Tag: F&I Compliance Tips

Keeping Aftermarket Products In Line: F&I Compliance Tip

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Aftermarket products are important to dealerships’ bottom line. Recent NADA research has shown that 50 percent of profits for the average dealership come from the sale of aftermarket products.

A majority of these profits come from vehicle service contracts but, but other products driving profits also include guaranteed auto protection, credit life, and disability insurance, among others.

When selling aftermarket products, a dealership must disclose the products separately from the vehicle, indicating that the purchase is voluntary and that it is not required to obtain financing. Several states even have detailed regulations about how items need to be disclosed to the customer.

This is important to keep in mind as the FTC and CFPB continue to actively investigate and look for any unfair and deceptive practices in the sale of aftermarket products. The CFPB has made aftermarket products a priority since its inception and have the authority to bring actions against certain independent and buy-here-pay-here dealers while also referring other dealer violations to the FTC or a State Attorney General.

Best Practices

So, when selling these aftermarket products, how can dealerships protect themselves? We recommend the following to keep the FTC and CFPB away:

  1. Eliminate Excluded Customers from Your Target Direct Marketing Lists – There are consumers that opt out of all types of solicitations. If you have customers that do opt out, remove them from your lists. You can take it a step further and obtain the customer’s written consent to receive auto-dialed or prerecorded calls or texts. Cross-checking numbers with the FTC’s National Do Not Call Registry will save you headaches and potential issues.
  2. Understand Warranty Disclaimers for Each State – Service and insurance contracts can be structured in many different ways, all of which have different tax and liability issues. Dealers need to make it clear as to whether or not they have “entered into” a service contract. Both retro and reinsurance policies are subject to state insurance laws and customer claims. Dealers need to run the structure of service contracts with their lawyers and accountants.
  3. Charge the Same Price for Everything – Each product needs to be priced the same. If you surcharge a customer, that is considered part of the “finance charge” under TILA (Truth in Lending Act). As a result, that then must be calculated into the APR and disclosed in the RISC (Retail Installment Sales Contract).
  4. Be Consistent – The way you sell aftermarket products in the F&I office needs to be consistent. As a dealer, you are responsible for what is legally required in your state in terms of scripts, FAQs, and presentations that outline products and what they will cost.
  5. Adjust Your Practices to Address Customer Feedback – As laws change and consumers have positive and negative reactions, you need to adapt your selling of aftermarket products. Your employees need to be on board with this as well.
  6. Review and understand the CFPB Bulletin Incentives – When incentives concern products or services that could cause harm to consumers or not benefit them as strongly, they need to be reined in. Always have consumer interests in mind.

Start protecting your dealership from federal fines and audits: download your 2025 Compliance Guide today.  Learn more about the Dealertrack Compliance solution here.

Monitor Dealership Activity: F&I Compliance Tip

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One of the biggest threats to dealership compliance is inside the showroom. That’s right: your employees. Some studies claim that a majority of data breaches are caused by workers, a sobering statistic that may be due to negligence or mistakes – such as leaving credit applications, credit reports and deal jackets open and in plain sight – or could be caused by willful acts of disgruntled employees.

Point is, today’s dealership management must be prepared and proactive, with comprehensive training and real-time monitoring. For example, electronic databases should give you the ability to track employee access, and oversight of operations should include a compliance dashboard.

Why it Matters

By providing your employees with the education and tools they need, and by monitoring activity, you can help protect the dealership and keep it compliant. That includes taking steps such as implementing basic security requirements from your Safeguards program, and teaching employees best practice actions around issues such as opening unknown links and creating appropriate passwords.

Most important of all, however, is an effective monitoring program that gives oversight into critical areas such as data flow into the system, user activity, access, and even patterns of irregularities. Follow these best practice tips to better monitor the sales process and help ensure compliance.

Best Practice Compliance Tips

  • Put a robust monitoring program in place. It should include a real-time compliance dashboard that monitors activity in real-time, from a single screen.
  • Quickly identify and contain any customer information breach and make sure all employees safeguard customer information provided to them. Actively manage your data and develop policies to manage it during its lifecycle. Require secure passwords and authentication – consider two-factor authentication: something you know (a complex password) and something you have (a randomly-generated number from an ID token).
  • Manage user permission to give customer information access only to those employees having a legitimate business need. Don’t keep non-public personal information (NPI) longer than you need to do so.
  • Create a culture of security in your dealership and get senior management buy-in. Train employees on unfair, deceptive, and abusive acts and practices; emphasize honesty and transparency in all customer interactions.

Get more tips and recommended compliance practices. Download the free 2025 Dealertrack Compliance Guide. 

Adverse Action Notices: F&I Compliance Tip

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An “adverse action” is, basically, a refusal to grant credit, the termination of an account, or the changing of an account’s terms in a manner unfavorable to the consumer — such as unwinding a spot delivery contract.

Why it Matters

As creditors, dealers are required to give adverse action notices to consumers in three situations:

  1. When a dealer takes a credit application but does not send it to any financing source, typically because the consumer is credit-challenged.
  2. When a dealer unwinds or re-contracts a spot delivery deal.
  3. When the dealer is unable to get the customer financed on terms acceptable to the dealer, or because the customer declines the dealer’s final offer of credit after concluding negotiations.

Auto dealers are viewed as creditors because they are involved in negotiating the credit terms, and are typically named as the creditor on the retail installment sale contract (RISC) – which is later sold to a financial institution. A lender’s adverse action notice does not contain the necessary disclosures that must be given by the dealer. That includes, but is not limited to, naming the credit bureaus used by the dealer and the federal agency that administers compliance.

How it Works

An adverse action notice must do the following:

  1. Inform the consumer of the adverse action either with two to four reasons, or by notifying the consumer who to call at the dealership within 60 days to get the reasons.
  2. Identify any consumer reporting agency that provided a credit report or credit score.
  3. Provide the consumer’s credit score, information about the credit score, and up to four to five “key factors” that adversely affect the credit score (four key factors unless one is the number of recent credit inquiries).

The notice must contain other mandatory language as well. To view a sample notice and get more detail about adverse action notices and more compliance advice, download the free 2025 Dealertrack Compliance Guide.

Learn more about Dealertrack Compliance and register for a demo to find out if you’re meeting Adverse Action notice requirements today.