F&I and Showroom, August 2017

www fi magazine com 44 F I and Showroom August 2017 ACE A As the industry is moving in varying degrees from manual processes to digital processes the desking process is one process that is ripe for digitization perhaps even at the top of the list of the processes that should be converted We have a few working theories in our consulting practice These working theories help us to focus on probable areas of concern as we begin reviewing deal files One working theory is that if a dealership is still buying Sharpies to complete paper foursquares we will probably find a higher percentage of packed payments or potentially discriminatory pricing thats if we can fully decipher the scrawl and figure out whether the green Sharpie is the first pencil or the final agreement At the least we usually find that there is not a consistent approach to quoting the first pencil There are two primary sales processes in the industry today Some dealers will not quote payments during the sales process and focus on negotiating the trade difference before TOing the customer to F I Other dealers employ a process where the focus is on the payment from very early in the sales process Some dealers use a combination of the two For dealerships that quote payments as part of the sales process there are many compliance pitfalls a dealer must guard against Working the trade difference is not as susceptible to compliance issues after all if you dont quote a payment you cant pack a payment The first potential compliance issue with quoting payments is an expectation from the Dark Side that the payment quote is accurate for what is disclosed and contemplated at that point in the negotiation One contingent of the Dark Side the attorneys general coined the phrase payment packing around 30 years ago and considers it a deceptive practice Payment packing can take many forms such as including undisclosed F I products in the payment quote using an undisclosed short term to artificially increase the payment using a rate that is higher than the known rate if an approval has already been obtained extending the number of days to first payment or shortening the number of payments per year Of course the old school ubiquitous leg is packing a payment It can be difficult to detect some of these methods with a colorful confusing four square Maybe thats why some sales managers or general sales managers insist on keeping their paper forms and buying Sharpies Another problematic issue with quoting payments can be perceived discriminatory pricing If I conducted an analysis of the first pencils during a period of time and the results show that any of the protected classes under the Equal Credit Opportunity Act were quoted higher rates than the rest of the deals an allegation of discriminatory pricing could be leveled Many dealers who quote payments during the sales process have implemented a policy on how first pencil payments are to be quoted Essentially it depends on whether the credit score is known or not If a credit bureau has not been pulled the dealer requires that an average rate be used to quote the first pencil If a credit bureau has been pulled a published rate matrix determines what rate must be used on the first pencil Additional policy requirements include the disclosure of term no more than 45 days to first payment always use 12 payments per year do not include undisclosed F I products do not add leg and keep the payment spread to 5 or less While a kink can still pack payments using an edesking system just as easily as if she were still using a Sharpie and a four square the edesking system tracks the history of the pencils Using such software I can tell what the first pencil is and if it is compliant with the dealerships desking policy I can tell if the manager had a credit approval in hand and quoted a payment in excess of the approvals max rate I can tell if the number of days or number of payments per year were manipulated to pack the payment In fact it is easier for me or a member of the Dark Side to verify that the payments are packed when an edesking software is used This is a huge benefit for the dealer principal to understand who is following the dealerships desking policy and compliance training and who the rogue kink is ABOUT THE AUTHOR Gil Van Over is the executive director of Automotive Compliance Education ACE and the founder and president of gvo3 Associates Email him at gvo@ bobit com Setting Up the Edesk Continuing with his noble effort to define the edealership the magazines resident compliance pro explains why the desking process is ripe for digitization BY GIL VAN OVER IT CAN BE DIFFICULT TO DETECT SOME OF THESE METHODS WITH A COLORFUL CONFUSING FOURSQUARE MAYBE THATS WHY SOME SALES MANAGERS OR GENERAL MANAGERS INSIST ON KEEPING THEIR PAPER FORMS AND BUYING SHARPIES