs and no compliance program is complete without it.

In conclusion, for a dealership to remain competitive and remain a top choice for consumers, they must be 100% compliant. By instilling a culture of compliance there is increased production, sales and promotes a positive reputation. By remaining non-compliant or only partially compliant, dealers will remain risk for huge profit or loss.

Total Dealer Compliance (TDC), a car dealership compliance-auditing firm, launched with a comprehensive solution that will help dealers mitigate risk faced from proactive regulators and create a compliance culture that will reduce exposure.  The solution includes on-site compliance audits and an E-Learning Platform offering more than 20 online courses.  Dealership staff completing courses and passing required tests receive TDC certification.  By working with TDC, car dealers can be fully compliant with Federal regulations across Sales, BDC, F&I, Fixed Ops, HR, and IT departments.  

TDC’s Advisory Board includes seasoned professional auditors, attorneys, and automotive industry veterans whose sole mission is to protect car dealers’ interest and improve operations. TDC works closely with its Board to help car dealerships of all sizes by providing a variety of packages including:

• Best in Class – TDC’s most comprehensive offering and guaranteed to make a positive impact on a dealership with quarterly audits, unlimited access to the company’s E-Learning platform, testing and certification, policies and procedures, and best practices.
• Stand Alone Audit – Uncovers problems, reduces risk, improves internal controls with on-site audits, schedules interviews with department heads, and creates action plans for success.
• Individual Online Courses – Dealership employees can choose from a range of topics pertaining to their day-to-day job responsibilities.
• Online Course Bundles – Dealerships looking for additional savings can package together online courses by departments.

Compliance is essential in today’s car dealership environment. TDC offers a unique and simple comprehensive approach that generates fast results and stands above competitive offerings.

“Federal regulators see car dealers as low hanging fruit, and every dealership is having internal meetings about regulations across all departments,” said Max Zanan, President of Total Dealer Compliance. “TDC will improve the industry, benefit both dealerships and consumers, and weed out all the bad apples.”

About Total Dealer Compliance

Total Dealer Compliance is an auditing firm that provides a comprehensive solution to ensure car dealers are fully compliant with Federal regulations within Sales, BDC, F&I, Fixed Ops, HR and IT departments. For more information, please visit www.totaldealercompliance.com or call 1-888-243-5204.