Category: F&I

Stranger Danger: Why Identity Verification is Important for Compliance

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In 2022 alone, the Federal Trade Commission received more than 1.1 million reports of identity theft and more than 2.3 million reports of fraud. Legislators and consumer protection agencies are well aware of the risks, which is why there are so many regulations that require verification of customer identity.

Making sure a customer is who they say they are is not only important for legal compliance, but it also helps protect your dealership from the financial and legal costs of fraud. One of the most proactive compliance processes your dealership should undertake is to develop and assign a Program Manager to implement a written Identity Theft Prevention Program (ITPP) to comply with the FTC Red Flags Rule1.

Saving Consumers and Your Dealership from Identity Theft

According to the FTC, your ITPP should be customized for your dealership’s size, location and activities to identify and address the “red flags” that you are most likely to encounter. The verification activities an ITPP may establish could include:

  • Closely examining photo IDs
  • Reviewing a customer’s recent credit bureau activity
  • Using an electronic identity verification service to compare customer information against databases of fraudulent activity and to assess the Social Security number that a customer has provided
  • “Out-of-wallet” questions, which are authentication questions about someone’s identity that go beyond the information that could be found in a stolen wallet

Use the ITPP with every customer and every document. In cases of problematic customers who resist requests for identity verification, you could escalate to your Program Manager and continue to seek additional information or ask more out-of-wallet questions. The Program Manager should persist until they are satisfied that they have verified the customer’s identity or that they need to decline to do business with the customer.

It’s important to document your ITPP activities for each credit customer and do ongoing training and testing to make sure your staff stays up to date on the process. Consult your legal counsel on developing and updating your ITPP as needed.

Making Sure Your Customers Are Legally Allowed to Buy in the U.S.

Another important identity check requirement centers around the OFAC SDN list. The Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury maintains a list of Specially Designated Nationals (SDN) who are prohibited from doing business in the United States, which includes buying a vehicle. Dealerships are required to run each customer’s name against the list and – if they get a “hit” – follow steps to find out whether a possible match is a false positive. There are substantial civil and criminal penalties for doing business with someone on the list, so it’s vital to make sure that customers are not on the SDN list and to keep records of your OFAC checks.

To learn more about customer identity verification and compliance, sign up to download the free 2024 Dealertrack Compliance Guide.

1Please check with legal counsel for further details.

 

3 Reasons Lenders Appreciate eContracting

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Not sure your lenders are interested in eContracting? Cox Automotive research shows that the need and demand for eContracting efficiency is high for both dealers and lenders. In many cases, lenders are waiting for their dealers to get set up for eContracting so they can all benefit.

Here are three reasons that lenders appreciate eContracting solutions:

1. Improved Accuracy

The last thing lenders want to do is reject the funding package a dealership sent them because of errors or missed signatures. More and more lenders are eContracting with their dealer customers because the technology helps reduce errors that can lead to re-contracting.

When you’re working with multiple systems, re-typing and re-entering data, there’s a possibility that human error can lead to inaccuracies. Integrations with other dealership systems help eContracting platforms boost contract accuracy by reducing or eliminating the need for data re-entry.

eContracting solutions are also designed to verify data entry in real time, flagging potential errors and missing signatures before the contracts are even submitted.

Additional integrated functionality can make it easier for a dealership to submit accurate contracts. For example, lender checklists help ensure that the contract package is complete with digital copies of all required forms upon submission.

When the lender needs more information for funding after the initial submission, eContracting can even support uploads of trailing documents to keep the review process moving smoothly.

2. Faster Processing

With eContracting, contract data can be pushed directly into the lender’s loan origination system (LOS), which speeds up the review process and allows for faster funding. Compare that to many manual processes where documents must be sent to the lender by a combination of overnight delivery and fax, which takes an average of five days in transit.

Ideally, you want a complete digital funding package that keeps all deal documents together, saving the lender the time they would have to spend matching documents that arrived by separate methods.

With eContracting, the lender gets all of the contracting documents immediately, which gives them the capability to fund as fast as the same day.

3. Better Service

Finally, lenders are eager for dealers to submit contracts digitally because it gives them the opportunity to provide faster and better service, which is key for strengthening their partnership. They understand that improving a dealership’s cash flow is vital—and faster loan review and funding helps accomplish that for their dealer customers.

See the growing list of lenders  to learn how Digital Contracting on Dealertrack F&I helps dealerships get faster funding from lenders.

4 Ways eContracting is Easier Than You Think

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When a dealership is planning to introduce new technology, the initial worry is often, “Will it be a hassle?” Here are four reasons that adopting and using eContracting can be easy and beneficial for dealers.

Setup is simple

As with most technologies, eContracting setup is “one and done.” There’s minimal setup and easy integrations with other systems. The daily hassle of paper contracts is much more of an obstacle for dealerships than the minimal setup required by eContracting platforms.

Multiple devices can support eContracting

It’s important to know what hardware is necessary for the eContracting functionality you plan to use. Some providers require proprietary devices for contract review and signing—or otherwise limit your technology options for using their solution. Choosing a hardware-agnostic solution will allow you to work with the devices you already use every day, which will save you time and money.

Lender form changes and updates can be done automatically

When using DMS for paper contracts, there are licensing and programming fees. eContracting has the potential to eliminate those fees, as the latest approved forms from lenders can be added at no charge. With no paper programs, you can avoid paper licensing – and always have access to the correct lender version of every form.

A digital workflow adds efficiency and convenience

Workflows for paper contracting processes are filled with everyday hassles where customers must sign paper form after paper form, all of which are then overnighted to lenders – sometimes sent back for corrections, then shipped again – and finally, securely filed.

eContracting offers a streamlined workflow that is easy to learn and use. The benefits are immediate, with file cabinets full of paperwork replaced by digital deal jackets that include every document needed to complete a deal. Some eContracting platforms even include aftermarket contracts.

You’ll find that integration with other dealership systems means less data re-entry, which helps prevent the introduction of errors. That means eContracting helps dealerships submit accurate contracts quickly and easily, with no more back-and-forth with lenders.

Whether your dealership is considering a switch to eContracting or looking to maximize the benefits of your current eContracting platform, the more streamlined processes of eContracting can help you leave many of your current hassles behind you.

Click to learn how your dealership can take the hassles out of contracting with Digital Contracting on Dealertrack F&I.

Less Paperwork Equals More Customer Satisfaction

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We live in a world where purchase transactions keep getting faster and more convenient. Consumers are accustomed to ordering coffee with an app and having it waiting when they arrive, getting next-day or even same-day delivery from Amazon Prime, and pulling up to Target or Walmart to have merchandise they ordered loaded directly into their cars.

When these same consumers visit a dealership, they fully expect to discover a technology-enabled sales process that will be an improvement over what they experienced with previous purchases. The good news is that dealers are responding to this expectation, with 69% of franchise dealers adding at least one digital step due to COVID-19 according to the Cox Automotive Digitization of Online Retail Study.

How does that help? The same research uncovered that the number one benefit for car buyers of a digital process is saving time. The average amount of time a customer spends at the dealership has been dropping steadily and they would prefer to spend their time on enjoyable activities like test drives. However, the 2020 Cox Automotive Car Buyer Journey study found that nearly half of their time is spent on negotiations and paperwork, the part of the process they dislike the most.

Despite 92% of car buyers researching their vehicle purchase online, many dealerships still do not offer customers the option to sign their paperwork digitally. So even when a customer has researched and started much of their deal online, most still face an outdated paper and wet signing process before they can take delivery of their vehicle.

The pile of paperwork comes out near the end of their purchase process, which risks lowering CSI scores when the lengthy contract review and signing process takes the customer’s positive car buying experience and adds frustration.

One of the drawbacks of the paperwork stage is that it’s where any inefficiencies in the process start to snowball. If a dealership has unconnected systems that force re-entry of customer data, it’s way too easy to introduce errors and create a contract that the lender may not be able to process on first submission. If that happens, it can delay the transaction and inconvenience the customer even further.

Using a combination of desktop and mobile technology to take paper out of the sales process can make a significant difference to the customer experience. Just starting with digital review and signing of contracts can make a significant difference in the customer expereince. eContracting helps eliminate those intimidating stacks of contracts and replace them with convenient review and sign-and-tap functionality. Additional digital solutions including mobile data collection and menu technology to present aftermarket products can provide a more customer-friendly approach overall.

The digital deal addresses many of the frustrations car buyers have with the car buying process. And it’s better for dealerships as well. In fact, 77% of franchise dealers that have enabled digital contract review and signing are more satisfied with their overall digital retailing experience.

Find out more about how Digital Contracting with Dealertrack uniFI is a customer-friendly and dealership-friendly solution.

Best Practices for Remote Signing

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Dealerships have made impressive strides in responding to the restrictions imposed by CDC guidelines and social distancing rules by adopting tools that allow them to work with customers remotely. One vital part of that process is remote contract review and signing.

With a growing percentage of deals starting online, remote signing followed by at-home delivery are logical next steps to ensure convenient and socially distanced auto purchases for consumers.

Here are some important considerations for successful remote signing:

  • Make sure your internet connection is secure – An important aspect of compliance is protecting customer and deal data. Especially if you’re working somewhere other than the dealership, be sure your wi-fi signal is password protected.
  • Begin with some show-and-tell – Start by having a conversation with the buyer to make sure they have access to the proper technology required for the contract review and signing: a desktop computer, laptop or tablet with an up-to-date browser that’s connected to the internet. Then explain the eSign process, including the need for their consent, and talk through how the signature capture process works.
  • Verify the customer’s identity – When you’re dealing with customers remotely, it’s more important than ever to make sure every customer is who they say they are. Using a compliance solution like Dealertrack Compliance during the deal process for vital Red Flag alerts and OFAC checks can help – and can also provide out-of-wallet questions if needed.
  • The next best thing to face-to-face – We recommend using video conferencing, Facetime or another video chat app to help make sure you’re dealing with the right person before you connect to their device for contract review and signing. Video is also helpful for walking the customer through the review and signing process so you can see their screen and provide direction as needed.
  • Record the signing ceremony – Choose a video conference platform that allows you to record the signing session for the purposes of ID verification and fraud risk mitigation. Tell the customer you’ll be recording and get their permission before you begin.
  • Give the customer time to read the fine print – Before the customer signs, make sure they review the contract. They can do it on the screen, but you should recommend that they use the print or download functionality to create their own copy.
  • Follow delivery protocols and best practices1 – The vehicle should be delivered as soon as possible after contract signing. When you arrive at the customer’s location,2 start by validating the buyer’s identity by matching their driver’s license to the information on the contract.
  • Don’t renegotiate upon delivery – Do not negotiate terms and conditions of the deal at the consumer’s home, as this could invoke a three-day rescission period that allows the customer to cancel their transaction.
  • Disinfect high-touch areas of the vehicle – Relieve any customer concerns by cleaning the vehicle in accordance with CDC guidelines and telling the customer about your sanitizing procedures.
  • Finalize all documentation – If there are any remaining DMV or dealer documents, have the customer complete them now. Use a tablet to photograph and upload any remaining stips and trailing documents. Be sure to have the customer sign the delivery receipt and keep it for your records. And don’t forget to deliver the final signed copy of the contract to your customer.

If a customer will be at the dealership to sign their contract and take delivery of their vehicle, you can still give them the option of bringing in their own device for signing. That can help to ensure social distancing and alleviate any concern the customer may have about handling shared devices.

Dealertrack assisted Remote Signing is available for dealerships with Digital Contracting on Dealertrack F&I. Click to learn more about getting started with assisted Remote Signing at your dealership.

The 2022 Dealertrack Compliance Guide includes a new chapter on automotive eCommerce sales. Download the Compliance Guide here.

.1 In locations where permitted by federal, state and local COVID-19 ordinances, consider offering at-home delivery and observe CDC protocols during vehicle delivery.
2 Customer must take delivery in the state they are in as out-of-state deliveries are not available at this time.

5 Compliance Tips for F&I Selling

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As dealerships look for ways to counter shrinking profit margins, F&I product sales are one of the revenue sources they turn to. Cox Automotive 2022 Car Buyer Journey research shows that 67% of car buyers purchased an F&I product with their recent vehicle purchase, an increase of nearly 10 percentage points from 2021.

In the push to make the most of this revenue source, it’s still important to make compliance part of the process. You should consult your legal counsel to ensure that your F&I sales process is compliant. Here are five tips to keep in mind as you promote and sell F&I add-ons:

  1. Be Consistent – Never skip required steps in the F&I product presentation process. Charge each customer substantially the same price for each product or grouping of products.
  2. Make Your Presentations Transparent –Prepare your menus, sales scripts and presentations to be up-front about what each product is and how much it will cost. Consult your legal counsel for questions about how your state’s laws apply.
  3. Train Your Employees – To help ensure consistency, transparency and compliance, train and test your staff on your F&I sales processes. Observe and document their performances regularly and retrain as needed.
  4. Exercise Caution with Incentive Programs – Consult the CFPB bulletin on incentives – and your legal counsel – when you’re creating and tracking any incentive programs. Take special care when incentives relate to products and services whose sale may benefit your employees more than their purchase will benefit customers.
  5. Change Your Presentations as Needed – Pay attention to customer feedback and CSI scores related to your F&I presentations and adjust menus, presentation scripts, and F&I sales practices to address changes in the law, negative consumer feedback, and your CSI scores.

With the FTC and the CFPB actively investigating the sale of all types of F&I products for unfair and deceptive practices, active compliance efforts are vitally important for dealerships. We recommend building a culture of compliance at your dealership throughout the deal process.

Want to learn more about aftermarket compliance? Sign up for access to download the online Dealertrack 2024 Compliance Guide.

What Dealerships Need to Know About Electronic Signatures

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In the year 2000, Tiger Woods became the youngest golfer to win a career Grand Slam, the original Mini ceased production, and the U.S. passed the E-Sign Act (Electronic Signatures in Global and National Commerce) ensuring that electronic signatures can be valid and legally binding.

Even though more than 20 years have passed since then, confusion about the legality of eSignatures remains. In this post, we’re going to work on clearing up some of the common misconceptions around electronic signatures.

Federal Laws Regarding eSignatures

The E-Sign Act states that a contract or signature, “may not be denied legal effect, validity, or enforceability solely because it is in electronic form”. Basically, the E-Sign Act gives eContracts and eSignatures the same legal standing as paper records. It also says that electronic records count as information “provided in writing,” as long as a consumer agrees to conduct their transaction using electronic means.

The E-Sign Act also requires lenders to keep accurate and complete electronic records that can be accessed and reproduced as needed by people who are authorized to access them.

You can click here to read the E-Sign Act if you want to know exactly how it’s stated.

In 2010, provisions of the Uniform Electronic Transactions Act (UETA) helped ensure that each state aligned on recognizing the legality of electronic contracts for business and commercial transactions. As of August 2021, New York State has not adopted UETA, but they have other laws recognizing electronic signatures for lenders.

But What About California?

When California adopted UETA, it made an exception for auto signing. However, California later adopted E-Sign, which supersedes UETA. Currently, every major provider and lender includes California in their eContracting platform.

Please consult your lawyer if you have doubts or questions about the legality of eSigning in your state.

What Are the Advantages of eSigning?

Giving electronic contracts and signatures the same legal status as their paper counterparts offers significant benefits for dealers, customers and lenders:

  • Accuracy – eContracting helps ensure that contracts are complete and more accurate before the customer signs and the dealer submits them to the lender. It also helps eliminate missing signatures, which is one of the top reasons that funding packages are returned as incomplete and subject to re-contracting.
  • Compliance – With the system flagging any potential issues, a dealership can be more confident that each contract is compliant with state and federal consumer protection regulations. Customers are protected by a documented process that ensures they know what they’re signing before they sign and that they’ve provided affirmative consent to complete their transaction electronically.
  • Customer Satisfaction – The ability to review and sign documents electronically greatly enhances the customer experience. Rather than flipping through dozens of pages one-at-a-time, eSigning offers customers the ability to seamlessly and efficiently move through the car buying process. 2021 Cox Automotive Car Buyer Journey research shows that heavy digital buyers who completed more than half of their purchase activities online, saved nearly 30 minutes by handling negotiations, contract review and signing digitally. These buyers had more overall satisifaction with the shopping experience, which can help to preserve the dealership’s CSI score and improve customer loyalty.
  • Faster Funding – The lender receives data that has already been checked for accuracy directly into their loan origination system (LOS), which not only maximizes data security but allows for loans to be processed and funded more quickly.

How Widespread is eSigning?

Industry-wide, lenders have purchased, securitized and funded billions of dollars in eSigned retail and lease contracts to date in all 50 states.

Are All eSignatures the Same?

Dealertrack eSignatures are accepted by all major lenders participating in eContracting on our platform in every state. In addition, there are aspects of our technology and signing process that help ensure eSignature authenticity and provide the authoritative copy of each contract in ways that some other providers do not. We can also offer a better customer experience with “tap and sign” functionality that allows buyers to sign one time per signing session and have all subsequent signatures pre-fill with just a tap.

If you’d like to learn more about the advantages of Dealertrack Digital Contracting, please click to request a demo.

Expedite Contract Processing Regardless of Workload

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eContracting has made it so indirect auto lenders can process contracts and fund their dealers faster. Unfortunately, many dealers haven’t given up the paper contracting habit yet, so lenders must find ways to beef up their contract processing on two fronts.

It can be a challenge for lenders to deliver faster funding for paper contract packages, especially if their in-house operations are set up for a certain level of processing volume.

Lending institutions can find themselves understaffed for peak car buying season, but reluctant to scale up permanently knowing that their loan volume will ebb and flow. Still, lenders must find a way to receive contracts, accurately enter all the data into their system, finalize the funding package, get the package through review and approval, and store all of the paperwork for the appropriate period.

The resources required for this process vary depending on the size of the lender, but the workload fluctuates regularly either way.
So how can a lending institution maximize their resources to keep loans processed efficiently?

One solution that many lenders turn to is a partnership with outside experts who can handle the contract submission workflow and help lenders stay flexible and improve their efficiency and profitability. This support team can facilitate both paper and eContract processing to give lenders optimum workflow year ‘round.

Want to learn more about optimizing your operations to deliver better dealer service? Download our eguide or schedule a no-obligation 1:1 consultation with your Lender Solutions Specialist today.

Dealertrack and the Evolution of Digital Retailing

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Earlier this month, Cheryl Miller, Senior Vice President and General Manager of Dealertrack F&I and Titling Solutions, participated in a keynote panel at the Consumer Banking Association’s CBA Live 2019 conference. The topic was Digital Retailing Evolution: What’s NOW & What’s Next, and Cheryl shared her expertise on digital retailing in the automotive industry and how the technology is bringing lenders and dealers together.

Following are some of the subjects Cheryl addressed during the panel.

How has digital retailing evolved over the past year and where do you see it going over the next 2-3 years?

The trend is toward an end-to-end digital experience that gives car buyers the flexibility to do as much or as little of the deal online as they prefer. This opens up new worlds for dealers when it comes to buyer targeting throughout the customer lifecycle, including advertising, purchasing, servicing and financing.

For dealers and lenders alike, it’s driven by customer demand. The way consumers purchase things has changed, and customers want the car buying process to incorporate conveniences such as shopping online. Our research shows 83 percent of customers prefer to do at least one purchase step online outside of the dealership. Using a digital retailing solution can help deliver a better customer experience that’s in line with what buyers want.

This is not the only way dealers benefit from digital retailing. The traditional retail sales process takes 3 or more hours for the average dealership to complete. Completing steps of a deal online saves an average of 30 minutes. A more efficient process gets deals completed more quickly, which gives a dealership more time to serve more customers. Digital retailing solutions better connect the online to in-store shopping experience due to streamlined processes, less data re-entry and increased accuracy.

The market is growing, in large part due to demographics. By 2020, Millennials (consumers in their early twenties to late thirties) are forecast to represent 40% of car buyers. There are more than 75 million members of this tech-savvy generation, and they’re at the forefront of demand for digital retailing experiences. Eventually we expect to see the 100% digital deal where every facet is handled online. Most of today’s customers still prefer to finalize their purchase at the dealership, but each successive generation will be more comfortable with ordering a car online the way they order merchandise from Amazon.

How are dealers and lenders working together to succeed with digital retailing solutions?

Dealers see digital retailing as an opportunity to connect the online experience to the in-store experience, and ultimately as a way to increase revenue. Our 2018 Cox Automotive Lender Study revealed that 51% of dealers say it is important for lenders to offer digital contracting to complement their digital retailing workflow. Dealers select their lender pool based on rate competitiveness, turnaround time for credit application decisions, and the strength of their relationship with their finance partners. Being able to work with lenders via the same platform they use for other digital retailing functions strongly meets two of those criteria.

Dealers today suffer from margin compression, so they are constantly looking for ways to profitably structure their deals with their lender partners. Lenders should strive to bridge the gap so that dealers understand you are there as a partner and what you can bring to the table to assist on margin compression and the deal structure – at the right rate for profitability. We see that most dealers are looking for qualified customers who meet their lender requirements. Dealers are a critical part of the retail experience, often finding the best financing available with valuable incentives for their customers. We offer solutions to both dealers and lenders that are well positioned to offer consumers choices that lead to a frictionless car-buying experience.

Dealertrack and all our Cox Automotive solutions are fully committed to our vision to digitize the process to procure a vehicle “from contact to contract.” We understand dealers and lenders both play key roles in every vehicle sale that involves financing. A well-planned digital retailing solution gives both of them tools that work together seamlessly.

With 85% of all new cars sold needing to be financed, dealers and lenders do play well together. The dealer works with the lender and for them – as well as for the consumer. The dealer provides the lender an opportunity in the form of a sourced lead, the lender is retained, and they work together to sell cars, to the benefit of both organizations. Partnership here is instrumental between dealers and lenders.

Do lenders need to upgrade to digital retailing tools now or can they wait for the industry to mature?

The answer is “now.” The time for waiting is over because dealers are already engaged in some form of digital retailing – many dealers already use their website for leads, digital media/social strategies, and more. Digital retailing enables dealers to capture more opportunities. Thus, now is the time for lenders to act if you are trying to increase your partnerships with dealers and gain market share and grow originations.

The technology is in demand by dealers. Customers are demanding better service orientation and a solution more akin to other shopping experiences, like the way they buy coffee and shop for groceries and other household goods. It makes sense for lenders to put digital retailing tools in place now, even if there are certain functionalities and features that won’t be fully utilized until the industry matures further. Be ready for what is here now, and it will simply continue to grow. Be ready so you can win in the marketplace.

3 Questions You Should Ask About Your F&I Compliance Technology

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Advanced automotive retail technology offers streamlined dealer workflows designed to improve the customer experience and ultimately enhance your profits.​ 

These workflows can provide other crucial benefits, including regulatory compliance safeguards and protections against consumer fraud, integrated across the sales and F&I workflow.

Here are three questions to keep in mind when you’re selecting this type of technology to ensure that it meets compliance standards:

1. How does the platform address safeguards and ID verification?

There should be verification checkpoints such as red flags reports built into the workflow. You also want to make sure that you can add additional ID questions as needed. This is important for dealership security and will help you meet FTC and OFAC requirements.

2. How does the software handle adverse action notices and risk-based pricing notices?

You want adverse action notices and risk-based pricing notices to be an integral part of the technology workflow. For adverse action notices, the software should help you manage the mailing of notices and show confirmation that the notices were sent.

3. Does the compliance offering include aftermarket product sales?

To reduce the risk of non-compliance, it’s important for your F&I solution to incorporate a consistent presentation, accurate pricing, and proper aftermarket disclosures.

F&I solutions are aided by technology, but they also require training, knowledge and guidance that encompasses every customer interaction from advertising, to showroom conversations, to starting, structuring, financing and transacting the deal.

Want to learn about Dealertrack’s F&I Compliance solutions? Click to schedule a demo.