Eight Tricks To Keep Lawyers & Regulators Off Your Doorstep

by Steve Levine | Chief Legal Officer

I spent the first years of my legal career representing buy-here-pay-here dealers in matters ranging from litigation to compliance and practically everything in between. While our legal and compliance landscape has always been challenging, the myriad of complex laws and regulations affecting our industry has exploded in the last decade or so. Now more than ever, it is important for dealers to conduct vigilant self-assessment to be sure their house is in order. While there is no magic formula or absolute “right way,” here are a few recommendations to get started:

1) First, don’t be penny-wise and pound-foolish by thinking you can do this alone. It’s better to use an outside professional to take a critical look at your operations. There are attorneys, compliance companies and even ex-regulators who offer these services at various levels of cost.

This is one area where you truly get what you pay for. But rest assured, even making an investment of a few hours can have a significant positive impact and greatly reduce your legal exposure and risk.

For those of you who use AutoStar Solutions’ dealer management products, you’ve already taken a meaningful step by choosing a company that takes these issues seriously and provides robust management software. Now, though, you need to take it to the next level.

2) Look at your contracts and make sure the forms being used mirror the way you want to do business. Be certain that all of your folks are using them consistently.

3) Realize that compliance is a lot bigger than just using the right forms. It involves putting your entire business under scrutiny and proactively seeking to uncover problems before someone else finds them for you. So examine all of your paperwork for consistency. It may surprise you that, in many cases, documents contradict each other, or one document may even unintentionally take priority over the other.

4) When I was conducting these assessments in private practice, I’d usually throw my clients a curveball early in the process and ask to review all credit declines. This is an often-overlooked area that holds much legal risk because adverse action litigation has become commonplace. It won’t take long for someone with training to determine whether there is a flaw.

5) After that, I’d analyze repossessions and charge-offs, looking to see that the collection letters are compliant and also that the overall collection strategy didn’t raise a concern.

6) It’s important to review all of the Uniform Commercial Code Article 9 letters because the statutes tend to be detailed, and many dealers don’t realize that even cutting a line or two to make the form fit on a page can eliminate required information and create risk.

7) It is necessary to check the surplus/deficiency letters if you are looking to collect a deficiency balance.

8) A thorough review will also include using a “private shopper” to walk the lot, examine the cars’ stickers, and interact with the sales staff to discover any bad habits. This simple step usually provides substantial information on the legal “health” of the dealership.

Again, the purpose is to make sure that the practices are consistent with the way the dealer intends to do business. If you want a good place to start when designing a compliance audit, have it mirror what the regulators examine when they come knocking. If you’re truly committed to achieving 100 percent legal and regulatory compliance at your dealership, your final – and most important – step is to invest in high-quality compliance education. I may be biased, but AutoStar’s 2014 Innovate conference is the best place I know of for this kind of meaty, focused learning.

With 10 back-to-back compliance sessions – including an Ask the Lawyer panel and a Q&A with former CFPB Assistant Director Rick Hackett – you will no doubt walk away with every tool you need to avoid legal and regulatory troubles. In addition to compliance classes, you’ll also have access to a full schedule of technology and industry education. Finding a way to attend this conference is a no-brainer if you’re ready to take your dealership to the next level.

This article is provided for informational purposes and is not intended nor should it be taken as legal advice. The author is licensed to practice law in Texas.

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