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The Compliance Foxtrot

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Article: The Compliance Foxtrot

Article Date: Wednesday, March 2, 2011

Author: Michael Charapp

Article Source: Michael Charapp, Charapp & Weiss, LLP

compliance_foxtrot.pdf

The Compliance Foxtrot

By Michael Charapp
Charapp & Weiss, LLP
http://www.cwattorneys.com

Old dance studios used to put on the floor large oil cloths which had arrangements of footprints to demonstrate various dance steps. Follow the steps in time to the music with a little flair and, voilà, you’re dancing.

The last several years have seen a slew of new compliance requirements for auto dealers – the Information Safeguards Rule, the Red Flags Rule, and the Risk Based Pricing Rule, to name a few. And with the regulatory climate in Washington and some state capitals, the requirements to implement new compliance programs in your dealership are likely to continue.

To the regulators, a new program means just another form. Easy, right? But in training dealer managers to implement new compliance programs, we are regularly reminded that nothing is as easy as outsiders think in car dealerships. Folks in the showroom make money when they sell cars. Legal compliance is nice. But moving iron across the sidewalk feeds the family. So a dealer implementing a new compliance program has some work to do.

Any change to dealership routine must be part of a management program that is effectively implemented and enforced. The compliance oil cloth on the floor has several steps, no matter what the regulatory requirement may be.

1. Appoint a coordinator who will be responsible for implementation and continued operation of the program.
2. Prepare a compliance program. Study the regulatory requirements. Understand how to make them work for your dealership. Put the program in writing.
3. Have senior management review and adopt the program.
4. Implement the program. Meet with your senior and department managers and review it in detail.
5. Train staff in the plan’s operation. Make sure that staff members understand why compliance is important for your dealership and them. Sure, you want to comply with the law, but there are also other good reasons why a program works for your dealership and your staff members. For example, an information safeguards program protects your customer data which is an asset of your dealership that can create income opportunities for your employees, and a red flags program can prevent costly losses for the dealership and potentially the employees involved if you sell a vehicle to an identity thief.
6. Monitor and enforce compliance with the program. If the regulation requires that you deliver a notice to a customer, make a copy, have the customer sign it and maintain it in the deal file. There is only one way to ensure that a form is delivered. The first rule of thumb in every car dealership is that a form that was not signed or initialed by the customer was not delivered to the customer.
7. Follow up. Spot check deals to be sure that your program is being followed. Some personnel may have some initial reluctance to comply with a new program since they
may see it as just something else that must be presented to and explained to a customer, with the possibility of slowing down the process. So spot checking to be sure that the program is being followed is important to be sure that initial reluctance is overcome.

“Appoint, develop, adopt, implement, train, enforce, and follow-up” are the steps for solid legal compliance in a car dealership. Do them with a little flair and, voilà, you’re doing the compliance foxtrot.