Tom Kline

Lead Consultant & Founder | Better Vantage Point

Tom Kline, a former franchise dealership owner with 30+ years of experience, specializes in risk mitigation by preventing and solving dealership problems through risk transference remedies, compliance, and dealership dispute resolution. Tom is the Lead Consultant and Founder of Better Vantage Point and has worked with both publicly-held and private dealerships. Kline speaks at national conferences and workshops, writes for six (6) publications, and has endorsements from multiple trade groups. Thanks for seeing things from a Better Vantage Point, where “We Get You Out of Trouble…and Keep You Out of Trouble.“

The Best Parking Lot Strategy

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I'll be in trouble with my wife if she finds out I told you this.  Do you have a strategy for getting the best space in the parking deck? From my personal observations, most folks tend to drive onto the lower decks and try to (maybe) find that perfect space as close to the door/stairway as possible. They will circle and circle (like airplanes waiting to land) trying to get the best space. It takes a while to find, they end up disappointed, and proceed to the next level up. Then, they do it again. (Rince, wash, repeat.) Perhaps, just maybe, there’s a better way? Consider this. Instead of trying to cram your way into the last space on Level 2, why not just drive higher to the top or the second to the top level?   You can get there quickly. You can get yourself pretty close to your preferred entrance door. (Some alleged “pros” have told me you never want to park on the top deck because of the blazing sun on your vehicle and potential to get wet if it rains.) Ha!  I’ll buy the rain argument, but unless you’ve spent as much time as I do at airports, I am going to waive you off the flight pattern with that sun related philosophy.  The added driving, elevator, or stair time is minimal compared to circling the lot like a shark.  It’s less stressful, you’re done, and on to your next task.  AmIright?  Sometimes, you just need a different perspective. Same task, same outcome, better process.   Let’s discuss the insurance renewal at your dealership. Does this sound familiar: Once a year, your insurance agent comes to visit and to deliver this year’s bad news. Your premium is going up on every single policy. Without question, they arrive in your office one (1) week ahead of your renewal so there isn’t any time to maneuver or negotiate. You’re irritated. “This isn’t right,” you say to yourself. Then, you swallow hard and tell him to renew everything and (almost) throw him out of your office – banished for another year. Sound familiar?  Here’s a different perspective and a better way. First, spread your insurance renewals throughout the year.  Don’t have all of them renew at once. Second, require your agent to bring you the quotes thirty (30) days ahead of the renewal date. In the case of the garage renewal, because of its complexity, I suggest ninety (90) days.  This accomplishes multiple things: You’ve created an opportunity to review and renew each policy calmly, carefully, and without stress.   You’ve given yourself the option of having enough time to review the actual policy forms. This allows you to consider where your vulnerabilities lie and determine if there are ways for you to cover these through the insurance policies. By requiring your agent to give you the new numbers ahead of time, you’ve opened up the option of your negotiating with the insurance company about either (1) the policy form itself or (2) the premium. You will be less aggravated. For certain, you will be able to exercise control over your policies. Maybe you will send the agent to get prices from another carrier? Maybe you will ask the carrier to come visit you or you go to their offices to talk about the policy and renewal? Perhaps, you can discuss how claims are handled and how that effects your renewal premium?  In short, you gain control. I would proffer that’s a better way. By the way, if I find our favorite parking spot on Level 7 of the Norfolk, Virginia airport parking lot blocked, I’m going to be in trouble with my wife. Please be gentle with me!   
10 + 10 = Exposure

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Answers these questions honestly: Do you have a Compliance Management System (CMS) and whose responsibility is it? When was the last enterprise risk assessment to ensure all personal and dealership assets are protected? (Who has looked at the “big picture?”) Who trains the staff about compliance and how often? Has anyone ever done an analysis of your insurance policies to determine if there are any holes in your coverage?   Do you have a process at the dealership to find and fix online consumer complaints? Do employees have a channel and mechanism to bring their complaints to the attention of management?  When was the last update to the Employee Guidebook? Do employees sign a Legal Rights Agreement? Are you using arbitration to settle disputes with consumers? (In practice, do you understand why this strategy is highly ineffective?) Are you prepared for a local media story? Do your employees know what to do, what to say, or who to direct the reporter to? Who audits your websites on a monthly basis to ensure compliance with advertising laws? Who inspects your other advertising?    Does your dealership have work to do?  Any one of these issues could cost you a lot of money.   Remember, it’s not how much money you make that’s important.  What’s critical is how much money you keep! Consider the “what if.”  What if…this were to happen or that were to happen?  How would you handle it? If those ten (10) didn’t stimulate you enough, here are another ten (10): What would you do if a regulator walked into your dealership? Do you have a plan as to how you would handle that situation One very large dealership group with more than eighty (80) stores allowed the Federal Trade Commission (FTC) to survey its customers to ask them about potential dealership wrongdoing.  What would be your thinking here? How would you handle that?  Have you started your work on the new Gramm Leach Bliley regulations?  The deadline is December 9. Unfortunately, the new regulations are complicated enough that you cannot simply write a check for an “app” to be compliant.  Some of your work will require good ol’ fashioned shoe leather.  Is anyone tracking how your waste (oil, batteries, tires etc.) is being disposed of and have you ensured your vendors have the adequate insurance to protect the dealership if it’s not handled properly?  Do you have a recall policy for your used vehicles?  Whether or not the used car is “your brand,” did you know the dealership would likely be liable if a customer were in an accident as the result of an unfixed recall? Have you ever checked to see how your IRS 8300 processes are working?  Are your cashiers receipting in monies with enough detail for you to track the transactions?  (Did you know the fines for non-compliance are up to $3 million and potential jail time?)  Did you recently inspect your Red Flag compliance?  Are your F&I managers just “blowing past” that screen and selling vehicles without paying attention?  This is a critical issue which will help in your defense if you are ever taken to court for selling a vehicle to someone with a stolen identity. As a dealership, are you sending out Adverse Action Notices in compliance with the Fair Credit Reporting Act (FCRA)?  Failure to send these could result in a class action lawsuit to include punitive damages for “willful non-compliance.” Are you selling repossessed vehicles or salvage vehicles without disclosing this status? Does your staff know how to handle an Office of Foreign Asset Control (OFAC) “hit” on a potential buyer’s credit application?  Do you have a procedure in place?   These questions are but a few of the concerns for your dealership when you are thinking about your daily risk.  As one dealer friend of mine advises, “Button up!”. Another says, “Stop everyone from reaching into your pocket!” Practice your “what ifs” and prepare!   In my experience, it’s not necessarily “if,” but “when!” Watch the YouTube video here . Check out Tom Kline's YouTube Channel for relevant information which is at the forefront of sharing preventative measures and insightful actions that you can take today to protect your dealership.
Let The Government Be Your Customer Service Department!

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Three super-large dealership groups are trying it!   Here’s how it’s going for them so far… Carvana lost the ability to transact in Illinois according to  Automotive News  (May 16, 2022) because, “The Secretary of State's police department opened an investigation into consumer complaints about Carvana in February, (Henry) Haupt told  Automotive News . The investigation spans about 90 signed complaints, Haupt said. He said he couldn't provide an exact date as to when Carvana might see the suspension lifted.” According to a press release from the Texas Attorney General’s Office: “Texas Attorney General Ken Paxton filed a deceptive trade practices lawsuit against the online used vehicle dealer Vroom Automotive LLC and Vroom Inc., which also sells cars to Texas consumers under the name Texas Direct Auto. The lawsuit alleges that Vroom has misrepresented and failed to disclose significant delays in transferring clear title and obtaining vehicle registrations, burdening thousands of consumers. The State also alleges that Vroom has misrepresented and failed to disclose vehicle history and condition and terms of financing and approval—all violations of the Texas Deceptive Trade Practices Consumer Protection Act. According to the lawsuit, Vroom has not managed its growth effectively, leading to inadequate systems and procedures that have harmed Texas consumers.  Over the last three years, consumers have filed over 5,000 complaints with both the Better Business Bureau and the Office of the Attorney General against Vroom and Texas Direct Auto.”  According to the Federal Trade Commission’s (FTC) Press Release dated April 1, 2022: “The Federal Trade Commission and the State of Illinois are taking  action against Napleton , a large, multistate auto dealer group based in Illinois, for sneaking illegal junk fees for unwanted “add-ons” onto customers’ bills and for discriminating against Black consumers by charging them more for financing.  Napleton will pay $10 million  to settle the lawsuit brought by the FTC and the State of Illinois, a record-setting monetary judgment for an FTC auto lending case… A survey cited in the complaint showed that 83 percent of buyers from the dealerships were charged junk fees for add-ons without authorization or as a result of deception. One consumer cited in the complaint reported that the dealership located in Arlington Heights, Ill., charged him for nearly $4,000 in add-on fees after he’d paid a similar amount in down payment.” So, from the outside looking in, it appears these three (3) organizations do not have procedures in place to handle their customer queries, issues, and problems. So, by default, by attrition, or by apathy, they are ceding control and allowing the regulators to fine them and suspend them, thereby driving the dealerships to manage their own business affairs. (Good pun, right?)                                                                                                                 In the Napleton matter, a staggering 83 percent of buyers said Napleton took advantage of them. Let’s examine that statistic even further. In order to gather the information about the 83 percent, Napleton had to allow the FTC to have access to its customer files.  The FTC must have had quite a lot of leverage for Napleton to agree to give them that access.  Further, 83 percent cannot be simply “miscommunications” or “misunderstandings.”  It’s an astonishing number which cannot be explained away. Let’s keep this simple: Handle your customers or the government will.  
Six (6) Perspectives On The New GLB Safeguard Regulations

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The new Gramm Leach Bliley Act (GLBA) regulations aren’t going away and become effective on December 9, 2022. You don’t have to agree, but you do have to comply. If you haven’t started already, it’s time to begin the work of parsing out how you will respond. I’ve asked various industry experts to chime in on how you should focus your efforts. Here’s what they had to say: Atul Patel CEO, Orbee  “Occasionally you get a nudge to rethink what you’re doing. While it might feel like it’s more an elbow to the ribs, the FTC Safeguard Rule that is part of the Gramm-Leach-Bliley bill is forcing auto dealerships to take their customer’s data security seriously. We find this to be the biggest opportunity for dealerships to   take back control over your data that is created on  your  properties, from  your  media investments, by  your  customers. When your shoppers give you their Personal Indentifiable Information (PII), they believe it was to you. But what is more likely is that it was to a third-party such as a trade-in tool, credit form, chat, and so on. We restructure the way data is created, stored, and activated. This offers the clearest path to Safeguard Rule compliance while benefiting your customer experience.” Jim Lawrence  COO, Sensitive Data Protect, LLC “There are 5 steps dealers should take to establish a good-faith compliance effort to address general cybersecurity, the FTC's Safeguard Rules, the ongoing battle against "phishing," and ransomware attack prevention:  Perform cybersecurity testing to find gaps in consumer facing IT infrastructure and behind your firewall.  Establish the policies and procedures and trainings to address the gaps and evaluate the investment options for ongoing IT security preventative measures. Make sure to review the difference between a "bundled" approach to cybersecurity versus a piecemeal, single-point solution.    Partner with an experienced automotive service provider who knows where the sensitive consumer data hides on your DMS and the third party software applications that share your client and prospect database.   NOTE : Dealers' are now responsible for their customer data. Their liability doesn't stop at the edge of their lot, it now stretches out to your third party dealer service providers. Approach your cybersecurity insurance provider about all this "Good-faith Compliance Effort" because they value and reward dealers with lower premiums and deductibles who attend to the needs of their cybersecurity in a "bundled" more comprehensive way.    SPECIAL STEP : If you're in the buy/sell due diligence process or even considering it, show your dealership's ability to protect its operational and sales value other dealers can't with the documentation of your good faith cybersecurity effort.” Michael Tuno President, ARMD Resource Group, LLC “In October of 2021, the FTC updated the 2003 Safeguards Rule to reflect the sign of the times.  While the industry is buzzing about this update as if it is something new, it simply is a rule that is reflecting the current state of the industry and the ever-growing risk to dealers with protecting customer’s information, both paper and  digital. The term “qualified” has been added to describe the seemingly elusive role in a dealership of a “CCO”.  The need to document all the digital audits and deploy the risk mitigation steps like multifactor authentication etc. have been added.  An incident response plan to document the dealer’s plan to deal with a breach has been added.  Vendor risk management continues to be a critical task, even since the 2003 days. The FTC is going to hold third parties responsible for any customer information in a more stringent light.  At the end of the day, on December 9, 2022, dealers are advised to document all these updates to the Safeguards Rule.  If it isn’t documented, it didn’t happen!    At $43,792 per day per violation, not to mention UDAAP or UDAP, (especially if you are using the FTC boilerplate privacy policy at your store), it can get very expensive very quickly if this law’s requirements aren’t met.  Déjà vu!” Hao Nguyen General Counsel, ComplyAuto “What we've seen is that the revised federal Gramm-Leach-Bliley Act's Safeguards Rule ("Revised Rule") continues to confuse dealerships across the country on how to exactly fulfill these new obligations. Many folks are talking about it -- their attorneys, state and national trade associations, and other dealers -- but none of them provide a cost-effective solution to meet the dealers' needs.  We work closely with a dealership's IT company or third-party managed service provider ("MSP") as two halves to a pair of scissors to get the dealership fully compliant with the Revised Rule. We help create required documentation (the Information Security Program and all of the required plans that go with it), provide employee security awareness training, execute phishing simulations on employee emails, perform penetration testing and vulnerability scanning as well as risk assessments at the dealership, and help manage vendor requirements in signing Data Processing Agreements and completing vendor risk assessments. Not only will this help fulfill the Revised Rule but also potentially affect cybersecurity premiums. If your clients have not experienced it yet, dealerships across the country tell us that their quoted premiums have increased two to three hundred percent for this year. Implementing our services to bolster your data protection and cybersecurity protocols will go a long way in showing them that you place a priority on data security and will possibly reduce your cybersecurity premiums (or get coverage in the first place).” John Acosta  CEO, Vtech Dealer IT “Compliance is like a marathon. Come the end of the year; you want to be on mile 22 rather than mile 3 of the race. Some of the GLBA compliance requirements are major systems upgrades that take time to set up properly. Start planning now.”    Of course, he’s right.  Here are other GLBA considerations: Is all of your customer data encrypted? Do you have endpoint protection throughout the dealership? Do you have a data retention policy in place? Have you implemented multi-factor authentication (MFA)? Do you have a written “incident response plan?” Have you completed cyber training for all employees?  …and there’s more… To practice optimal risk mitigation, here, begin by figuring out where your biggest areas of vulnerability are and build out your program from there.  Feel free to reach out to any of these folks (including me) if we can answer any questions.  We are happy to receive your call.  Cheers!    
Oops They Did It Again

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Oops, they did it again.  I just unpacked my new desktop computer, screens, camera, and enough cables for you, me, and every adult on the planet. (Well, not quite but definitely an abundance!) Along with my new goodies, I purchased, and I quote, the “Download Microsoft Office Home and Business 2021 All Languages Online Product Key License 1 License.” (Please note “Business” is part of the title here.)  So, when I bought this, I had an expectation I could use it for my WORK as a consultant, because I run a “Business.” When downloading the product, it wouldn’t sync with my Outlook. At. All. (There’s no telling how many times I attempted this with different variations and permutations.)    After six (6) hours on the telephone and online chats with Dell and Microsoft “support,” and my web host provider, I learned I had purchased the wrong product. After much typing and chatting and phoning, I finally learned from these fine folks, you see, “Business” doesn’t actually mean I am able to use it for a “business,” because I was informed that “Business” is really the “Home” version. Insanely aggravating, right?  Silly me, I thought the word “Business,” actually meant you could use it for a business. The software I purchased was $229.24 for a one-time charge but now Microsoft told me the new price for you know – business business - was $99 per year. Honestly, after six (6) hours struggling with tech support, I really didn’t care, I just wanted this nightmare to end. (Doesn’t that sound like a customer coming out of F&I after a long transaction?) And please allow me to mention I resent the word “support” here because none was given!     My Microsoft situation is a textbook bait and switch advertising ploy and is in breach of federal laws. I’m sure Microsoft has plenty of lawyers to argue about this. (By the way, if you’re a class action lawyer looking for a new case, Microsoft might be your next target…) This story illustrates two (2) important considerations in running your store: 1.     If you are having customers accuse you of bait and switch advertising, examine both your website and your other ads, including television, radio, internet etc. (Have you, as the dealer, looked at your online reviews recently? This is a terrific way for you to “listen” to customer feedback.)  If the terms are not “clear and conspicuous,” then likely the ad would be considered deceptive in some way. Because of competitive pressures, I know some dealers who advertise this way intentionally (so BEWARE!) and some who do it unintentionally. Either way, if you pay attention to Joe Public’s feedback, you will learn about process kinks at your store, and you can improve on procedures and avoid false advertising accusations and problems.   2.     In my experience, there is (almost) always a disconnect between the advertising and the sales staff, which leads to claims of bait and switch. The ad agency or in-house ad person should be training the sales staff on advertising specials and how terms were calculated mathematically. When Sally arrives at the lot and requests the advertised deal, then the sales person should be able to articulate clearly “how the deal works” and understand how to communicate this to Sally courteously and effectively. Otherwise, when Sally is told she cannot get the deal, (for whatever reason the sales agent creates), she will be (rightfully) upset. This is a classic scenario where the dealership can make improvements and avoid pitfalls by conveying information to the customer clearly and concisely. This potential negative situation occurs when the sales agent simply doesn’t have the information to properly do their job.This is easily fixed through training.   There are both federal enforcement agencies concerned with these issues, as well as the state Attorneys General.  As an example, Pennsylvania’s Attorney General, Josh Shapiro issued an advisory on March 3, 2022 warning of unfair and deceptive practices which violate the Pennsylvania Consumer Protection Law. Here are three (3) salient points specifically about dealers directly from his advisory: Represent and advertise goods or services at their actual price, comply with the terms of warranties given to the buyer; and not engage in fraudulent or deceptive conduct which creates a likelihood of confusion or misunderstanding. Sell a motor vehicle under the terms or conditions, including price or warranty, which a motor vehicle manufacturer or dealer has advertised or otherwise represented. Disclose any hidden charges in any advertised price of a vehicle, as well as the expiration date of any advertised price. Don’t be the dealer who ends up saying: “Oops!...I did it again, I played with your heart, Got lost in the game…”  It didn’t go well for Brittany Spears in 2007 and it won’t go well for your business either.  If your sales staff gets lost in the game, and plays with customers’ heart, you are going to create irate prospects, which (1) you won’t sell, so you will lose the sale and, (2) even worse, these bait and switch behaviors will attract regulators and lawyers.   Then, it’ll be your “Oops,” which will lead to a hefty fine, lawsuit, or worse…both!
I Hope You'll Learn With Me!

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Insurance! (Insert full eyeball roll here.) An October, 2021 survey by Embroker stated that just 22% fully read through their insurance policy, 56% admit to not knowing the cost of their insurance program, 34% carry a cyber policy, 20% admitted to not knowing how their insurance is handled, and 30% allow their policies to renew without making any changes. Let’s change that starting right now! If you don’t understand your insurance, then reach out to a consultant or your insurance broker and ask for a complete review of your coverage.   Understand what insurance you have, what the limits are, and importantly, what policies you do not have.   Here is a thumbnail: Garage Policy This is your main policy which you would turn to cover dealership operations.   Automobile liability, premises liability, product/completed operations liability, customer’s cars.    The type of coverage and the limits matter. Property This covers your buildings and business interruption, should you have one. Worker’s Comp This policy handles worker injuries on the job. Dealer’s Open Lot Your vehicles are covered separately under this policy. This can be covered and included in the Garage policy except in high hazard/catastrophe prone areas. Cyber If you have a breach of your data or if the bad guys ransom you. Pollution Covers your waste (used oil, antifreeze, tires, batteries etc.) and their disposal.   If your waste isn’t handled properly, you can be help personally liable for these problems. Directors and Officers (D&O) Would step in for allegations of fraud and wrong-doing which protect the owners, officers, and employees. Directors and officers (D&O) liability insurance protects the personal assets of corporate directors and officers, and their spouses, in the event they are personally sued by employees, vendors, competitors, investors, customers, regulators, or other parties, for actual or alleged wrongful acts in managing a company. Crime Employee dishonesty.   Theft of corporate assets by an employee of the corporation. Employment Practices Liability This policy handles problems which arise with employees, such as discrimination, harassment, wrongful termination etc. Unusual Options You can protect yourself from most issues.   Here are some more unusual options: Product Recall   Kidnap and Ransom Active Assailant/Workplace Violence Loss of Franchise Communicable Disease Liability Computer Systems Failure Injunction Risk Loss of Key Employee Loss of Key Customer It’s likely if you can think of it, you can insure it. I try to learn every day and here’s one thing I learned this week:   parametric insurance.   So, we are going to learn about it and think anew together.   According to the National Association of Insurance Commissioners (NAIC) “the term parametric insurance describes a type of insurance contract that insures a policyholder against the occurrence of a specific event by paying a set amount based on the magnitude of the event, as opposed to the magnitude of the losses in a traditional indemnity policy. An example is a policy that pays $100,000 if an earthquake with magnitude 5.0 or greater occurs. The amount of payment, the parameter, and a third party responsible for verifying that the parameter was triggered must all be specified in the contract. The third party will usually be a government agency, for example earthquake magnitude could be determined by the measurement issued by the National Earthquake Information Center.” Dealers who have significant weather-related concerns might benefit from this type of coverage.   One of the benefits of parametric insurance is claims are paid more quickly as once the outside entity verifies the event, the insurance company pays so the monies are deployed and in the hands of the business more quickly. My hope for this article is getting you to consider the importance of your insurance program.   I say “program” as there should be a strategy involved and a monitoring and auditing component to it. Please reach out if I can answer any questions.