Like me, I’m sure you’ve heard some classic responses in your years in the industry. I seem to be hearing them more often than ever now when discussing compliance issues with dealers and agents. Here are three of my favorite excuses when dealership managers try to explain away a compliance violation.

Knowledge is recognizing the difference between a reason and an excuse. Wisdom is acting on a reason and dispatching an excuse. 

1. “He's too stupid.”

We discover that the base payment on the menu has been packed in order to facilitate the sale of F&I products. The F&I manager increased the number of days to first payment from 45 days to 345 days. The result is the interest for the additional 300 days is capitalized behind the scenes and a new payment is calculated, but the amount financed does not change.

Sometimes when we bring up this scenario, a manager will invariably state, “He’s too stupid to figure that out.”

So let me get this right: You trust a manager in charge of spinning an average of 75 deals each month. If the average amount financed on these deals is $25,000, then you have effectively entrusted someone that is “too stupid” for close to $2,000,000 a month in receivables for your company. Kinda’ begs the question, doesn’t it?

Our response: If he is too stupid, then someone else figured out how to use this scheme to pack payments and has implemented it into your system. Let’s figure out who the mastermind is and take appropriate behavioral modification actions. Let’s also lock down the system so the number of days to first payment cannot be manipulated.

2. “Just a backup,” or “She’s/He’s new.”

Most F&I managers get a day off during the week. Customers don’t stay away on the F&I manager’s day off, so someone has to spin the deal. In some cases, it is a sales manager who used to work F&I. In other cases, it is a salesperson who aspires to be in an F&I position.

There is also a certain level of turnover in this industry. In most cases, when we make a return visit to a dealer, there will be a new person in an F&I position.

Deals from backups or green peas invariably have compliance issues, either from not following the dealership’s prescribed processes, missing required documentation, or overlooking mistakes. “Just a backup” or “She’s/He’s new” are excuses often provided during the findings recap session. 

I’ve read a few depositions where the dark side attorney attacked the backup or new F&I manager on the transaction with questions such as “How much training were you provided in the areas of Truth in Lending? Red Flags? Used Car Rule? Equal Credit Opportunity Act?”

When the response is “Little or none,” it damages the credibility of the dealership’s professed processes and the sanity of the dealer for putting someone in charge of a transaction without adequate training.

Our response: Ensure that anyone completing an F&I transaction is trained and certified. The backup must be held to the same standards as the person who normally sits in the seat.

3. “The desk set up that deal.”

Sometimes when we discover that the subprime acquisition fee has been added to the price of the vehicle, or the deal includes a side loan of cash back to the customer, a dealer’s response has been, “The desk set up that deal,” as an excuse for the F&I manager.

Our response: The F&I manager must be your watchdog for compliance concerns. She must have the ability to stop a deal if there are compliance violations. He cannot deliver a deal he knows is a straw purchase, or where there are unresolved indicators of identity theft. Just because the desk gave her a deal that is fraught with potential violations, she does not have to spin the deal that way. Corrections must be made.

Additionally, we look at approximately 20,000 deals a year from nearly every state. On average, 68% of the compliance issues we note in a full compliance review either germinate in sales or are a sales function. Sales managers should be trained, certified, and held accountable for their portion of your dealer’s compliance quotient.

Knowledge is knowing a tomato is a fruit. Wisdom is not putting it in a fruit salad. Knowledge is recognizing the difference between a reason and an excuse. Wisdom is acting on a reason and dispatching an excuse. 

Don’t let these non-excuses for non-compliance derail your dealership’s compliance efforts.

Stay safe, good luck, and good selling!

Gil Van Over is the executive director of Automotive Compliance Education (ACE). He is also the founder and president of gvo3 & Associates.