Tips for Better F&I Compliance Now and For the Future

Every F&I manager has things about their job that are great (the money is pretty good) and things that are a perpetual thorne in their side. That thorne is compliance. 

It’s probably unfair to describe compliance as such a negative thing but it becomes tedious when there are so many regulations coming from different channels…Fed, state, financial companies, etc. It’s a lot.

It can also be challenging to make sure F&I staff new hires are also knowledgeable in compliance best practices. How would you know? You could ask in an interview but most would gloss over it and say  “Sure, I understand all current rules” but may actually be lacking in that department.

Dealerships also have to be sure that their existing staff is current on regulatory compliance procedures. It’s an ongoing process (or it should be anyway) to keep up. 

The good news is there are some easy ways to both be sure current staff is well versed in compliance and that your new hires are too……

Structured Audits Can Help

F&I is the most regulated department at the dealership and rightly so. Financial disclosures, fair lending practices, identity fraud concerns, proper income reporting, etc. make it easy to have something slip through the cracks and cause a potential legal nightmare for the business and sometimes an irreparable hit to your reputation. 

Consider having an annual audit to review random deals to see if anything was missed or if things were airtight with no worries from current staff. This approach gives a more general look at how F&I managers are performing throughout the year and can help you spot staff that may have more issues than others. 

Doing an audit more frequently (if your store is busy) can work as well to help catch and correct issues before they build over time. Staff can be retrained faster and there is less chance for any damage if it’s only a couple of deals where something was missed. 

Regular Refresher Training

Ask your current F&I provider if they have a compliance training program that can be executed once or twice a year for staff. That helps if there is turnover throughout the year to keep new F&I staff trained faster. 

Make sure it’s never presented as something punitive but rather as something that helps your F&I managers be as current as possible on any new changes. Like all required training, it’s meant to be something to help empower your staff, not overwhelm them.

Consider a Test for New Hires

If you want to know a candidate's compliance knowledge quotient, consider giving them a test. You can give them a test deal and test to administer during the interview process that should give you a solid idea if they are ready for this element of the job.

Consider a test that touches on the following best practices, state/Federal laws, and deceptive practices:

  • Power booking
  • Payment packing
  • Menu presentation/execution
  • Red Flag
  • truth in Lending
  • Credit App Fraud

Keep the questions simple and time it. Any semi-experienced F&I manager should not take long to answer the most basic questions on obvious compliance hot button topics like those shown above. 

Good sample questions include:

What’s the best way to structure a straw purchase?

Do you call it a warranty or vehicle service contract?

What should you do with a dead deal?

Put together a sample deal or use a past deal with names and PII redacted and have them follow through the documents to see if they can easily identify mistakes or fraud that could be a red flag in an audit. Includes sales contracts, desking worksheets, credit apps. Make it relatively easy to spot the issues to see if he/she can spot it, too, and explain why there’s an issue. 

Be sure to have HR or your dealership attorney weigh in on the answers and be willing to provide feedback if necessary.

One last point…decide what is a realistic ‘grade’ for your candidate to achieve to move on to the next phase of the hiring process. You may think every F&I manager knows EVERYTHING but reality is that there may be one or two things missed and that should not rule them out as a potential new hire. But if someone missed too many red flags, chances are they are not right for your dealership or any other. 

date published
March 7, 2022

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