Thursday, May 01, 2008

Compliance and the Dealership

In today’s business environment, operating a RV dealership is larger than simply selling and servicing RVs. In addition to making a profit, the dealership must have certain policies and procedures in place that addresses specific federal regulations.

I am neither an attorney nor a judge, and not licensed to practice law. Use the following as educational material and, as with all legal matters, seek your own legal counsel.

Here are the “Hot Topics” as I see them:

1. The Gramm-Leach-Bliley (GLB) Act

Give a privacy notice to every customer who completes a credit application or credit statement. The privacy notice explains what you do with the customer’s information, such as who you share the information with, and why. Some states have an opt-in or an opt-out box, and some states allow the customer to choose. Whether you receive the information in person or online, the customer supplying the information must receive a privacy notice.

In your current business model, who takes customer credit information? Is it the sales representative or the F&I department? When, if at all, does the customer receive a privacy notice? A best practice is to have the same person taking the information, provide the privacy policy.

Review your privacy notice to ensure the document accurately depicts how you share this information, and properly identifies what measures you take to safeguard the information.

2. Safeguard Rule

This is the second part of the GLB Act. You have already given the customer a privacy notice. That statement usually includes language outlining the steps the dealership takes to safeguard information physically and electronically.

What information do you safeguard? Protect all non-published information (NPI) to minimize identity theft. NPI refers to social security numbers, driver’s license numbers, account numbers, credit bureau information, past residence information, and past and current employer information.

As with any federal regulation, the key is to write down policies and procedures, educate employees, conduct self-audits of the policies, perform a risk assessment of the facility, and appoint someone to implement and monitor the policies and procedures.

3. OFAC – Office of Foreign Asset Control

The U.S. Treasury Department has a list of Specific Designated Nationals (SDN) who they are seeking. All businesses must check everyone they do business with against this list. Customers are everyone who does business with your company, including employees. This rule applies to cash and credit transactions.

If there is a match, the deal stops and you notify the federal agency. You must retain records for five years and the penalties for non-compliance can be up to $10 million and 30 years in jail.

According to the counsel from Agent Jerry Livigni at the Treasury OFAC office, dealerships need the following to be 100 percent compliant:

1. A written policy
2. Trained dealership personnel
3. Checks of all customers to the Treasury’s SDN list
4. In the event of a match, follow the instructions
5. If there is no match, copy the screen showing the “no match” message and keep it in the F&I deal file

4. Regulation B and Fair Credit Reporting Act (FCRA)/ Adverse action notices

When taking a credit application, the dealership is the creditor. Think of the “Rule of Three.”

1. You take a credit application and never send it into a financing source.
2. You cannot secure finance approval for the terms you got the customer to agree to.
3. You unwind or re-contract a spot delivery.

Customers must received adverse action notices within 30 days of the credit action. Notices must identify the credit bureau with a telephone number if that was the reason for adverse action. The notices must have specific wording.

There are more federal regulations that every dealership must adhere. We have Regulation Z - Truth in Lending, which governs retail installment contracts, disclosures, advertising, how to calculate the APR, and how to handle negative equity on the trade-in vehicle.

5. The Red Flag Rule

You have read articles about it, and now it is here. There is more documentation, education, and record keeping. You will hear more about how to comply with this new regulation as time goes by. Stay tuned.

RV Executive Today, May 2008, P. 50-51