Saturday, April 19, 2008

Are You Compliant? Part 3

A Review of Recent Developments Part 3

Document Preparation Fees

Many dealerships charge various fees when a vehicle is delivered, including a document preparation fee. However, the so-called “doc fee” frequently comes under fire. Recently, consumer attorneys have developed a new attack on the doc fee. They are now arguing that a dealership is essentially practicing law without a licence by charging a fee to prepare documents. And as you know, that’s illegal. Just like you need to be a doctor to practice medicine, you need to be a licensed attorney to practice law. I don’t buy the argument that charging a doc fee equates to the unauthorized practice of law, but several courts have. This is why many states regulate the fees dealers charge. While dealers need to be familiar with these laws, they may not always help defend against this new attack on doc fees. If you’re charging a document preparation fee, it may be a good idea to contact your legal counsel to discuss the matter.

Credit Card Truncation

Under the FACT Act, credit card numbers on receipts have to be truncated so only the last five digits are shown. However, did you know the rule also requires that receipts not show expiration dates? Unfortunately, many people miss that part of the rule.

There was a lot of litigation about the expiration date after the rule went into effect at the end of 2006, especially in California. The good news is that this is an easy matter to handle. You just need to check every credit card machine in the dealership and make sure they’re all printing out receipts with the card numbers properly truncated — and without the expiration date.

Privacy Rules

Most dealerships know about their general responsibilities for safeguarding their customers’ personal, non-public information under the Gramm-Leach-Bliley Act. But do they know all the details? For instance, the Safeguards Rule requires a dealership name a specific employee to oversee safeguard activities.

The rule also requires a written information security plan that is periodically reviewed. Do you have a written plan? Has your dealership designated someone to oversee the program? Have you yet to fill the position after the person you designated left the dealership? Have you done the required periodic evaluations?

Now, you may be doing your best to comply with the rule, but you aren’t compliant if you aren’t meeting the detailed requirements of the Safeguards Rule.

Just remember that many of these rules governing how we operate our business act like moving targets. This is why periodic reviews of your compliance efforts is required. Just remember, even the best compliance programs can get better. Thankfully, there are plenty of resources available to help. So take advantage and don’t get caught with an outdated policy.

Todd Clarke is an associate counsel for JM&A. For more information, visit

Link to source article here

F&I Manager profile:

Back to blog homepage


Anonymous said...

Reading through this, legal compliance seems to be the major issue. Is this predominantly seen on a federal level or state. I live in CA (So Cal) and know the laws here are pretty restrictive, do you have any examples or articles you can point me towards that point out instances concerning fraud, mis-dealings or issues in the F&I department. Scary stuff!

Anonymous said...

If you had to list the top 5-10 infractions that occur in the car dealership, what would they be, in what order would you prioritize them and why?

AFI said...

Hi anonymous,

I have been collecting articles concerning fraud and mis-dealings in the f&i dept. Here are a few links:

You'll have to paste to your browser. I can't link to them here.

Email if you like to and I will send you more articles.

As for the question of my opinion on order of infractions occuring in a car dealership, I think I will publish this in a separate post. Good article topic. Stay tuned and subscribe at the top with your email in the feedburner open field.

Thanks for the feedback.