A dealership’s Compliance Management System (CMS) must ensure the business’s compliance with numerous federal and state laws and regulations inherent in the operation of a retail automobile dealership.
To be effective, a CMS must have these four interdependent control components:
- Ownership/board and management oversight;
- Compliance programs;
- Tracking and responding to consumer complaints; and
- Compliance audits, policy reviews, corrective action, and policy and procedure modifications as required.
Ownership oversight and involvement in a dealership compliance program is not only necessary, it is imperative. Government regulators understand, as do management gurus, that employees will prioritize that which is important to ownership. If ownership treats compliance as an afterthought, all the training in the world will not create a culture of compliance.
Regulators recognize the key to having ownership involved in dealership compliance. At the start of an examination, government officials will review:
- Board meeting minutes and supporting materials during the period under review for coverage of compliance matters;
- The role of the chief compliance officer and his/her authority;
- Training of board members and ownership;
- Compliance budget; and
- Compliance reports to management.
As an owner, ask yourself:
- When was compliance last discussed at a board meeting?
- Does the dealership compliance officer have authority within the dealership?
- Does the compliance officer have access to upper management and ownership for compliance-related issues?
- Does the dealership have budgeted funds for compliance?
- Are compliance reports reviewed by ownership and upper management regularly?
If you are not sure of the answers to these questions, the compliance system in place is more fluff than substance. Compliance malaise by ownership is hard to understand because:
- Who pays for compliance errors and violations? No money comes out of the employee’s pocket for failure to comply.
- Fines, settlements, litigation costs, and consumer remuneration all get paid from dealership profits.
- Put another way: You, the owner pays.
Protecting your profits and investment requires active participation in the creation, implementation, review, and modifications to your dealership’s compliance management system. Ownership buy-in to a CMS is noticeable. In those dealerships where ownership takes an active role in compliance:
- All employees know their responsibility;
- Errors are discovered and corrected before they become costly; and
- Department heads know of their compliance obligations, and authorized to take actions necessary on compliance issues.
With ownership fully on board, and engaged in the dealership compliance program, it is time to assess risk, and create compliance programs and policies to address them.
For more information on this subject, contact the author or visit the Automotive Compliance Consultants Inc. website.
David R. Missimer, [email protected], is General Counsel for Automotive Compliance Consultants Inc. (www.compliantnow.com). He spent 28 years in private practice as a seasoned litigator and trial lawyer representing lenders, auto dealers, and numerous other entities and individuals. He has worked with dealership compliance issues since 2003. He joined Automotive Compliance Consultants in 2003. He is a member of American Financial Services Association and National Automotive Finance Association.