The commotion in your service department sends a shock wave through your entire dealership, and you, the dealership, arrive just in time to witness one of your service technicians being handcuffed through the hood of a vehicle for service.
Your technician has been charged with stealing the checking account number from an old checkbook register in the glove compartment of a service customer and then emptying the customer’s account.
So what are the limits of an auto dealer’s liability due to their dishonest employee? Compliance certainly cannot be an issue because your DMS representative and even your garage liability provider have assured you that with their particular compliance solutions, you are fully compliant.
However, the victim’s attorney, the law firm of Dewey, Cheatum and Howe, then request a copy of the Gramm-Leach-Bliley Safeguards Rule Policy from your dealer and documentation of total staff training (I have Has your service staff been trained?) as required by federal regulations. Contact your trusted DMS and shop accountability representatives for assistance in providing the documents, only to find there are none! When they assured you that you were compliant, it turns out they meant you were only complying with the Red Flag Rule, OFAC, and Do Not Call scans, or in other words, just a small part of the required automotive dealer compliance.
Although the safeguards rule does not provide for identity theft victims to directly recover losses and damages, rest assured that the victim’s attorney will use your “deliberate breach” to force a grand deal or use it as a high point of your opening statement to the jury in litigation against you … and you know how jurors simply love car dealerships. And do we need to mention the potential for class action with some regulations?
But it only gets worse. Now the feds are investigating and looking for what they call “an atmosphere of compliance,” and they are also demanding to see the same compliance documentation that the victim’s attorney requested. So what is your responsibility to the federal government? The fine is $ 11,000 per day, retroactive to May 23, 2003! In other words, tens of millions if you wish.
Oh, and in case you didn’t know, there is no such thing as “good insurance” provided by your garage insurance company; They will represent you, but you are alone when it comes to paying the fines and penalties.
Car dealerships: creating and maintaining a “Atmosphere of compliance”.
So what about the other federal regulations like the Red Flag Rule, the Do Not Call Act, and the OFAC and FINCEN regulations of the Patriot Act? They also require distributors to have a formal written Policy and documentation of formal staff training for each.
And then there are other dealership compliance regulations where lack of staff training has cost dealers hundreds of millions in recent years; Truth In Lending, fraud issues, sexual harassment, diversity issues, and the Magnuson-Moss Warranty Act. Here are some examples:
– A car dealer loses $ 92 million in a jury verdict because a seller said only one thing wrong regarding the Magnuson-Moss “guarantee of fitness for a specific purpose”.
– A merchant is forced to settle a diversity harassment claim for $ 400,000.00.
– Multiple merchants, managers and vendors across the country served prison terms for fraud and Truth in Lending violations.
– A car dealership resolves a sex and age discrimination case for more than $ 1.5 million.
In each case, there was no evidence that the automotive dealer was promoting an atmosphere of compliance … specifically, there was no formal training on dealer compliance.
So how can car dealers create and maintain an atmosphere of fulfillment?
1. Appoint a dealer program coordinator to oversee your dealer’s compliance performance.
2. Have implemented all required Concessionaire Compliance Policies signed by employees.
3. Provide training to all designated personnel at least once a year with documentation available for government inspections or litigation actions. (Note: simply allow staff members to read and sign the required Dealer Policies IS DO NOT considered training under these regulations.)
4. Provide all required Compliance Training and Signed Policies as part of your hiring process complete with documentation.
5. Perform annual compliance inspections and audits annually, once again, with documentation on file.
The question: “Did the merchant use reasonable efforts to prevent this violation from occurring, and if so, where is the evidence?”
Virtually all fines, penalties, litigation, or compliance arbitration decisions by automotive dealers revolve around this single issue.
In fact, any self-respecting attorney will tell you that the only true defense in dealer compliance litigation is being able to provide documentation of compliance performance – again, specifically, staff training.
Legislators understand that you, the dealership, cannot see every move that each of your employees makes while conducting business, but they provide you with the opportunity to perform dealership compliance items to mitigate liability, or even in some cases, to benefit. the state of safe harbor.
Therefore, in the eyes of the law, any merchant who chooses to ignore the required compliance compliance does not respect the consequences, and generally juries and feds seize that opportunity to accumulate it.
Is there only one way to get rid of the “compliance monkey”? Take care of it right now!