COVER STORY PAGE 6 The Next Generation of Successful Selling o… · AAA Oregon AutoSource. 6 SW...

COVER STORY PAGE 6

The Next Generation of Successful Selling

uinside• CREATING VALUE• DEALER PRACTICES• COMPLIANCE OVERDRIVE

V I S I T U S A T W W W . O I A D A . C O M

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PAIDDALLAS, TEXASPermit No. 2079

PRSRT StandardU.S. Postage

PAIDDALLAS, TEXASPermit No. 2079

magazineDEALER NEWS

R E P R E S E N T I N G A L L A U T O , T R U C K , T R A I L E R , R V A N D P O W E R S P O R T D E A L E R S O F O R E G O N

NOVEMBER 2013

GET YOUR DEALER EDUCATION CREDITS FROM THIS MONTHLY MAGAZINE

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NOVEMBER 2013 O I A D A D E A L E R N E W Sw w w . o i a d a . c o m

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Dan Nicholson, CMDPresidentCentral Oregon Motors1123 N 6th StreetRedmond, OR 97756541-923-3961Fax [email protected]

Bryan StewardExecutive Vice PresidentAAA Oregon AutoSource6 SW Centerpointe Dr. #100Lake Oswego, OR 97035503-973-6570 | Cell [email protected]

Tommy Wilson2nd Vice PresidentTommy Wilson Motor Company LLC9215 SW Canyon RdPortland, OR [email protected]

Eric Freeman, CMDSecretary7524 SW Macadam AvePortland, OR 97219503-310-5555 | Cell [email protected]

Gary SargentChairman of the BoardSargent’s Motorsports10207 SE Foster RoadPortland, OR 97266503-775-9445 | Cell [email protected]

Diane SparksExecutive [email protected]

Pauline SillOffice [email protected]

Carol EffringDealer Forms SalesEugene

Lakyn JacobyDealer Forms SalesPortland Metro Area

Executive Committee

OIADA OfficeOregon Independent Auto Dealers Association, 1475 Capitol St. NE Salem, OR 97301800-447-0302

Staff

Inside08 Creating Value12 Washington Update14 Dealer Practices18 Convention Recap22 Compliance Overdrive

What’s Newu MAKING YOUR VOICE HEARD

2013 National Leadership Conference & Legislative SummitNov. 11-14 in Washington, D.C.NIADA’s Legislative Committee, Association Executives Council, State Presidents Council and state officers frame the NIADA legislative and regulatory agenda for 2014 and beyond, and meet face-to-face with legislators and federal regulators to discuss the present and future of the used vehicle industry.

Advertisers IndexAlly .................................................................................5AutoManager, Inc. ....................................................9. Brasher’s Northwest AA ........ Inside Back CoverBrasher’s Portland AA ........................ Back CoverDAA Northwest .........................Inside Front CoverDealerMatch...............................................................7Dealix.........................................................................15Hecht & Hecht Insurance Agency .....................19.Protective .................................................................13United Acceptance ................................................16VAuto .........................................................................11

OIADA OfficeOregon Independent Auto Dealers Association 1475 Capitol St. NE Salem, OR 9.7301800-447-0302

NIADA HeadquartersNational Independent Automobile Dealers Associationwww.niada.com • www.niada.tv2521 Brown Blvd. • Arlington, TX 76006-5203 phone (817) 640-3838

For advertising information contact: Troy Graff (800) 682-3837 or [email protected].

OIADA Dealer News is published 8 times per year by the National Independent Automobile Dealers Association Services Corporation, 2521 Brown Blvd., Arlington, TX 76006-5203; phone 817-640-3838. Periodicals postage paid at Dallas, TX and at additional offices. POSTMASTER: Send address changes to NIADA State Publications, 2521 Brown Blvd., Arlington, TX 6006-5203. The statements and opinions expressed herein are those of the individual authors and do not necessarily represent the views of OIADA Insider or the National Independent Automobile Dealers Association. Likewise, the appearance of advertisers, or their identification as members of NIADA , does not constitute an endorsement of the products or services featured. Copyright © 2013 by NIADA Services, Inc.

State Magazine MGR./Sales Troy Graff • [email protected]

Editors Andy Friedlander • [email protected] Timmerman • [email protected]

Art Director Christy Haynes • [email protected]

Printing Nieman Printing

The National Independent Automobile Dealers Association and Manheim presented the third annual Dealer’s Edge National Community Service Award to Freeman Motor Company of Portland, Ore., during the 67th NIADA Convention and Expo in Las Vegas.

Freeman Motor Co. received a check for $5,000 to be donated to Bridge Meadows, the dealership’s charity of choice. Bridge Meadows develops and sustains intergenerational neighborhoods for adoptive families of foster children to promote permanency, community and caring relationships while offering safety and meaningful purpose in the daily lives of older adults.

Eric Freeman, the dealership’s president and founder, and wife Jenny are personally committed to making a difference and have served as an example for the dealership’s employees.

Freeman Motor Co. is involved with a myriad of local nonprofits. Charities include Children’s Center, a child abuse assessment center; Remember

Nhu, which works to prevent children from entering the sex trade industry; Jubilee Transitions Home, which provides housing for homeless men and Toys for Tots.

In 2010, while visiting a resettlement camp in Kageyo, Rwanda, Freeman learned the remote village needed a vehicle to transport food, supplies and sick children through a harsh climate with challenging terrain. Bicycles and walking were the only modes of transportation for the community of 3,000 residents, which included 1,000 children.

Freeman launched a campaign that raised funds for a truck to meet this need. Freeman remains involved with the needy village.

Three other dealerships were honored at the NIADA National Leadership Awards Banquet as finalists for their charitable efforts:

• The Car Store, Oklahoma City, Okla.

• City Auto Sales, Memphis Tenn.• Alamo Valley Auto Sales,

Kalamazoo, Mich.

u F R E E M A N M O T O R C O M PA N Y R E C E I V E S N AT I O N A L C O M M U N I T Y S E RV I C E AWA R D

A S S O C I A T I O N N E W S

NIADA Salutes Oregon Dealer

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O I A D A D E A L E R N E W S NOVEMBER 2013

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I N D U S T R Y N E W S

Powell Motors Celebrates 80th AnniversaryOn September 8, 2013, Vince Powell and Powell

Motors celebrated the 80th anniversary of their family-run dealership. There were approximately 200 guests in attendance, including long-time customers, dealers, associates and past and current employees, some who have worked with Powell Motors for over 20 years. Guests enjoyed photo opportunities, a classic car cruise with over 30 cars, dinner, awards, prizes and gifts.

In business since 1933, Powell Motors has weathered many storms, going back to the depression when cars sold for $4 -$8. They are proud that they have customers several generations deep.

Vince Powell has dedicated so much to the industry, serving as president of OIADA from 1998 to 2000 and on the executive board from 1994 to 2001. He was also awarded the Oregon Quality Dealer of the Year in 1993 and again in 2013.

In honor of their 80th anniversary, Powell Motors and the Powell family gifted OIADA $880.80 for continued education in the form of developing a scholarship program for new dealers to attend OIADA’s annual convention. They also donated a beautiful children’s pedal car to be auctioned off at this year’s convention, the proceeds of which will also fund the scholarship.

u I N B U S I N E S S S I N C E 1 9 3 3

u Most dealers I know do at least one of those things, some even two or three, but only a few do all of them. And do them well.

I have the privilege and honor of traveling this great country of ours and working with Buy Here-Pay Here dealers of all shapes and sizes. But no matter where I am or what the dealer is like, I always get the same question.

What do “they” do?The “they” they are asking

about are the successful dealers.Now, the good thing about

BHPH is there are a whole bunch of ways to do it. There is no one way that will work for everyone everywhere.

The problem is there are just as many ways to do it wrong.

But among the dealers who seem to do it a little bit better than everyone else, there are a few common denominators. A few things “they” seem to do a tad bit better than the average Joe.

The first thing, and the most important, is people. Their overall people management makes them better, from hiring to training to pay plans to simply their employment environment.

They hire slow and fire fast. They hire who they want rather than having to hire who they need. They continually train their entire staffs. Their pay plans promote a team mentality. And they provide a professional but fun work environment.

“They” do people very well.Next are processes and

procedures. They have documented processes and procedures for most, if not all, of what happens in their organization.

“Documented” is the key word here. They make sure those processes and procedures are implemented and adhered to on a consistent basis. They do it by continually training on them and updating them when necessary.

“They” do processes and procedures well.

Education is the next thing that sets them apart. They are always looking for ways to educate themselves. They belong to local, state and national dealer associations.

They subscribe to as many trade publications as they can. They attend industry conventions and conferences. And they seek advice from industry consultants and are members of 20 Groups.

“They” educate themselves well.

Technology is something else they take advantage of. They not only have a DMS that can handle their needs, but they know how to use all it has to offer.

They not only have a well-functioning website, but track and make changes when necessary. And they take full advantage of the World Wide Web, from collections to car buying to pre-employment testing.

“They” are technologically savvy.

Lastly, they plan. They know what their cash flow needs are. They budget for expenses. They project collections and sales. They do it not only on a monthly basis, but annually as well. And they do it based on

what they can do, not what they necessarily want to do.

“They” plan effectively. That is what “they” do. I can

assure you they didn’t always do those things. But they all realized at some point what it would take to be one of “them.”

Most dealers I know do at least one of those things, some even two or three, but only a few do all of them. And do them well.

How close are you to being one of “them”?

BY BRENT CARMICHAELBRENT CARMICHAEL IS EXECUTIVE CONFERENCE MODERATOR FOR NCM ASSOCIATES INC. HE CAN BE REACHED AT [email protected].

u “ T H E Y ” A R E T H E S U C C E S S F U L D E A L E R S , A N D H E R E ’ S W H A T T H E Y S E E M T O D O A T A D B I T B E T T E R T H A N T H E A V E R A G E J O E

B H P H P E R S P E C T I V E SWHAT “THEY” DO

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B H P H P E R S P E C T I V E S

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With the growth of the millennial generation’s buying power – an estimated $170 billion per year, according to the digital analytics firm comScore – dealers must expand their communication strategies to reach consumers when, where and how they want to shop for vehicles.

And today, more than ever, that means online and on mobile. Millennials, the tech-savvy, empowered generation of consumers born between 1983 and 2004, are increasingly integrating the mobile phone into their shopping process.

To ensure success with millennials, dealers need to understand how they operate in the market. For instance, millennials tend to use their smartphones to research, shop for and even purchase vehicles in larger numbers than previous generations.

A recent eBay Motors study looked at new vehicle shopping preferences in the increasingly online and mobile commerce environment, including how millennials approach car shopping, suggesting some ways to target this critical generation of consumers:

Make sure your web presence is up to date and easy to find: Broadening your visibility online is the first step to getting on the radar of millennials. Ninety-four percent of millennials go online to gather information when shopping for a new vehicle. It is crucial to have a strong online presence to enter and remain in their consideration set.

Optimize your site for mobile: If a dealership’s website doesn’t render correctly on smartphones or other mobile devices, nothing else matters. Mobile is the fastest evolving sales and marketing channel for dealers. More than one-third of millennials use a mobile device to research information while shopping for a vehicle, versus 19 percent of non-millennials.

Supplement the showroom: Forty-four percent of millennials are likely to use mobile devices to compare prices or get information while they are at a dealership, compared to 27 percent of the non-millennials surveyed.

Dealerships should consider offering free in-store wi-fi to allow customers to comparison shop online. While that seems

counterproductive, the advantage is your salespeople are on hand to discuss the results with shoppers in real time, and maybe even to save a potentially lost sale.

Embrace apps: Applying the adage “be where your customers are” is increasingly important for dealers, especially considering the evolution of shopping habits – 70 percent of millennials say technology is changing the way they shop.

Mobile apps enable dealers to connect with car shoppers anytime, anywhere. Dealerships can leverage existing platforms or apps that already have a large reach to engage with mobile customers – a great entry point for dealers of all sizes to build a mobile presence.

Social me, social you: Millennials love social media, and nearly a quarter of shoppers use social media to research consumer opinions of vehicles during their shopping process.

Millennials also enjoy engaging with brands through social media and are open to providing feedback on their experience. Being actively engaged on various social media channels is beneficial, as long as you treat it as a two-way street. Use comments as an opportunity to bolster your brand perception and tailor future engagement.

Given the buying power of millennials and their shopping preferences, dealerships not yet engaged with consumers via online and mobile risk losing a significant new stream of revenue.

Dealerships have the opportunity to connect with millennials on a deeper level, building relationships and providing valuable content that helps them feel confident about their purchasing decisions. Attracting this generation through a blend of online, mobile and social media is crucial to a dealership’s long-term success.

BY CLAYTON STANFIELDCLAYTON STANFIELD IS SENIOR MANAGER OF EBAY MOTORS.

u CRUCIAL TO A DEALERSHIP’S LONG-TERM SUCCESS

M A R K E T I N G M A T T E R S

The Next Generation of Successful Selling

W W W . N I A D A . T V

NIADA.TV NEW SERIES

You might know Barry Switzer as the former football coach of the University of Oklahoma and the Dallas Cowboys. You might know him as a member of the College Football Hall of Fame.

But you might not know he is a partner in an independent used car dealership – Auto Option in Edmond, Okla. He was also the keynote speaker at the 2013 NIADA Convention and Expo.

Check out this game plan session on how his philosophy has made him the successful businessman he is today on NIADA.TV under “New Programs.”

Black Book’s “Special Program” series will be up and running Oct 1, highlighting their weekly Market Report(s) featuring Ricky Beggs. Visit www.niada.tv today!!!

FIRST AND GOAL:

BECOMING A CHAMPION IN LIFE AND BUSINESSF E A T U R I N G B A R R Y S W I T Z E R

FIRST AND GOAL:

FIRST AND GOAL:

FIRST AND GOAL:

FIRST AND GOAL: u Mobile apps

enable dealers to connect with car shoppers anytime, anywhere.

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Traveling miles on the lot selling vehicles paves the pathway to the finance department in many dealerships.

While walking those many miles, astute sales consultants learn quickly that they create value in a vehicle during the demonstration and presentation as they engage every sensory fiber of the prospective buyer.

Yes, the interview is the cornerstone of the sale because it leads the sales consultant to the proper product selection. And many will say all sales is the same process.

My reply to that is yes – and no.

When selling a vehicle, the presenter can present value that can be seen, can be sat in, can be felt, can be smelled. The sales consultant uses every available sense the customer has to create the picture of positive ownership.

But when demonstrating an intangible, the question becomes: How can the presenter engage the customer’s senses to establish value before talking price?

As we all know, we cannot sit in a service contract, nor can we feel the acceleration of the claims payment. Yet the benefits are real and will be there when the customer needs them most – when they are facing an unplanned repair bill on a major

component of the vehicle.Recently I met some

experienced sales business managers who claimed they do not use point of sale materials. Instead, they sell by stories.

Stories, while often entertaining, do not provide the customer with anything to

hold, nor anything to look at. By telling stories, the presenter is only actively engaging one of the customer’s senses.

Is that enough to create value in intangible products?

For best results, customers should be engaged with the presentation. The best business practice is to use point of sale aids to get all parties engaged in the conversation.

I am sure your service contract provider spends millions of dollars creating and producing brochures and other point of sale aids to assist you in your efforts to make a positive, professional impression on your customers. Are they being used or are they collecting dust?

The presenters of the finance suite of products must believe in the value of the products before they can build a solid presentation. Do they themselves purchase service contracts when they purchase vehicles, or computers?

Have the finance professional

ask the service contract company’s representative to provide copies of claims that have been paid. Telling customers about the ease of claims is one thing. Having proof – statements that show claim payments – adds weight to the story.

Do you ask your customers to write reviews on your website? If not, get started. That’s a great way to showcase the value of your customer care protection products.

Each time a customer says thank you for offering a service contract because he did indeed use it, ask him to go to your website and write a review about his experience. Younger

buyers especially read the reviews before coming to the dealership.

Get prepared for the finance presentation. Does your finance department have a presentation manual? That’s a one-inch binder with five to eight dividers and top-loading page protectors so the presenter can easily update proof statements as needed.

Here’s how the five sections break down:u Section One, Customer

care products and services brochures: Group them as you would a package presentation. Note the brochures must follow your verbal interaction with the customer and they must line up with the menu used to close the payment selection. Consistency and repetition is the key to success.

Mechanical protection includes service contracts, prepaid maintenance plans, tire and wheel policies, and roadside assistance. Appearance protection includes exterior paint protection, interior fiber and leather protection and windshield protection.

Equity protection includes guaranteed asset protection (better known as GAP coverage) and credit life and accident and health protection (if you are properly licensed to sell that product).

u HOW CAN YOU ENGAGE THE CUS TOMER’S SENSES TO ES TABLISH THE VALUE OF F&I PRODUCT S BEFORE TALKING PRICE?

M A R K E T I N G M A T T E R S

Creating Value Presenting Intangible Products

C O N T I N U E D O N PAG E 10

u Have the finance professional ask the service contract company’s representative to provide copies of claims that have been paid. Telling customers about the ease of claims is one thing. Having proof – statements that show claim payments – adds weight to the story.

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u Section Two, Dealer-controlled financing: This is a place for the copies of the “truth in lending” clauses from the credit unions that steal yourfinancing opportunities. Read the terms and highlight the items that give you a reason to think a credit union might not be the best place for a customer to finance a vehicle. You are looking for the clause that says “Pledge of Shares.”

Yes, I know many credit unions finance dealer retail installment contracts. For those resources we all give thanks. But be alert, there are some credit unions that still only do direct financing with your customers.

Include some proof statements from a local bank. You will need to obtain a copy of a booklet regarding the terms and conditions of deposit accounts from the bank. Read and highlight the section that identifies the “Right of Setoff.” The lender might also refer to that action as the “Right of Offset.”

When discussing financing options with customers, remember when financing through a dealership the only thing required as collateral is the title to the vehicle. By

reviewing those items you can show the best place for your customers to finance is through your resources.u Section Three, Cash

conversions/bi-weekly payment examples: Too many finance managers are too quick to write a receipt and fail to inquire why the customer wants to pay cash.

Perhaps he or she could use a new credit start. Perhaps the customer really does need to establish a cash cushion for emergencies.

In talking with the customer, the finance professional can identify and highlight the benefits of financing and use only some of the customer’s cash to make the purchase.u Section Four, Proof

statement, copies of paid claims, thank you letters, reviews from the website: Have those documents filed by company reference and keep them updated. In order to comply with all customer privacy laws you will need to black out the customers’ nonpublic information.u Section Five: This section

is a place for copies of all the policies you have to present, filed alphabetically so you can locate them quickly. It’s best to

have the policies’ specific items of coverage highlighted. Make it easy to review the fine details with a customer.

I’m often asked, “Do you expect me to go through all this information with every customer?”

The answer is no. The first section is the part that is used with each and every customer, each and every time. The grouping of brochures will assist the presenter in making a full presentation and give the customer something to hold and to look at while the presenter is sharing how the products can provide a worry-free experience. The remaining sections are available to use as objections or customer concerns arise.

A professional presenter in the finance office should be able to create value in the products before price is mentioned or shown.

The plan should be benefits before bucks! Create the value using the presentation manual or other point of sales materials. Bring out the menu to summarize the benefits and discuss the cost of the policies.

How do we bring out the menu after the presentation? Simple.

“As you know, for accounting purposes everything must be itemized. With everything we just spoke about – mechanical protection including your service contract, pre-paid maintenance, tire and wheel coverage, protective coatings and your equity protection – your monthly payment would be $____. The next category is without ______. The next is without ______. After reviewing these options which plan best meets your needs and budget?”

Many states require the retail prices of every item on the menu be in print on the menu. The menu must also contain the base monthly payment with no extra products or services in it.

That process should take the presenter 15 to 20 minutes to obtain a payment commitment, then another 10 to 15 minutes to print documents and properly disclose the terms and conditions of the loan to the customer.

BY JAN KELLYJAN KELLY, PRESIDENT OF KELLY ENTERPRISES, IS AN EDUCATOR, CONSULTANT AND CONVENTION SPEAKER WHO WRITES FREQUENTLY FOR INDUSTRY PUBLICATIONS. FOR MORE INFORMATION, INCLUDING INFORMATION ON F&I 20 GROUPS, CALL (800) 336-4275 OR VISIT WWW.JLKELLY.COM.

C O N T I N U E D F RO M PAG E 8

P R O D U C T S & S E R V I C E S

Used Shoppers Even More SelectiveThe certified pre-owned

industry is coming off its best sales month ever and shopping-trend data from CNW Research is reinforcing why.

During the past 16 years, the percentage of shoppers who would consider an off-lease CPO unit rose from 88.9 percent to 98.2 percent. In the September edition of the firm’s Retail Automotive Summary, CNW indicated none of the respondents in its data set said they would not consider an off-lease CPO unit.

Autodata Corp. reported monthly CPO sales surpassed 200,000 units for the first time – August’s total came in at 200,332 CPO units, up 25 percent from the previous year and 9.6 percent more than the prior month.

While the appeal and sales of CPOs are at all-time highs, a much different scenario in

regard to shopper consideration is unfolding for off-rental and repo units.

CNW discovered the turnoff of repossessed vehicles is a trend that’s developed significantly since 1997.

CNW president Art Spinella said it was “hard to believe” that back in 1997, 70 percent of used vehicle shoppers would consider buying a repossessed vehicle even though “a majority had been abused.”

Fast forward 16 years and CNW’s data shows only 31.8 percent of shoppers would consider buying a repo unit.

Even more telling, according to Spinella, 55 percent of shoppers would never think about buying a repo. Back in 1997, that level was just 8 percent.

Off-rental units aren’t high on used vehicle shoppers’ lists, either. CNW indicated a consistent level both in 1997 and

this year when it comes to those models.

In 1997, 64.6 percent of shoppers said they were unlikely to consider an off-rental unit and 24.7 percent said they would definitely not consider it. This year, those numbers were 61.4 percent and 29.3 percent.

“First and foremost, consumers are becoming increasingly more selective in what they will buy used,” Spinella said. “They want a vehicle meeting exacting specifications from color to options to mileage.

“In 1997 and before, a less finicky shopper might accept a blue model instead of the desired red one or abandon the desire for power seats. Not any longer. Even those looking at 10-year-old or older vehicles are quick to reject an offering that doesn’t meet an increasingly strict criteria.”

u STATISTICS SHOW USED CAR BUYERS ARE TURNING TO CPOS AND SHOWING LESS INTEREST IN REPO UNITS

NIADA 20 Group

NIADA Dealer 20 Groups are about dealers learning from each other.

But what’s more important is what they’re learning from each other.

How to create and manage a better, more efficient dealership. How to save and make money. How to be more profitable.

“I want to see how much better or worse someone else is doing than I am,” explained Craig Durrett of Houston’s Durrett Motor Company. “You look at their numbers and now you ask the questions. Why are theirs so much better? … What are they doing? And they can give you the answers.”

The next 20 Group meeting, moderated by NIADA director of dealer development Joe Lescota, is scheduled for Dec. 9-10 in Dallas. For information on NIADA Dealer 20 Groups and how to join, contact Georgia Brown at 800-682-3837 or [email protected].

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NIADA Dealer 20 Groups are about dealers learning from each other.

But what’s more important is what they’re learning from each other.

How to create and manage a better, more efficient dealership. How to save and make money. How to be more profitable.

“I want to see how much better or worse someone else is doing than I am,” explained Craig Durrett of Houston’s Durrett Motor Company. “You look at their numbers and now you ask the questions. Why are theirs so much better? … What are they doing? And they can give you the answers.”

The next 20 Group meeting, moderated by NIADA director of dealer development Joe Lescota, is scheduled for Dec. 9-10 in Dallas. For information on NIADA Dealer 20 Groups and how to join, contact Georgia Brown at 800-682-3837 or [email protected].

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On Sept. 12, NIADA executive vice president Steve Jordan and regulatory counsel Shaun Petersen traveled to Washington and, along with D.C.-based lobbyist Sante Esposito of Federal Advocates, met with federal regulators and legislators to discuss issues affecting the used vehicle industry.

This month, the Washington Update provides a report on some of those discussions.

LEGISLATIVE REPORTLegislators

The NIADA contingent met with the staff of Rep. Mike Kelly, a Republican from Pennsylvania’s Third District and the congressman representing NIADA treasurer Andy Gabler. Kelly is also an auto dealer – he owns Mike Kelly Automotive, a group of new car stores in Butler, Pa.

Kelly is a member of the Congressional Auto Caucus, a group of House members with an interest in the automotive industry, and is scheduled to speak at NIADA’s National Leadership Conference this month.

NIADA provided a history and explanation of its mission, particularly as it relates to its role as advocate for the independent dealer in D.C.

NIADA also met with Josh Finestone, legislative assistant to Sen. Dean Heller (R-Nev.). Heller is the ranking member of the Subcommittee on Consumer Protection, Product Safety and Insurance, which has jurisdiction over S. 921, the bill that would prohibit the sale or lease of rental vehicles subject to a recall without the defect being cured.

After receiving NIADA’s opposition letter to the bill, Heller’s office contacted NIADA and requested a meeting to become more familiar with the association. The meeting focused almost exclusively on the rental recall bill. It is NIADA’s belief that the bill will generate little movement in the Senate and will likely have even less traction in the Republican-controlled House.

REGULATORY REPORTConsumer Financial Protection Bureau

Jordan and Petersen met with CFPB personnel to introduce themselves to Dan Smith, head of the CFPB’s new Office of Financial Institutions and Business Liaison. That office was created this year to connect the bureau with trade associations, financial institutions and businesses to enhance collaboration and communication.

Eric Reusch of the CFPB’s Installment and Liquidity Lending Markets Division and bureau attorney Craig Crowie also attended.

Among the topics discussed was the bureau’s guidance regarding indirect auto lending. The CFPB staffers said unequivocally it was not their intent to regulate dealers by proxy, nor was it their intent to require finance companies to pay dealers a flat fee, saying the flat fee comment was intended to be merely a passing mention. We noted our concern that the flat fee was even mentioned in the bulletin in light of a statement on the CFPB’s website directing consumers to ask what the buy rate is and to offer to pay the buy rate plus a flat fee.

We also asked if the bureau has any benchmark for the industry as to what would be considered a disparate impact across a financier’s portfolio. The CFPB confirmed it does not have a specific benchmark and will consider it on a case-by-case basis, examining the facts and circumstances unique to a particular lender. We expressed concern that that does not provide regulatory certainty.

Perhaps the CFPB’s biggest point of emphasis was its desire to have NIADA preach to its members the importance of having a compliance management system in place. The CFPB looks more favorably on businesses that have invested in compliance, a key element of the bulletin on responsible business conduct the bureau issued this summer.

The meeting ended with NIADA re-emphasizing its desire to partner with the CFPB on matters the association can assist with, including an offer to provide the CFPB data about the industry, particularly the Buy Here-Pay Here segment.

Crowie and attorney Gerry Sachs will be the CFPB’s speakers at the National Leadership Conference.

Federal Trade CommissionNIADA met with James

Reilly Dolan, acting associate director of the FTC’s Division of Financial of Practices, and two staff attorneys, in order to get acquainted with the new appointee.

Dolan has confirmed he will speak at the NIADA National Leadership Conference.

After going over the history and mission of the association, we had a general discussion regarding some issues of concern to the FTC.

The staff attorneys emphasized their recent settlement with two dealers over advertising issues and expressed concern that dealers are making offers and either not disclosing all of the terms and conditions of the offer or burying them in a manner that is not clear and conspicuous.

In addition, we discussed the FTC’s concerns regarding spot delivery in cases they believe it turns into “yo-yo financing.” The FTC did not provide any specific information or specific complaints, speaking instead on a theoretical level. Asked if the FTC intends to introduce formal regulation on the matter, the commission delegation declined to discuss its intentions.

Also discussed were issues related to GPS/starter-interrupt devices. NIADA provided the FTC with some information on how we understand the technology to be used and our position that the use of such devices should be clearly disclosed to the consumer. Again, the FTC declined to discuss what if any future requirements could be placed on dealers’ use of such devices.

Just as the CFPB, the FTC also asked us to emphasize the need for dealers to have a viable compliance management system, including the tracking of consumer complaints. The FTC said the decision to impose a fine or the amount of the fine in compliance violations will be based in part on the dealer’s compliance management system.

As with the CFPB meeting, we ended by reiterating our desire to partner with the FTC on matters where we could, including updates to the guide on complying with the Used Car Rule, once the final rule is released.

u K E E P I N G Y O U I N F O R M E D O N T H E L A T E S T G O V E R N M E N T A L I S S U E S A N D A C T I V I T Y I N T H E U S E D C A R I N D U S T R Y

NIADA Government Report

u In addition, we discussed the FTC’s concerns regarding spot delivery in cases they believe it turns into “yo-yo financing.” The FTC did not provide any specific information or specific complaints, speaking instead on a theoretical level. Asked if the FTC intends to introduce formal regulation on the matter, the commission delegation declined to discuss its intentions.

W A S H I N G T O N U P D A T E

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We live in a world of consumers who have become accustomed to shopping 24/7. Retailers that aren’t operating accordingly are not maximizing their potential.

Dealer principals and general managers may think longer operating hours are the solution to better meeting changing consumer demands, but it is not realistic to staff a dealership around the clock. Even simply introducing longer hours may not be cost-effective due to overhead and additional operating costs.

In an effort to reach more customers, many dealers market their inventory in just about every medium available, including print, web, radio and TV. The reality is once the customer knows your dealership is out there and is in the market to make a purchase, he/she is likely going straight to your web page.

In fact, every day more and more consumers making major purchases start the process online. This underscores the importance of not only meeting your customers’ expectations for content, but also understanding how your website can actually make it easier to do business.

Your basic web approach likely solves for content that is “sticky” and provides as much information as possible to help the customer move forward with a purchase from your dealership. Basic questions your online content strategy should address include:u Are you providing thorough

information about each vehicle featured, including a full description, damage history, upgrades and mileage?u Are you providing pictures

of the vehicle from a variety of angles?u Are you providing links to

external sites where customers can purchase a copy of the vehicle history report?

Many of these website features may seem like irrelevant added expenses but they have already become the standard expectation of most consumers. Anticipating what information the customer will look for and providing as much of that information as possible gives you a better chance of keeping the customer on your website.

Most dealers realize that every time a customer leaves their web page to go elsewhere in search of additional information about a vehicle or financing options, the more likely he/she will be to not find his/her way back to the dealer’s site.

Basic features are critical components to remaining competitive, but having great pictures is the equivalent of just getting the customer in the door. How is your online content strategy making it easier for your customers to actually enter into the sales process?

One of the most overlooked components of a dealer’s online strategy is the ability to get actual financing underway. Providing as much information as possible to advance the sales process should be a key online content objective. The following questions should be addressed as a way to increase your chances of ultimately selling a vehicle to visitors of your site:u Do you list available financing

options for your inventory?u Do you provide access to an

online credit application?Another benefit of engaged

website traffic is your ability to capture information about your potential customers. Capturing the prospect’s name and contact information is an obvious primary objective, but effective tracking can tell you a lot even without getting every visitor’s specific contact information.u What makes and models

of vehicles are getting the most views?u Are you getting more views

on high mileage or low mileage vehicles?u What price point is getting

the most hits?u Which vehicles attract the

most qualified buyers?u What are the most used

features of your website?With an integrated credit

application on your website, you will have access to a treasure trove of information. Not only can an online credit application provide an avenue to capture customer contact information and hopefully further the sales process, it can also tell you a lot about the customers who are not purchasing vehicles from your dealership.

When a customer completes a credit application he has exhibited the willingness to purchase a vehicle from your dealership, but in some cases that application may be declined by the lender. This is where you might start asking questions.u Was the credit application

declined due to the collateral not fitting the lender’s program guidelines?u Was the credit application

declined due to insufficient loan-to-value?u Was the credit application

declined due to the customer’s poor credit history?u How can I affect the credit

decision?If you ask questions like these

and record the information for all loan applications, you will start to identify trends. These trends can help drive adjustments to your current business model, which will allow you to become more successful in helping your customers gain financing and thus complete more sales. Perhaps you will discover there is a need to diversify the types of vehicles in your inventory to fit current lender programs. Maybe you could benefit from adding vehicles that allow for a better loan-to-value using your lender’s valuation methods. Trends could reveal the need to add more lenders so you can better meet the credit spectrum of your potential customer base.

Even though you may operate or own a small dealership, a website can provide you with access to information on potential customers that can dramatically change the way you run your store and increase your effectiveness.

It’s really not about working longer hours. It’s about working smarter. Taking information from every customer interaction and making this business intelligence work for you by implementing small changes can improve your ability to close deals.

BY CHET HEUGHANCHET HEUGHAN IS DIRECTOR OF APP ONE RISK MITIGATION SERVICES, INDIRECT LENDING FOR WOLTERS KLUWER FINANCIAL SERVICES. FOR MORE INFORMATION, VISIT WWW.WOLTERSKLUWERFS.COM.

u W E L I V E I N A W O R L D O F C O N S U M E R S W H O H A V E B E C O M E A C C U S T O M E D T O S H O P P I N G 2 4 / 7

Round the Clock Sales Opportunities

u It’s really not about working longer hours. It’s about working smarter. Taking information from every customer interaction and making this business intelligence work for you by implementing small changes can improve your ability to close deals.

D E A L E R P R A C T I C E S

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I want to thank all the dealers and venders who attended OIADA’s 57th annual convention in Lincoln City. You made this one of the most outstanding events the association has provided in years. We had top educators from around the United States presenting the latest software technology, new market trends, accounting information and dealer operations.

All this information can be very overwhelming and seem next to impossible to implement, so I would like to share a technique someone taught me a few years ago. First, write down all the changes that you want to make in your dealership and list them in the order of importance. Then picture what that change looks like when it is finished and write that down. Next, write down all the steps and resources it is going to take to accomplish

your change. Then write down the date you are going to start and the date you will finish. This could be days, weeks or longer.

Now you have identified the steps, resources and date the primary change will be accomplished. Then repeat the process for each change on your list, starting with the second. Next, look at the final date for the last change on your list.

Congratulations, you have now identified how long it will take you to make the necessary changes in your business to take you to the next level. It doesn’t matter if it is one month, six months or a year. You now have a plan!

I encourage you to keep an eye on our website OIADA.com and the magazine for seminars that we have planned for the near future.

Dan NicholsonPresident OIADA

u H O W T O P L A N F O R C H A N G E

A S S O C I A T I O N N E W S

LETTER FROM THE PRESIDENT

CONGRATULATIONS OIADA 2014 QUALITY DEALER OF THE YEARRUSS SELL OF SOUTH PACIFIC AUTO SALES, ALBANY, OREGON.

RUSS STARTED IN BUSINESS 1989 AND CURRENTLY HAS 49 EMPLOYEES - SIX OF WHICH ARE FAMILY MEMBERS. SOUTH PACIFIC

AUTO SALES HAS BEEN A MEMBER OF OIADA FOR OVER 20 YEARS.

u

CONVENTION RECAP

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17u

RIGHT TO LEFT: DAN NICHOLSON, PRESIDENTCENTRAL OREGON MOTORS

BRYAN STEWARD, EXECUTIVE VICE PRESIDENTAAA AUTOSOURCE

ERIC FREEMAN, 1ST VICE PRESIDENTFREEMAN MOTOR COMPANY TOMMY WILSON JR, 2ND VICE PRESIDENTTOMMY WILSON MOTOR COMPANY

TODD STAVER, SECRETARYWEST COAST AUTO ENTHUSIAST GARY SARGENT, CHAIRMAN OF THE BOARDSARGENT’S MOTORSPORTS

CONGRATULATIONS OIADA 2014 QUALITY DEALER OF THE YEARRUSS SELL OF SOUTH PACIFIC AUTO SALES, ALBANY, OREGON.

RUSS STARTED IN BUSINESS 1989 AND CURRENTLY HAS 49 EMPLOYEES - SIX OF WHICH ARE FAMILY MEMBERS. SOUTH PACIFIC

AUTO SALES HAS BEEN A MEMBER OF OIADA FOR OVER 20 YEARS.

THE ANNUAL PRESIDENT’S AWARD WAS PRESENTED TO THE FREEMAN MOTOR COMPANY TEAM. THIS YEAR PRESIDENT DAN NICHOLSON PRESENTED THE PRESIDENT’S AWARD NOT TO ONE INDIVIDUAL BUT TO A TEAM, STATING WHAT GREAT SUPPORT THE FREEMAN TEAM GAVE TO THIS YEAR’S SUCCESS OF OIADA. WE HONOR ERIC FREEMAN, MARSHALL ZOERNER, KARA COPELAND AND PENELOPE FAIN FOR ALL YOUR SUPPORT.

CONVENTION RECAP

CONVENTION RECAP

PRESENTING OIADA OATH OF OFFICE, 2013 QUALITY DEALER OF THE YEAR AND PAST PRESIDENT VINCE POWELL

u

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CONVENTION RECAP

IT IS OFFICIALLY A CELEBRITY GOLF TOURNAMENT: MICHAEL HOLTON, FORMER PORTLAND TRAILBLAZER.

THANKS, MICHAEL HOLTON STATE FARM INSURANCE, FOR YOUR GOLF TOURNAMENT SPONSORSHIP.u

u

FUN ON THE GOLF COURSE: TAKING A BREAK JUST BEFORE THE CONVENTION KICKS OFF, TEAM BRASHER ENJOYING THE BEAUTIFUL

WEATHER ON THE OREGON COAST. BRASHER SPONSORED THE QUALITY DEALER OF THE YEAR AND CONVENTION DINNER.

uTEAM MANHEIM PAUSING FOR A PHOTO ON THIS BEAUTIFUL DAY AT OIADA’S GOLF TOURNAMENT. THANK YOU, MANHEIM, FOR SPONSORING

THE PRESIDENT’S RECEPTION.

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uu

You have a busy schedule. You have a job to do and your family, employees and community depend on you and your business. You know compliance is crucial to the success of your business. But how do you make time for compliance management without your operations, marketing, sales and other important aspects of your life suffering?

NIADA now offers Dealer Compliance Suite, a comprehensive solution that fits your schedule and budget. On demand videos allow your entire staff online access to a comprehensive suite of training that focuses on federal regulations and compliance. Its content can be tailored to match individual employee functions, such as sales or service, with interactive testing to reinforce material.

These test results are stored as the program tracks employee

training participation. This tracking capability that reports participation also aids in providing proof of compliance.

There are also numerous compliance related documents available to download from the site, such as compliance policies and deal agreements. The site offers federally required dealership compliance policies as well as documents and agreements designed to limit dealer liability.

A lack of federal compliance training could put your business at risk. You may not be as prepared as you think. The site also provides a checklist to evaluate your compliance level. There may be regulations of which you’re unaware or unfamiliar.

Did you know?• Dealers are required to

adhere to numerous rules and regulations and should provide formal employee training

regarding eight regulations.• Documentation of employee

compliance training should remain on file and available for government audits.

• New hires should be trained immediately with appropriate documentation of training.

• Dealership employees should be retrained on regulations annually.

Several federal agencies and the newly formed Consumer Financial Protection Bureau (CFPB) require and advise all motor vehicle dealers to perform employee federal compliance training regarding various regulations. Regulations include training on the Safeguards Rule, Patriot Act, OSHA, Do Not Call rules, the Federal Risk Based Pricing Rule, the Magnuson-Moss Warranty Act and the Federal Truth in Lending Act. Visit niada.com for a complete list of training regulations.

In addition, these same federal

agencies require all motor vehicle dealers to have in place written Dealership Policies regarding similar regulations. Visit niada.com for a complete list of those regulations as well.

In previous dealership federal audits, investigations and civil litigation, independent dealers have been required to provide documented proof of all required compliance training and to produce all written policies on demand. Failure to produce documentation of required training and/or policies has contributed to fines in the tens of thousands and even federal prison terms for the dealer.

Not only does compliance help your business succeed, it prevents adverse legal action. Visit http://www.niada.com/dealershipcompliance.php today to learn more about NIADA’s flexible comprehensive dealer compliance solution.

u N E W F L E X I B L E O N L I N E T R A I N I N G A D J U S T S T O Y O U R S C H E D U L E

P R O D U C T S & S E R V I C E S

NIADA Offers Comprehensive Dealer Compliance Solution that Fits Your Schedule

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Business Name_____________________________________________________________________

Dealer# ______________________________________________________Expiration_____________

Name_____________________________________Spouse__________________________________

Business Address____________________________________________________________________

City_______________________________________State/ZIP________________________________

Mailing Address (if Different) __________________________________________________________

Business Phone #____________________________________________________________________

E-mail___________________________________________________________________________

Cell____________________________________Fax_______________________________________

Signature___________________________________________Date_____________________________________

___Visa ___M/C ___Discover ___American Express Check # _________________

Exp. ________/________ CVC __________

PAC – Political Action Committee – Keeps us strong at the Legislature!

Your voluntary $50 contribution is an Oregon Tax Credit taken directly off your state tax liability.

PAYMENT MUST ACCOMPANY THIS APPLICATION Annual dues - $325

Upon acceptance as a member, I pledge to uphold the OIADA Code of Ethics and all laws pertaining

to the automobile business.

Your contribution will actually cost you nothing PAC $50 $375

Sponsor ________________ Renew Date ___/1/___

Trans _____ QB _____ PAC _____ Access _____ ODN _____ MBR_____Office Use

By completing this form, I am consenting and giving OIADA/NIADA, its affiliates and subsidiaries, my permission to contact me and provide information to me at the mailing and email address, telephone and fax numbers I have provided.

OIADA 1475 Capitol St. NE, Salem, OR 97301 | Phone 503-362-6839 | Fax 503-364-7331

MEMBERSHIP APPLICATIONOIADA

REPRESENTING ALL AUTO, TRUCK TRAILER, RV AND POWER SPORT DEALERS OF OREGON

OR_1113.indd 20 10/21/13 11:46 AM


21

SERVICE CONTRACTSAUL CorporationJacqueline Swank 800-826-3207

Automotive Business DevelopersShannon Meany 541-944-9186

Auto Marketing Associates NorthwestGary Palaniuk 503-519-7725

Auto Services CompanyDick Proudfoot 503-705-7597

A.U.L. Corp/ D.P.C. Inc.Jim Bangert 360-834-3333

Protective - Asset Protection DivisionDylan Doran 818-836-1455

TRAININGAutomotive Business DevelopersShannon Meany 541-944-9186

OIADA: Continuing Education, Title & Registration & Pre-licensingPauline Sill 800-447-0302503-362-6839

ADVERTISINGAffiliated Media LLCRonald Massey 503-705-9497

AutoTrader.comEd Merrick, [email protected]

Carsforsale.comAaron Oestretch 605-306-3302

Cars.com312-601-6134

The OregonianRich Fryback 503-221-8486

UCMLink Allison Pittman 601-812-5876www.ucmlink.com

UsedCars.com by DealixTamara Garris 704-243-6652

AUTO ACCESSORIESAuto Marketing Associates NorthwestGary Palaniuk 503-519-7725

PRIVATE AUCTIONSBrasher’s Portland Auto AuctionJerry Hinton 800-300-3200www.brashersportland.com

Associate MembersBrasher’s Northwest Auto AuctionMark Melton 800-905-3901www.brashersnw.com

Crosspoint NW Dealer AuctionBrian Hardy 503-594-2800www.crosspointnw.com

Manheim Portland Auto Auction503-286-3000www.manheim.com

OUT-OF-STATE AUCTIONSAdesa Seattle Auto AuctionJason Arcaro 253-735-1600 x 213

Dealer’s Auto Auction NorthwestSteve Doyle 509-244-4500

Manheim Seattle Auto AuctionJulie Picard 206-762-1600

PUBLIC AUCTIONSInsurance Auto Auctions, Inc.Ryan Hall 503-253-1500

Petersen Auction Group of OregonCurt & Susan Davis 541-689-6824

Woodburn AuctionSteve Morin 503-981-8185www.woodburnauction.com

DEALER SOFTWARESkywerksMartyn Olliver425-738-0234

Frazer ComputingMichael Frazer 888-963-5369

FINANCINGCredit AcceptanceJohn Bragg 253-279-3230

Credit ConceptsJason Moon 541-342-8545

JP Morgan Chase Auto FinanceJeff DeGarmo 503-201-4370

Nationwide Northwest, LLCMark Tischer 503-339-4165

Reliable Credit AssociationDavid Marx 503-462-3022

Gold Acceptance/ Oregon Auto Finance1700 Valley River Dr. #300Eugene, OR 97401Gary Veum, 541-868-0472

United FinanceBurnside, 503-232-5153Eugene, 503-342-7671Salem, 503-585-6411Medford, 541-779-7391

SmartwayAdvisorsSheldon Harris 503-795-7700

The Equitable Finance CompanyBrandon Fox [email protected]: 503-808-7939 / C: 503-896-8873 / F: 503-546-1689

FLOORPLAN FINANCINGFloorplan XpressSean Fodrea [email protected]

Dealer Services CorporationGarrett Jorewicz 866-230-0820

INSURANCE & BONDINGHecht & Hecht InsuranceEvelyn Hecht [email protected]

Shepard & Shepard Insurancewww.shepardinsurance quote.com509-396-0488

The Summit Group of Oregon, LLCJohn Petrie 503-581-2825

LEASINGOregon Roads, Inc.New & Used Vehicle & Commercial LeasingJoseph McKinney 541-683-2277

PAC – Political Action Committee – Keeps us strong at the Legislature!

Your voluntary $50 contribution is an Oregon Tax Credit taken directly off your state tax liability.

PAYMENT MUST ACCOMPANY THIS APPLICATION Annual dues - $325

Read & Respond or Certify BelowOIADA CONTINUING EDUCATION PROGRAMComplete this test or Certify below that you have read the articles for November 2013 The Next Generation What five tips does the article list for targeting millenials?

______________________________________________

______________________________________________

______________________________________________

______________________________________________

______________________________________________


For best results in creating value for the customer, according to the article you should:a) Tell memorable stories.b) Have expensive brochures and other marketing materials.c) Engage customers with the presentation.

What is one way to add validity to your claims?

______________________________________________

What are the five sections of a finance presentation manual?

______________________________________________

______________________________________________

______________________________________________

______________________________________________

______________________________________________

I certify to OIADA that I have personally read these articles in The Oregon Dealer News Magazine for November 2013.

My Name _________________________________________________

Dealership Name ___________________________________________

Dealership # _______________________________________________

Dealer License Expiration Date: (Month)__________________________

(Year)______________

Signed: ____________

Date_______________

FAX TO: 503-364-7331 or mail to OIADA, 1475 Capitol St NE, Salem, Oregon 97301

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In the last Compliance Overdrive column I discussed how indirect lending practices had recently come into the regulators’ spotlight, citing the March Bulletin issued by the Consumer Financial Protection Bureau. In the months since, news headlines have continued to illustrate how dealer lending practices face heightened scrutiny by banks and other lenders as a result of pressure from regulators.

Strong lender relationships are among a successful dealership’s most valuable assets. In an effort to maintain good relationships, dealers can benefit from a better understanding of the regulatory landscape within which its lenders are making day-to-day credit decisions. Lender rules and restrictions have an impact not only on approvals but also on how quickly a customer’s loan application goes from origination to completion.

In July, Wolters Kluwer Financial Services conducted a survey to identify top regulatory issues facing the industry. The survey of over 400 banking professionals showed the number one issue keeping them up at night from a regulatory standpoint was fair lending and other compliance concerns.

Forty-six percent of the bank and credit union executives who responded indicated they have an overall concern with regulatory reform in general. Specific concerns cited include regulatory pressures from the Dodd-Frank Act, the CFPB and the vast landscape of ongoing rules and requirements taking effect across the industry. More than a third of respondents cited evolving consumer lending regulations as a primary concern.

Recent enforcement actions offer further evidence that Equal Credit Opportunity Act or other potential fair lending violations are at the forefront on most lenders’ list of concerns.

In September, the U.S. Department of Justice announced that it had settled a lawsuit alleging ECOA violations by an auto dealer. The case provides some insight into where regulators and enforcement

agencies stand on enforcement of the ECOA.

The suit involved an auto dealer and one of its lenders. The DOJ alleged that the dealer violated the ECOA by charging higher interest rate markups on car loans to a certain class of customers (race/national origin) than to others over a three year period.

The case was settled and the dealer in question went out of business before the settlement was reached. But, in the consent decree the DOJ indicated if the dealer or its main shareholder decides to go back into business within a defined time period, it will be required to “implement clear guidelines for setting dealer markup and pricing, in compliance with ECOA, and establish appropriate fair lending training for its employees and officers.”

Note that the enforcement path went through the auto dealer’s lender. The lender’s regulator, the Federal Reserve Board, noted issues as part of its examination of the lender’s indirect lending program. The FRB then referred the case to the DOJ. In 2009, the DOJ announced that the lender resolved allegations against it through a partial consent decree under which it is “prohibited from discriminating on the basis of race or national origin in any aspect of its automobile lending.” Now, four years later, the DOJ reached a settlement with the dealer involved.

Recent industry publications have also reported that the CFPB and DOJ are probing the lending operations of some of the nation’s largest auto finance companies for possible lending discrimination under the ECOA. If true, it confirms regulator focus on ECOA and on auto lenders. Because any discrimination found in a lender portfolio will likely have taken place at the auto dealership, it is certain that lenders and other regulators will soon be focusing on dealer ECOA compliance.

The CFPB’s March Bulletin outlines concerns over dealer discretion in setting consumer interest rates by auto lenders. The principal concern is the increased risk of dealers either

intentionally discriminating against certain groups through higher rate markups or unintentionally discriminating against certain groups by its rate markups practices. Both could be ECOA violations for which dealers are accountable and for which their lenders may also be liable.

The CFPB bulletin suggests that auto lenders simply provide dealers a flat fee for contract assignment/sales or that they stop sharing rate markup revenue with dealers. A flat fee solution would probably take the form of a lender paying a flat dollar amount to the dealer for any retail sales contract it purchases, regardless of whether the rate had been marked up and regardless of the amount that it had been marked up. The flat fee would be more like a finder’s fee for the dealer rather than a participation in, or sharing of, any additional markup revenue. It’s interesting to note that the recent DOJ settlement with an auto dealer did not prohibit rate markups or suggest using flat fees. Instead, it required the dealer to “implement clear guidelines for setting dealer markup and pricing, in compliance with ECOA.” The DOJ seems to still allow rate markups if they are subject to guidelines and controls.

The CFPB bulletin also suggests that lenders engage in closer supervision or review of dealer ECOA compliance. In an August webinar co-sponsored by the CFPB, the Federal Reserve Board and the U.S. Department of Justice, Patrice Ficklin, fair lending director for the CFPB, indicated that lenders may be liable for discrimination that takes place at a dealership whether or not they have knowledge of a particular offence and they are expected to analyze auto loans dealer by dealer as well as on an aggregated basis across the lender’s entire portfolio. The recent CFPB bulletin, DOJ lawsuit settlement and co-sponsored webinar with multiple regulators are clear indications that ECOA compliance is a priority shared by a number of agencies with enforcement

authority over lenders and dealers. Again, it is certain that lenders and other regulators will soon be focusing on dealer ECOA compliance.

So what should dealerships do in response to the ECOA focus? Prioritize and focus attention on your dealership’s ECOA compliance before your lender or regulator knocks on the door. Begin by taking at least the following steps:u Review your written ECOA

policies and procedures to make sure they are consistent with ECOA requirements and that they are targeted to root out and prevent discrimination. Create written policies and procedures if you don’t already have them and regularly review and update them as needed. u Conduct regular ECOA

training for your entire staff, officers and board.u Review your rate markup

policies. Make sure that you have caps and/or other standards and controls in place to help reduce or eliminate the risk that rate markups are intentionally or unintentionally being applied to discriminate against certain groups based on race, color, national origin, age, gender, etc. u Review your employee

compensation policies to make sure that they do not unintentionally fuel possible discriminatory behavior.u Review your credit records

or otherwise conduct tests for any unexplained pricing disparities for different groups of credit applicants.

You should also make sure that your ECOA compliance activities are recorded so that you have evidence of your efforts. As my colleague Ed Kramer, vice president of regulatory affairs for Wolters Kluwer Financial Services puts it, “You’ve got to demonstrate you are taking steps to stay compliant. If you don’t, it’s going to be really difficult to persuade regulators, or lenders, you are interested in being compliant.

BY CHIP ZYVOLOSKICHIP ZYVOLOSKI IS A SENIOR ATTORNEY FOR INDIRECT LENDING AT WOLTERS KLUWER FINANCIAL SERVICES. FOR MORE INFORMATION, VISIT WWW.WOLTERSKLUWERFS.COM/INDIRECT.

u I T ’ S T I M E T O T A K E A C T I O N

Dealer Lending Practices Remain in the Spotlight.C O M P L I A N C E O V E R D R I V E

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