Risky F&I Practices That Can Sink A Dealership

In the years since the Consumer Finance Protection Bureau (CFPB) began to strike fear in the hearts of dealers everywhere, there have been a lot of changes in how F&I departments handle the heavy compliance burden they have on every deal they write.

Yet even in the wake of such a massive change in how this profit center does business, there are still reports of risky F&I practices that are resulting in fines, and for some extreme cases, jail time for those directly involved.

What are some examples of the unethical practices that are prominent on the ‘regulatory radar’ these days and how can a dealer avoid the penalties they could incur?

‍Common F&I practices that will put your dealership at risk:

• ‘Internet only’ rate specials that can be seen as discriminatory against buyers that have no web access. California has laws prohibiting this practice, which is common as the Internet increasingly becomes vital to a dealer’s business.
• Not securing and protecting personal information per state & Federal guidelines. Identity theft is still a real thing and dealer personnel have access to personal financial information that must be kept confidential.
• ‘Jamming’ or ‘payment packing’ that has F&I personnel adding extra products to the deal and in some cases, leaving it off the contract altogether. GAP, etch, extended warranties, etc. are some of the products that can be arbitrarily added into the payment without the buyer knowing.
• Charging higher rates for different borrowers based on race/color/sex/age, etc. It seems every few weeks there is another headline regarding a dealer accused of ‘disparate impact’ discrimination on interest rates.

Decades of bad reputation have had dealers spend years remaking their F&I departments to combat that view in the eyes of their customers. Consider a robust compliance program to help reinforce both government-mandated regulations and ethical behavior from F&I staff.

Click here for a look into our compliance training to help keep your F&I staff sharp and the dealership out of the headlines.