Page 57 - GIADA-April2017

COMPLIANCE

The Rising Cost of Noncompliance

Compliance expert says the propagation of rules and escalation of enforcement should
persuade more dealers to invest in basic compliance safeguards.

by Ken Suprenant, Senior Vice President of Data Solutions for National Credit Center

When most auto dealers sit down to calcu- issues particular to the automotive sector. tions designed to help you manage ad-
late their financial assets and liabilities, it’s A prime example is the Red Flags Rule, verse action notices and related calls in-
easy to anticipate items such as inventory, which was written specifically to include house, handle the printing and mailing
labor costs, marketing expenses, and taxes. auto dealers. This regulation compels auto of the reports, and field related incoming
Another critical factor that may help deter- dealers and other creditors to implement consumer calls on your behalf.
mine your financial success is your compli- a program designed to detect and prevent
ance with the litany of rules and regulations identity theft. As if domestic compliance challenges
governing your business. weren’t enough, auto dealers also have to
Auto dealers found to be comply with regulations from the Office of
Given the long list of daily operational de- Foreign Assets Control (OFAC), which re-
mands you confront just to keep the doors noncompliant with OFAC quires dealers to check customers’ names
open and the lights on, it’s understandable regulations can face up to against the Specially Designated Nationals
that sometimes bureaucratic regulations 30 years in jail and fines of (SDN) list.
might feel as though they are just an after-
thought. But just as any doctor will tell you, up to $10 million against While all regulatory noncompliance fines
prevention really is the best medicine. In your company plus up to can be significant, fines associated with
the automotive industry, compliance is the $1 million per incident. OFAC violations can be very substantial.
best way to prevent the often considerable Auto dealers found to be noncompliant
costs involved with remaining fully compli- with OFAC regulations can face up to 30
ant with applicable regulations. Red Flags compliance has gained even years in jail and fines of up to $10 million
greater importance with the dramatic in- against your company plus up to $1 mil-
Of course, keeping up with the wide array crease of identity theft in recent years. On- lion per incident. In 2016, OFAC-related
of applicable federal and state laws govern- line programs offered by my company and fines and penalties totaled in excess of $21
ing automotive dealerships is no small task. others provide training for dealership staff million.
Audits, lawsuits and even fraud are all un- and proof-of-identity reports that clearly
wanted distractions that can frequently im- display any “red flags” for potential car To ensure clients avoid OFAC’s very harsh
pede an auto dealer’s ability to spend his (or buyers. We also offer identity-verification penalties, I advise dealer clients to screen
her) limited time focusing on his primary and fraud-detection tools with every cred- customers against the most current OFAC
goal: building and maintaining a successful it report we generate. list of terrorists, drug traffickers and oth-
relationship with his customer base. ers on the SDN list, and include the results
Another critically important compliance of this screening with each credit report.
The list of federal and state regulations regulation that directly affects auto dealers
governing auto dealerships is lengthy and and creditors is the Adverse Action notice. Given the enormity of the task of remain-
complex. Some rules, such as the Ameri- In the event that a potential customer is ing fully compliant with the litany of ap-
cans With Disabilities Act (ADA), are not denied credit, written notices — including plicable laws, perhaps the most important
specific to the auto industry. There are also a list of specific reasons why the adverse operational compliance rule auto dealers
other regulations that might not specifi- action was taken — must be sent to the ap- need to remember is simply this: Never
cally mention the auto sector but have far plicant, typically within 30 days. underestimate or forget the potentially
more relevance to auto dealers — and re- skyrocketing price that accompanies non-
lated lending — than they might for other To be clear, the adverse action category compliance! n
businesses. One example is the Fair Credit can include either a denial or revocation __________________________________
Reporting Act (FCRA), which is designed of credit, a refusal to grant credit in the Ken Suprenant is senior vice president of
to protect the privacy of credit report infor- amount or under the terms requested, data solutions for National Credit Center
mation while guaranteeing that the infor- or any negative change in account terms and has expertise in dealer compliance
mation supplied is as accurate as possible. connected with an unfavorable review of from a retail and service provider perspec-
a consumer’s account. To address these tive. Contact him at ken.suprenant@bobit.
There are, of course, some compliance laws challenges, consider joining forces with com.
that are designed specifically to address a compliance partner that can offer solu-
GIADA Independent Auto Dealer APRIL 2017 | 55