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Dealership Compliance

Who’s Liable for Dealership Compliance?

The vast majority of dealers want to follow the letter of the law but often have difficulty keeping up with the constant stream of new legislation impacting their business. Unfortunately, ignorance is no defense to a violation and sometimes what you don’t know can land you in jail.

Having worked on the line, desked deals, and managed finance departments, I can personally attest to the state of legal compliance within dealerships and it isn’t often great. Worse, new areas of dealer liability continue to arise as new laws go into effect. The vast majority of dealers want to follow the letter of the law but have difficulty keeping up with the constant stream of new legislation impacting their business. Unfortunately, ignorance is no defense to a violation.

WHO IS RESPONSIBLE FOR LEGAL COMPLIANCE?
The responsibility for legal compliance within a dealership falls directly on the dealers’ shoulders. Dealers themselves are ultimately responsible for the actions of their employees. Thus, if your desk manager is caught packing payments, your finance guy fails to make the required disclosures, or your lot attendant fails put the buyer’s guide on every used car, the store is responsible. As unfair as it may seem, when your employee screws up, all dealership liability falls to the dealer.

VET YOUR SOURCE OF LEGAL COMPLIANCE
Dealers have a tremendous incentive to ensure that their employees understand and abide by the law.  Accordingly, it is of the utmost importance that dealers obtain regular compliance training. Many dealers depend on third-party vendors to train their staff in legal compliance but most neglect to verify that the trainer is an attorney licensed in their state. This is a serious problem because the dealer won’t be able to use their compliance vendor’s incompetence as an excuse for violations. Take care to properly vet your compliance trainers before giving them free rein because you will ultimately pay for their mistakes.  The best way to ensure keep dealership compliance is up to par is to find a licensed attorney whose practice focuses primarily on auto dealerships.  In the event your attorney is wrong about some information they provide you, they should have a malpractice policy that will cover the mistake.

IMPORTANCE OF CERTIFICATIONS
It is often difficult for the uninitiated to separate reliable resources from bad. One of the considerations should be to determine where the “source” gained his/her experience.  Is the trainer licensed to practice law in your state? Another consideration may be how much weight they place in certifications. If your “expert” hasn’t even taken the time to obtain a certification in the basics you should be skeptical about the depth of their knowledge and their devotion to compliance training. What your expert does not know can hurt you.

DEALERS CANNOT DEPEND ON INSURANCE
As most dealership cases involve Consumer Protection Act claims, the dealership’s insurer (whether general liability or other) will reject coverage for reason that allegations of false, misleading, or deceptive conduct are specifically excluded by provisions of the relevant insurance policies. Accordingly, when a violation occurs, dealerships routinely end up having to bear the entire burden of legal fees themselves.