The commotion in your service department sends a shockwave through your dealership, and you, the dealership, arrive just in time to see one of your service technicians handcuffed on the hood of a vehicle for service.
Your technician has been accused of stealing the checking account number from an old checkbook register in a service customer’s glove box and then draining the customer’s account.
So what are the limits of a car dealer’s liability due to his dishonest employee? Compliance certainly can’t be an issue because your DMS representative and even your garage liability insurer 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 Howethen request a copy of your dealer’s Gramm-Leach-Bliley Home Rules Policy and documentation of full staff training (have Has your service staff been trained?) as required by federal regulations. You contact your trusted DMS and garage liability representatives to help you provide the documents, only to find there are none! When they assured him that he was compliant, it turned out they meant that he was only compliant with the Red Flag Rule, OFAC and Do Not Call scans, or in other words, only a small part of the compliance required by car dealers.
While the Safeguards Rule does not provide for identity theft victims to directly recover losses and damages caused by compliance, rest assured that the victim’s attorney will use your “voluntary unwillingness” to force a huge deal or use it as the highlight of your opening statement for the jury in a lawsuit against you… and you know how jurors just love car dealerships And do we need to mention the potential for class action lawsuits with some regulations?
But it only gets worse. Now the feds are investigating and are looking for what they call “an atmosphere of compliance,” and are also demanding to see the same compliance performance documentation requested by the victim’s attorney. 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 they wish.
Oh, and in case you didn’t know, there’s no such thing as “fine insurance” provided by your garage liability company; they will represent you, but you are on your own when it comes to paying the fines and penalties.
Car dealers: creation and maintenance of a “Atmosphere of Compliance”.
So what about the other federal regulations, like the Red Flag Rule, the Do Not Call Act, the Patriot Act OFAC, and the FINCEN regulations? They also require dealers to have a formal written policy and documentation of formal staff training for each.
And then there are other dealer 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 Guarantee Act. Here are some examples:
– A car dealer loses $92 million in a jury verdict because a seller said just one thing wrong about Magnuson-Moss “warranty of fitness for a particular purpose”.
– A merchant is forced to settle a diversity harassment claim for $400,000.00.
– Several merchants, managers and vendors across the country have served prison terms for fraud and violations of Truth In Lending.
– A car dealer settles a sex and age discrimination case for more than $1.5 million.
In each case, there was no evidence that the auto dealer was promoting an atmosphere of compliance…specifically, no formal dealer compliance training.
So how can car dealerships create and maintain an atmosphere of compliance?
1. Appoint a dealer program coordinator to oversee your dealer’s compliance performance.
2. Have in place all required Dealership Compliance Policies signed by employees.
3. Provide training to all designated personnel at least annually with documentation available for legal action or government inspection. (Note: simply allowing staff members to read and sign your dealership’s required policies IS NO considered training under these regulations).
4. Provide all required compliance training and signed Policies as part of your contracting process complete with documentation.
5. Conduct annual compliance inspections and audits annually, once again, with documentation on file.
The question: “Did the dealer do everything reasonably possible to prevent this violation from occurring, and if so, where is the proof?”
Virtually every auto dealer fine, penalty, litigation or enforcement arbitration decision revolves around this one question.
In fact, any lawyer worth his salt 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, may not be able to watch every move each of your employees make while conducting business, but they give you the opportunity to perform elements of dealership compliance to mitigate liability, or even in some cases, to to benefit. of the safe harbor status.
Thus, in the eyes of the law, any dealer who chooses to ignore required compliance performance has no regard for the consequences, and juries and feds generally use that opportunity to pile on.
Is there only one way to get rid of the “compliance monkey”? Take care of it right now!