Category: F&I

How eContracting Works with Aftermarket Products

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Aftermarket sales are an important part of the deal process, but sometimes there is confusion about how eContracting figures in.

For each aftermarket product, there are two types of contracts: one with the aftermarket provider and another that becomes part of the lending package submitted digitally to lenders. A complete eContracting solution should give your dealership the ability to create and digitally submit both.

Let’s take a closer look at the two types of contracts.

Service contracts submitted to aftermarket providers

Aftermarket or F&I offerings include protection products for the consumer such as Guaranteed Asset Protection (GAP) waivers, debt cancellation agreements, service contracts, extended warranties, roadside assistance agreements and maintenance agreements, and other vehicle protection products such as paint corrosion warranties or tire repair warranties. These products are offered by a wide variety of providers, so it’s possible that a deal that involves more than one aftermarket add-on will require contracts with multiple providers.

When a car buyer chooses an aftermarket product with their vehicle purchase, here’s how each service contract is digitally created:

  1. The system receives an accurate price quote and rating for a protection product from the aftermarket provider and generates the aftermarket provider contract.
  2. Depending on the aftermarket provider, this contract may be able to be electronically signed by the car buyer.
  3. The aftermarket provider receives deal data directly so they can initiate the coverage for the car buyer.
  4. In turn, the aftermarket provider generates an aftermarket sales contract for the dealership that becomes part of the funding package.

When a dealer rates a contract from an aftermarket provider, it’s a similar process to verifying vehicle purchase contracts. Both processes ultimately produce data that is used to create documents for the finance portion of the deal.

Sales contracts submitted to lenders

The resulting aftermarket eContracts are individual retail installment sales contracts that are handled by the lender in a comparable way to the eContract for the sale of the vehicle.

Although these aftermarket sales contracts are separate from the vehicle purchase contract, it’s ideal to be able to include them all in the funding package that is electronically submitted to the lender. Being able to submit a single, complete funding package helps ensure quick processing and fast funding for the entire transaction.

Digital solutions across the board

To maximize convenience and efficiency, look for a solution that enables you to handle all aspects of the aftermarket process in one platform, including:

  • Presenting aftermarket products
  • Allowing customers to make their selections
  • Generating electronic contracts to be sent to the aftermarket providers
  • Electronically sending the aftermarket contract(s) to lenders.

With an all-digital process, you should be able to calculate the payment for the customer including aftermarket products and store the documents within a single deal jacket, with no need to log into another system.

Click to find out how Digital Contracting with Dealertrack uniFI provides eContracting for your entire deal.

7 Features Your Compliance Software Should Have

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With the constant threat of audits, fines and lawsuits, every dealership must take compliance seriously. Fortunately, there are cost savings to be found in integrating finance and sales flow compliance functions. Here are seven features to look for when choosing compliance software:

1. Visibility and transparency
It’s important to have a compliance dashboard that monitors employee and deal activity in real-time from a single screen. Keeping a close eye on employee actions lets you step in to make corrections as needed, heading off non-compliance risk.

2. Integrated FTC and OFAC requirements
To meet FTC and OFAC requirements and reduce fraud risk, your workflow needs to include the proper checkpoints. The FTC Red Flags Rule is a requirement designed to help protect against identity theft.  The Office of Foreign Assets Control (OFAC) requires a check of names against its “Specially Designated Nationals” list (SDN) of people with whom you cannot legally do business. You should look for software that automatically pulls Red Flags, provides out-of-wallet knowledge-based authentication questions, and offers additional questions when a customer does not answer enough of the previous questions correctly.

3. Fully compliant menu selling
Consistent presentations and full disclosure should be built into the sales process to reduce your compliance risk. This is an important selling category to watch because many industry experts believe that the FTC will be zeroing in on aftermarket products in the near future with enforcement actions for possible unfair and deceptive practices.

4. Secure document management
To meet compliance regulations, you must store deal-related documents including credit applications, privacy notices, credit reports, pencils, contracts, menus and more. Secure electronic deal jackets make these documents easier to access as needed, protect them from misuse, and also reduce the need to store paper files at your dealership.

5. Ability to print risk-based pricing credit score disclosure notices and privacy notices
Every time you take a credit application, you need a Credit Score Disclosure Notice – and it’s a best practice to give each customer a privacy notice at the same time. Ideally, your software should give you the ability to print risk-based pricing credit score disclosure notices and privacy notices as part of the application submission process.

6. Adverse Action reports
Compliance technology should be able to immediately identify and give you insight into which customers might need an Adverse Action notice.

7. Integrated compliance checks and balances
Compliance should be an integral part of your software so that your employees immediately receive an on-screen notice if a step is overlooked. This information should also be displayed on a performance dashboard so that management can be aware of possible problem areas requiring intervention such as additional training.

To learn how your dealership can integrate compliance checkpoints into your workflow, visit our Compliance product page and schedule a live demo with a Dealertrack F&I sales representative. 

eContracting and Data Security

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Dealerships collect a significant amount of personally identifiable information (PII) about their customers in the process of selling them a vehicle and arranging financing. Information including the customer’s name, date of birth, place of residence, employment information, phone number, email address and social security number can all be at risk of misuse when not properly handled and secured.

The vulnerability of paper documents

Many people tend to associate data breaches with electronic transactions, but paper records can actually be much more vulnerable. Companies have been fined thousands and even millions of dollars for exposing printed customer information in ways that include:

  • Mailing letters with social security numbers visible through the envelope window.
  • Faxing sensitive information to an unauthorized individual.
  • Leaving customer files on public transport.

Paper document mismanagement isn’t always so dramatic. It can include letting paper records sit on a printer or copier or out on a desk where unauthorized people could view them, or putting files in a dumpster when they should be shredded. Even sending documents by mail or via a delivery service can increase the risk that a paper file may fall into the wrong hands.

eContracting security

Federal legislation that applies to eContracts, including the Electronic Signatures in Global and National Commerce (E-SIGN) Act, includes provisions that electronic transactions must be conducted through secure channels to protect sensitive information. The law requires that digital information be securely archived, indexed, and retrievable in a timely manner.

Access to a dealership’s eContracting solution is password protected and limited to authorized dealership personnel. The system encrypts all contract and customer data, and it flows securely and directly into a lender’s Loan Origination System (LOS).

Contract packages are stored in a secure eVault with multiple backup systems to protect the data and keep it accessible when needed. In cases where paper is required later, authorized representatives of the lender or dealer can easily export the eContract documents and print them without requiring the customer to re-sign.

The system also ensures that only one “authoritative copy” of the eContract can exist at any time. This security measure prevents fraud and potential misuse that can come from multiple contracts for the same deal.

Your dealership’s compliance protocols should include practices that encourage secure handling of customer data regardless of whether it’s on paper or stored digitally. The security features built into eContracting can help keep that data safe within the dealership, in transit to lenders, and after the deal is completed.

Find out more about how Dealertrack Digital Contracting helps secure and streamline your contracting processes. To learn more about regulations around data security, download the 2024 Dealertrack Compliance Guide.

Don’t Play “Hot Potato” With Adverse Action Notices

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As much as your dealership would like to be able to sell to every customer, sometimes it doesn’t work out. Maybe a customer was credit-challenged, so you decided not to send their application to any financing sources – or you did send their application for financing but couldn’t get acceptable terms. Perhaps you had a spot delivery deal in place that you needed to unwind or re-contract.

In any of these instances, consumer protection laws, including the Equal Credit Opportunity Act (ECOA) and the Fair Credit Reporting Act (FCRA), require that the consumer be presented with an adverse action notice within a mandated timeframe.

This is where it gets tricky. There’s a common misconception among dealers that lenders handle sending adverse action notices. It’s true that a finance source may present their own adverse action notice to a consumer, but that’s not enough to protect a dealership from liability if the notice doesn’t contain certain dealer-specific disclosures.

According to consumer protection laws1, an adverse action notice must tell the customer:

  • What the adverse action was
  • Up to four reasons for the adverse action (or provide the dealership’s contact information so they can find out within 60 days)
  • The names of the credit reporting agencies that provided the information to the dealership
  • Their credit score and information about it
  • Four or five “key factors” that adversely affected their credit score

These are detailed requirements and the dealership is in a better position to provide this information than any given lender, which is one of the reasons the dealer bears the responsibility for compliance.

So, it’s important be alert to situations that require your dealership to provide consumers with an adverse action notice.

Not sure exactly what to include? The 2024 Dealertrack Compliance Guide includes a sample of one type of adverse action notice form that’s appropriate for use in certain circumstances. Always consult your legal counsel for advice on developing an adverse action notice template for your dealership and knowing when to send an adverse action notice.

To learn more about adverse action notices and see the form sample, download the 2024 Dealertrack Compliance Guide.

1Please check with your attorney for verification and further details.

 

How econtracting can improve your dealership’s bottom line

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When a dealership is considering a switch to electronic contracting from traditional paper contracts, it’s important for them to figure the value they’ll receive from modernizing their processes.

Some paper contract expenses are easy to identify:

  • Paper, ink, toner
  • Maintenance of copiers and fax machines
  • Shipping costs and related materials

Then there are the expenses related to the time the process takes. Dealertrack data shows that the average time in transit for paper contracts is five days. In the meantime, holding costs accumulate and cash flow is halted.

Doing the math

A Savings Calculator can help dealerships estimate their projected savings using digital contracting.

Here’s how the calculator works:

Let’s say a dealership has an average of 200 contracts each month with an average loan value of $18,000. Their floorplan rate is 3% and it costs them $15 for overnight shipping and $2 to prepare basic ancillary documents on paper for each deal. Their contract in transit time using paper contracting averages 5 days. Plugging these figures into the calculator, we find that using eContracting for all their contracts would save them $4,879 per month, which adds up to $53,765 per year.

Interested in seeing how your dealership’s numbers add up? Use our Savings Calculator to find out.

Selecting a cost-effective eContracting solution

To maximize cost savings, it’s important for dealerships to choose a solution that doesn’t trade one type of expense for another. If an eContracting solution requires that a dealership purchase expensive equipment or pay a transaction fee for each contract they submit, it will take a lot longer to see a positive return on the technology investment.

An eContracting solution should maximize efficiency and time-savings so that the dealership staff has the capacity to work with more customers. That means a solution that requires less data re-entry and includes functionality to catch input errors and missed signatures to cut down on re-contracting is ideal.

Digital Contracting on Dealertrack uniFI is hardware-agnostic so it can be used on any device including tablets, touchscreens and laptops. And, there’s no transaction fee for dealers. Take into account the savings of submitting all deal documents to lenders instantly and getting funded as fast as the same day, and that’s the ROI dealerships are looking for.

Find out how quickly your dealership can start saving with Digital Contracting on Dealertrack uniFI.

3 Things to Know About Risk-Based Pricing Notices

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Many of your dealership’s compliance responsibilities are designed to inform and protect consumers as they make financial decisions. That is definitely the case for the Federal Trade Commission’s Risk-Based Pricing Rule of the Fair Credit Reporting Act, which may apply to dealerships that use credit reports to help them make lending decisions.

When should you provide a Risk-Based Pricing Notice?

Under the Risk-Based Pricing Rule, a customer must be informed if they’re being offered worse credit terms than other consumers because of information in their credit report.

The threshold that determines when a consumer should receive a Risk-Based Pricing Notice is when they’re offered credit on less favorable terms than what a “substantial proportion” of other customers receive. In most cases, “less favorable terms” refers to customers being offered a higher annual percentage rate than other car buyers.

What are CSD Notices?

As an alternative to providing a Risk-Based Pricing Notice to these selected consumers, some dealerships choose to provide a credit score disclosure (CSD) exception notice to every credit applicant.

CSD Notices include an applicant’s credit score and other information such as the national distribution of credit scores among consumers under the credit scoring model used and various disclosures about credit scores in general.

Consumer reporting agencies will provide CSD Notices upon request. Your dealership should give them to each credit applicant after you get their credit score but before you complete the vehicle sale transaction.

How can I make the process easier at my dealership?

A compliance technology solution integrated with your F&I process can help your dealership provide the required notices to consumers at the appropriate time based on their credit reporting and terms.

As with any compliance issue, we recommend that you address questions you may have with your own qualified legal counsel.

To learn more about the Risk-Based Pricing Rule and other compliance topics, download the 2024 Dealertrack Compliance Guide.

Improving On Your Paper Contracting Workflow

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When it comes to switching from paper contracts to eContracting or digital contracting, some dealerships have a hard time letting go of the workflows that they are used to. Even when they realize that their paper contract workflow is full of disruptions, inconveniences and expenses, it takes a mindset change to make the switch.

Let’s take a look at some of the ways a digital contracting workflow improves upon the paper process.

A place for everything and everything in its place

With paper contracting, you have piles of paperwork that must be printed as multiple copies and kept organized in paper deal jackets.

Digital Contracting on Dealertrack uniFI is designed to integrate with your DMS to minimize data reentry that can lead to errors.  It makes the contracting process more efficient by placing all documents in a single electronic deal jacket.

Need to add the customer’s drivers license? Just snap a photo on a mobile device and upload it to the deal jacket. Is the customer purchasing F&I products? Those contracts are in the deal jacket as well. Not sure what documents the lender requires? There’s a live funding checklist to make sure they’re all there before you submit.

Let’s not do this again

How often does your dealership end up re-contracting due to a missed signature or a calculation error? There are manual ways to make sure your contracts are complete and accurate before you submit them – we’ve heard of a dealership that had three different managers review each deal package. But that’s a time-consuming and expensive method to ensure that the contract is correct and ready to be sent to the lender.

With digital contracting, a real-time error display alerts you to any mistakes as you enter data. A verification step ensures that everything is signed before you submit the full package to the lender. No need to have your managers take up valuable time checking and double-checking, which makes them more available for customers.

Fast-forward to the good part

Test drives: fun. Taking delivery of a new car: exciting! Signing paperwork: heavy sigh.

So many steps of buying a car are legitimately positive for customers. However, when a car buyer is faced with a seemingly endless series of papers to sign, it can leave them frustrated and less than excited about their purchase.

But digital contracting smooths out the contracting stage and makes it feel like less of a chore for your customers. Contract review and digital signing can be done on whichever device works best for your process, either in-store or remotely. And sign-and-tap functionality to auto-fill signature fields leads to a faster signing process and helps ensure that you never miss a signature. That gets your customers to the best part of the purchase that much more quickly and helps maintain those positive CSI scores.

Want to know more about how Digital Contracting on Dealertrack uniFI can enhance your workflow? Let us show you!

The 5 Ws of Privacy Notice Compliance for Dealerships

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Your dealership’s privacy notice may seem like just another piece of paperwork, but it’s a vital part of your compliance plan. The federal and state consumer protection regulations that require privacy notices address a wide range of your dealership’s data handling and storage practices. Let’s go over the basics you need to know about them.

Why Are Privacy Notices Necessary?

Numerous laws and regulations require that dealers create and present a notice to inform consumers of their practices for collecting, using and sharing non-public personally identifiable information.

Privacy notices are generally based on the combined requirements of Fair Credit Reporting Act (FCRA) and the Gramm-Leach-Bliley Act (GLB). However, dealerships should also take into account federal laws including the FTC Privacy Rule, FTC Affiliate Marketing Rule and the Driver’s Privacy Protection Act (DPPA) when creating their privacy notices.

States are stepping up to provide consumers with additional privacy protections, so it’s important for your privacy policy to address the state regulations that apply where your dealership does business.

Remember, always consult with your legal counsel to ensure compliance with all privacy policy requirements for your dealership.

What Should Privacy Notices Include?

The recommend best practice is to create your FCRA-GLB Privacy Notice using the FTC’s Model Consumer Privacy Online Form Builder. Your dealership’s privacy policy should explain what personal information you collect, how you collect and use the personal information, and what third parties (if any) can access the information. An important key is that your privacy notice should accurately describe the actual way you collect and share information every day, which means you need walk the talk!

Who Should Get A Privacy Notice?

You should give a privacy notice to every consumer who gives your dealership personal information, regardless of whether they end up purchasing a product or service.

When Should A Consumer Get Their Privacy Notice?

As the previous item implies, your dealership should be prepared to present privacy notices to potential customers before they become customers. That means consumers should receive a privacy notice before the dealer plans to collect, use or share their information. The timing can be tricky depending on how the consumer first begins interacting with your dealership, but be prepared to provide a privacy notice when someone first gives you their personal information, or as soon as possible after that. An integrated compliance software solution should provide you with a disclosure alert to ensure that you provide the privacy notice to the consumer at the proper time.

Where Have Privacy Notice Requirements Gotten Broader?

The California Consumer Privacy Act (CCPA) took effect on January 1, 2020. This law gives California consumers the right to know what personal information is collected about them, know how their personal information is being used, access a copy of their personal information, request that a business delete the personal information that was collected from them, and say no to having their personal information sold to third parties. There are also related online privacy requirements. The law applies to dealerships doing business in California that meet certain requirements, so consult with your legal counsel to determine your status and ensure that your privacy policy is compliant.

California, Colorado, Connecticut, Delaware, Florida, Indiana, Iowa, Montana, Oregon, Tennessee, Texas, Utah, and Virginia—have enacted new data privacy and data security laws, many of which become effective in 2024. Several other states are considering legislation to enact similar laws.

Want to learn more about complying with privacy and customer information sharing regulations? Check out the 2024 Dealertrack Compliance Guide. 

4 Reasons Your Dealership Should Be Digital Contracting

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We all know that digital contracting is the wave of the future and that its big-picture benefits include speeding up funding, increasing accuracy and compliance, and virtually eliminating re-contracting. But how about the everyday improvements you’ll enjoy when you use less paper in your contract process?

1. No one’s ever gotten a paper cut from an iPad

Let’s face it: paper is a hassle for you and your customers. You have to make sure you have every document with the copies collated in the right order. Do it correctly and all your hard work will be greeted by heavy sighs when your customers see a giant stack of paperwork in front of them when all they want to do is drive off in their new vehicle.

If there’s a mistake, all that effort goes to waste and you have to print even more copies and start over from scratch.
Digital contracting has the advantage of being mobile, so you can use a tablet to get signatures anywhere in the dealership. And it puts all of your documents in one place with no need for hard copies.

2. ‘PC Load Letter’? What does that even mean?

Then there are the printers. They’re fine when they’re working properly, but it never takes long before you have to clear a paper jam or try to troubleshoot the connection from your computer. Sometimes you can handle it yourself, but other times it takes an expensive repair call and frustrating downtime before you can start printing again. Even routine replacement of an ink or toner cartridge can turn into a messy ordeal – and those supplies are costly.

With digital contracting, your battle with the printer comes to an end. You gather electronic signatures and all contract documents are securely sent to the lender online – no paper needed.

3. Wide open spaces

How much square footage at your dealership is taken up by filing cabinets? It may be a while before digital contracting completely replaces paper, but imagine how great it will be to reclaim that space for other uses!

Paper files are bulky and retrieving old files can be a challenge. Digital contract data can be stored in a single “virtual” deal jacket in a way that’s highly secure but easily accessible when needed. Plus, electronic transactions are encrypted and more secure than sending paper in the mail, so customer data is protected throughout the process.

4. Stay right where you are!

Being steered to a desk to tackle a stack of paper contracts puts a dent in any customer’s excitement about their purchase. With new remote signing technology, you can bring them a tablet to review and sign their contract from the comfort of the showroom or even the driver’s seat of their soon-to-be new vehicle. A car buyer can even use their own device to read over the contracts and sign from home.

With the ability to upload stips and deal documents, add signature and date fields to create eSignable forms, and set up a secure connection to a mobile device, you can create a single signing session for your customers no matter where they are.

The future is now
Digital contracting offers a better connection with lenders, less paperwork, a more flexible customer experience, and faster funding. The best time to get started is now!

Learn more about how your dealership can start benefiting from digital contracting today.

How eContracting Reduces Data Re-Entry

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You’ve probably heard that going digital with your contract process helps increase accuracy and improve efficiency. So, how exactly does it do that?

The key is integration between dealership systems.

Technology + connection

Research shows that the average dealership uses six or more technology systems in their workflow. If your back office staff has to re-enter data from other systems to complete each eContract – switching back and forth between screens and re-typing customer and deal information – several things could happen:

  • A customer’s name, address or date of birth could be re-keyed incorrectly.
  • The process would take longer than if the information flowed from one system to the next.
  • Errors can lead to re-contracting and subsequent delay in funding.
  • You’d be adding to your customers’ wait time and their frustration.

Integrated technology systems allow customer and deal information to flow more smoothly from lead to contract with less duplicate data entry. That means more accuracy and efficiency for your dealership and a better experience for customers.

A seamless upload

It’s important to find a partner that can provide dealer-level mapping from your DMS. Because each dealership is unique and each lender has different requirements, you want to be able to import data in a way that’s tailored to your specific needs.

With the right data mapping in place, your dealership will gain credit application and F&I process efficiencies in addition to eContracting workflow improvements.

Ideally, you want to choose an eContracting solution that also supports the aftermarket portion of the transaction. That way, you can digitally submit the contract for the entire deal, including F&I products.

Fast deal finalization

Minimizing data entry at the contract stage helps you finalize the deal more quickly. That added efficiency is good for customer satisfaction and it helps make your team more productive, which frees up time for them to help more customers.

Sign and tap eSigning

Simplify the signing process and never miss a signature. eSigning gives you and your customers flexible and convenient signing options in-store or remotely, and ensures that each document has been signed before you can move to the next. That helps eliminate one of the most common contracting errors that can lead to re-contracting.

Click to learn more about DMS integrations for Digital Contracting with Dealertrack uniFI.