Are You Losing the Compliance Battle?

The stakes have never been higher. The combination of the Pennsylvania Attorney General and the Department of Banking are making life more difficult for dealers. To learn how to succeed in this environment, it’s important that you attend the MidAtlantic Independent Auto Dealers Conference this October in Atlantic City. I’ll be there, joining Patrick O’Brien of NIADA and Corinne Kirkendall of PassTime on Monday morning, October 5th, to discuss Regulatory developments, and there are classes that will focus on many of the key functions of your business. Make plans to Win This Battle by attending this important event.

Did the title of this article hit a nerve? For a large portion of this audience, the answer to that question is a resounding “YES”. Many of you are not meeting your compliance obligations and are fighting a losing battle. I can list a bunch of reasons:

• the explosion of state and federal regulation over the past 25 years
• state regulators figuring out that levying fines against dealers can produce a healthy income stream
• the CFPB mandates that businesses of all sizes comply with consent decrees it enters into with some of the industry’s largest participants (regulation by enforcement)
• the media
• Plaintiff’s lawyers
• the internet
• Consumer Use of AI to attack dealers

All of these contribute to your struggles to varying degrees. Who cares? It doesn’t really matter how we got here, the fact is we’re here, and a good many of you leave yourselves open to attack by not making any sort of meaningful commitment to invest in compliance.

The “If It Ain’t Broke, Don’t Fix It” Mentality
Why? Many of you have a case of the “YETS”, meaning you think “it hasn’t happened to me yet” is a worthwhile strategy. Similarly, the “If It Ain’t Broke - Don’t Fix It” approach provides you a false sense of security and helps you sleep at night, but allowing compliance initiatives to continually get placed on the back burner behind business priorities means that the same problems continually repeat themselves and the risk just continues to compound.

I hate to hit our fine readers over the head with reality, but lots of folks are falling far short when it comes to their compliance function. Too many of you either think you’re too small a target, it will never happen to you, or that you can buy your way into compliance through software, policies and procedures or whatever other magic potion of the month is being thrust upon the industry. Save your money, because if you truly want to develop the fabled “Culture of Compliance”, you’ve got to COMMIT to building your COMPLIANCE INFRASTRUCTURE, and that’s a lot more work than simply buying a product or service.

Put a Plan in Place
Strong compliance starts at the top. It’s my observation that the dealers with the most successful implementation of compliance initiatives have owners and other senior leaders willing to live and breathe compliance on a daily basis. They talk about its importance in meetings, take corrective action immediately when they see or hear something done incorrectly, send companywide emails with reminders, and emphasize it in personnel development plans. They don’t wait for a customer complaint or letter from a Plaintiff’s attorney to take action, they have a plan in place and measure progress on a regular basis.

Let me provide an example to illustrate this point. I have a client that attends the industry conferences every year and makes it a point to attend my compliance classes. Each year, he returns home with some great information and educational materials. Being a leader that understands the critical importance of compliance, he doesn’t simply put them on the shelf, never again to see the light of day. Instead, he uses those materials to train his staff and then has each employee sign a sheet of paper that acknowledges receiving this training. Sure it takes some work, but think of how he stretches the value of the money he spends to attend these events. Not only has he disseminated that knowledge so that his employees can do their jobs better, but he can demonstrate his compliance efforts if he needs to do so.

Giving Them the Badge But Not the Gun
Contrast this mind set with the many dealers that make the common mistake of trying to “buy” their way into compliance through policies that never get implemented and certainly never get rolled out to employees through training. Similarly, many dealers are guilty of hiring a “Compliance Officer” in name but don’t offer anything in the way of training or resources to bring about success. These “officers” are usually high achievers and loyal employees from other parts of the business that quickly fall prey to the “Peter Principal” because they have no background in compliance. In Texas, we call that “giving them the badge but not the gun”. The results are often underwhelming, to put it kindly. For those reading this and shifting uncomfortably in your seats, ask yourselves this question: Are you comfortable with your Compliance Officer dealing directly with a state or federal regulator on an audit or other complex matter?

Conclusions
The need for a foundation and structure of compliance continues to increase. The rules of our business have changed and your businesses are at risk if you don’t change with the times. It’s time to give your compliance function the same commitment, resources and attention as the parts of the business that generate revenue, and acknowledge that falling short in this area can cost you that revenue you’ve worked so hard to create.