How do you describe your products to potential customers?

It’s difficult to apply a single description to our products. StoneEagle offers several products and they are quite diverse. Our Enterprise Admin Systems include a Credit Life system and SEcureARCH, our new Service Contract Admin system. SEcureARCH is a C#.Net all service oriented architecture that we believe is the future in administration systems. Our F&I sales and reporting application, SEcureMetrics, is one of the earliest reporting programs. It has been integrated to several DMS’s for over a decade and is used by thousands of dealers in the US and Canada. SEcureSalesTool is our Service Drive Sales system and can be integrated to include appointments and RO pull. It will sell multiple products, handle credit card or financing, has fully integrated e-contracting capabilities and remits sold business back to the product administrator. SEcureTransmit has been available to dealers and agents as long as our reporting tools and includes a user interface for generating a remittance register to allow any sold F&I product to be transmitted back to the administrator electronically. At NADA this year, we will be introducing Service reporting. This product will allow the dealer and servicing agent to monitor and develop very impressive income opportunities in the service department.

Traditionally, one of our most recognized services has been integration. StoneEagle has been providing integration services longer than most DMS providers have offered certified interfaces, and it is an essential part of almost all products.

When asked to describe our products, we find it just as important to describe our customer service. For the last 25 years we have made it our goal to provide the best service in the industry. We believe that the product is only as good as our ability to support it.

How did StoneEagle get into the integration business?

In the 90’s, one of our earliest business partners asked us if we could help them with administration of a product which they had been pulling from the DMS electronically. We eventually acquired their programing staff and technology as a byproduct of that initiative. Shortly thereafter, another client asked if we could produce F&I penetration reports in a timely manner by pulling data directly from the DMS. We found that creating effective F&I reports required much more effort than simply pulling data. Almost all dealers configure some part of their DMS differently. Each dealer requires “hands on” configuration for reliable results. This “hands on” knowledge eventually led to requests for properly configured data sets for many other areas of the industry. Ultimately our understanding of the inner workings of the dealership and their processes became our strongest asset for offering “best in class” service.

Which DMS providers do you work with, and what is your official status with each?

Today we offer some level of integration to the following DMS providers:

* – Dealer or DMS provider must send data to StoneEagle
** – Not currently supported, will require additional time and development charges to integrate
*** – May be possible but will require additional time and development charges
($) – Dealer may/will incur extra charges for setup, field switches or both

Considering the changes taking place in the industry today, this list is subject to change.

How do you push and pull data, and why would your solution be better than others?

Certainly we do consider the exact technology of how we push or pull data proprietary, but we do offer both functionalities to a limited number of DMS systems. Pushing data is a very tricky business. Very few companies will do it, and very few products take advantage of it. Improper pushing to the DMS can cause costly errors to the dealer. After a decade, StoneEagle has had no reported errors in our pushing process. We believe our success and longevity coupled with the innovative solutions we provide make us stand out above most other competitors.

There seems to be building controversy about DMS integration – How do you see the industry today, and where do you think it will be in the next five years?

In a previous question I pointed out that third party integration itself actually out dates the integration certification concept. Today, advancements in technology and security have caused a general movement among all DMS providers to create secure standard interface processes that require some sort of fee for access. From there, DMS providers of all sizes seem to be in one of two camps regarding integration to their systems. One camp sees product and service provider offerings as enhancements to their systems. They certainly don’t want to see an outside company cannibalize a product that they offer, but they also seem to understand that dealers will never see all services the same. These DMS providers can create reasonably priced integration tools that create a revenue stream but also stimulate the growth of technology from smaller more agile “niche product” companies. The second camp is much more guarded. They see any competing technology as a potential threat to their control of the dealer. These providers are typically difficult to deal with and offer cost prohibitive pricing for their integration tools.

The controversy today revolves around DMS providers moving to a “certified only” model where any other outside access is branded as dangerous and aggressively discouraged. Telling a dealer what he can or cannot do with his data is one issue, but forcing him to require certification is a much bigger issue for the dealer than the product providers themselves. Even a small dealer is doing business with as many as five outside product vendors. If all five are forced to certify their products and pay (for an example) $100 in fees, those fees are inevitably passed on to the dealer. At that point, the dealer is faced with not just one fee, but five fees for the same service now costing $500. The model needs to change. The dealer should be able to subscribe to the service and allow the vendors access to it. Product and service providers can compete on the merit of their systems, not the cost of their integration.

One way or the other, we think non-certified interfaces will eventually disappear over the next several years. The cost of supporting non-certified technology is going up, competition from other products is increasing, and service oriented system architecture is definitely becoming the accepted model. We just hope that DMS providers will open their systems in a way that is reasonably economical and creates a “best man wins” environment for product providers.

We don’t want to discount the issue of security. It is very important that dealers recognize the importance of their customers private information, and that it be safeguarded properly. There is a need in this industry to make sure that vendors are following all governmental and ethical rules concerning data. Proper service agreements and contractual obligations are essential. Having dealers, DMS providers and vendors work together to establish standards in this area would benefit all players without stifling business, but most importantly, it would protect the customer.

How do your current clients feel about the changes in integration?

Most of them simply feel blackmailed. They feel like they are being cornered into a position where they have to pay fees for services that have worked well for years and are now just being taken advantage of simply because the opportunity was there. Most are happy to pay for advances in technology that increase their ability to sell product. In this case, they feel like it’s simply another expense that must be passed on to the dealer who will then pass it on to the customer. Remember, we are not talking about one point of integration. We’re talking about five, 10, even 15 points of integration that can ultimately mean hundreds of dollars to the consumer.

How are you planning to re-invent your products and services to adapt for the future?

For StoneEagle, planning for the future is and always has been important. As a family owned business, we must rely on re-investing annual profits in R&D for future product and service planning. We have been preparing for the change in integration certification for a few years now. We have been re-developing old products and inventing new ones in order to capture other segments of the auto dealer market. We have certified our products with various DMS providers and are in the process of doing so with others. Re-focusing some of our efforts and resources from integration will mean terrific advances in our product offerings over the next few years.

What type of DMS Integration is right for F&I Product Providers?

By: Ron Greer

For most F&I Product Providers and Administrators, the primary sales channel is an automotive dealer, this distributed network often presents unique challenges to conducting efficient business. The F&I process is one of the most sophisticated processes to accurately transmit data between an F&I product provider and the DMS. Federal, state and county regulations, add-on services, sales campaigns, credit processes and approvals all require the integration between the DMS and the provider to be up-to-date and accurate at all times during and after the sales process. For instance, even the most well thought out F&I product and integration strategies can inevitably hamper the dealer’s network, cause system compatibility issues, and potentially place the dealer and consumer at risk if the data is not properly transmitted in a timely manner, calculated properly, validated, secured and monitored.

Those that conduct business through an automotive dealer know there are a variety of software applications used in the dealership sales process. Many applications have a specific purpose such as CRM, Sales Process and Tools, Specialized Deal Desking and more, and when used as part of the entire F&I process, each application is a critical part of a successful sale. But because each of these applications is often from a different supplier, the movement of the data, the transmission frequency and the requirement of accurate data complicates the process and, if not done in cooperation with the DMS, can cause the data flow to become disjointed.

The DMS is the system of record for all transactions stored in the DMS and transmitted to an outside F&I service. The DMS is where the forms are usually printed, where vehicle inventory is converted to customer inventory, and where the deal is sent to the accounting software. The term “DMS Integration” means a variety of things and without a full understanding of it and why it is important to the overall sales process, roadblocks continue affecting the accuracy of the data and the successful transmission for data transactions. By understanding internal needs and available options, F&I Providers and Administrators can find the right solution for their businesses.

Solutions vary based on need and circumstance, and there are three major ways for Product Providers and Administrators to conduct business more efficiently with their dealer partners, which all require some type of data exchange or integration:

• Data Interface between the DMS and other software or reporting solutions
• Forms/Contract Printing Management used in the dealership
• Transaction Integration between the Provider and the dealership

Data Interface

Moving data from the DMS to populate fields in a specialized software application has created buzz in recent years and is a requirement for the DMS to provide. Data Interface from the DMS to other software has been called by many different product names such as a Download, Certified Interface, Third Party Access, and Unsupported or “Hostile” Integration. Most major specialized software applications, such as CRM or Electronic Menus, need to make data flow between the two systems as streamlined as possible for the dealer. These specialized applications rely on accurate data to be passed from and updated to the DMS in a near real-time manner. The data needs to support the business processes defined by the application and supported by the DMS. F&I managers will not tolerate the extra work to re-key customer, vehicle and deal information, inaccurate payment and tax calculations, or bad data being transmitted into their specialized application. DMS software providers—including Automatic Data Processing (ADP), The Reynolds and Reynolds Company and other DMS providers—have developed programs to securely share data between software applications which helps to remove these obstacles.

DMS integration is becoming more and more complex due to the need for timely, reliable access to F&I data. Access to DMS data once a month, once a week or once a day does not meet the need for F&I type services. Real-time secure access is a requirement to ensure success. This type of integration has increased the risk to the dealer as well as the F&I software vendor for receiving accurate, safe and secure access if not directly received from the DMS provider. DMS providers like ADP and Reynolds and Reynolds have implemented comprehensive programs that support this type of access ensuring the dealer’s data is protected, system performance is reliable and the data transmission supports the DMS business rules.

Technical considerations for a smooth process are also significant and can only be provided successfully from the DMS provider. Mapping data to ensure that a field (such as customer name) is properly converted, state and county tax percentages are calculated correctly, rounding and payment calculations match those fields in the DMS as well as field lengths and formats between systems match all help avoid software support issues and awkward moments when data is mixed up in front of a customer during the sales process.

The entire process is complex, however, and extracting data from the DMS is just one aspect. There is also the entirely different and complicated matter of pushing data back to the DMS to complete the sales loop. This has to be done in cooperation with the DMS provider in order to assure the data of record in the DMS is accurate and secure. This data is used throughout the entire dealer’s network and therefore cannot be any risk.

The most reliable, secure and industry-supported method is a certified data interface with the DMS vendor. Programs such as Reynolds and Reynolds Certified Interface or ADP Third Party Access Program are available to certify partners who comply with the business rules and processes inherent within the DMS. These programs meet the business rules in the DMS, assuring the specific needs of the certified vendor.

A DMS approved application can also be used if the software provider has a specific need to receive a nightly “push” of data. The DMS has a “download” application that supports the dealer in moving data from the DMS to a dealer defined destination on their LAN. The data is then managed by the dealer and can be provided to any service or application provider.

In the last several years, non-certified access has been perceived as reliable, secure, low cost or even free. This type of access to the DMS requires due diligence. Because the success of accessing the DMS depends on a reliable stream of accurate data, these “hostile” integrators pose a potential risk. DMS vendors routinely change their applications and methods of access in order to support new automotive business rules and security requirements. Dealers expect these changes to be made. The “hostile” integrators have to react to these changes which may hinder the business by providing “unreliable data” and/or unexpected “breaks” in the data interface. Ask yourself, does the risk outweigh the security of a DMS certified interface?

Tip: If your dealers require a very specific business function that is only satisfied through a specialized software application, then consider leveraging a Certified Data Interface to assure safe, secure and accurate data.

Forms and Contract Printing Management

Forms and Contract Printing Management is a very common solution and a simple choice. Even today, most contracts are printed on forms stock in the dealership using what’s called an impact printer. Within the DMS there is a forms formatting program that places fixed data in defined line and column locations, as well as prompts the user for variable data that does not reside in the system. A Digital Forms Library replaces the old process whereby the Provider or Agent (forms owner) supplied a box of forms to the dealer. The dealer printed a deal, and sent it with five blank copies to their respective DMS Vendor to “program” the forms format. Multiply that process by all of the dealers a Provider does business with and the reliability of all necessary forms being updated diminishes significantly.

The technology advancement in utilizing a Digital Forms Library allows for a smoother transaction and according to Rod Allen, National Enterprise F&I Products Manager for ADP Dealer Services, there are definite benefits.

“Providers who participate in the ADP e-Forms Library indicate that they are proactive in using technology to assist dealers in improving the dealership F&I process,” Allen says.

ADP and Reynolds and Reynolds currently manage their respective libraries of digitized forms to streamline their dealer’s process. The company who owns the copyright and publishes the forms (forms owner) works directly with the DMS vendor to “push” updates to the dealer. In most cases, each dealership still requires customization, but the process is managed much more effectively upstream, reducing implementation time and increasing the chances of an accurate and timely dealer form.

Another feature of this forms library is the availability of advanced digital forms printing solutions. Dealers now have the option to have all of their F&I forms printed on laser printers, which enables a highly customizable consumer and dealer experience. This combination of software and services minimize dealer costs through paper efficiency including control over customizable page printing and printer routing. It also provides benefits such as electronic signature, deal jacket archival and the ability to email a very personalized electronic document folder to the consumer.

Connecting to the DMS Forms Library offers a single point of contact for F&I Administrators. Whether the dealer prints on traditional forms, or uses optional laser printing features, the process of maintaining accurate forms is centrally managed.

Tip: Participation in the DMS Forms Library improves the process and paves the way for future capabilities. This is usually available to Providers at no charge.

Transaction Integration

The industry has conceded that the DMS cannot be everything to everyone. It is a lot of work building and supporting a system to satisfy a diverse population of dealers. Factor in compliance to Regulatory, OEM, Lender and Provider processes and it is clear why a DMS might need to narrow the F&I Aftermarket Screen to a simple “input only” function.

It is in this arena where the game is changing and the market need was apparent. There is a third solution, commonly known as Transaction Integration, which is advancing the industry towards a seamless and secure data flow. The logic behind this integration is that the DMS could hold all functions and processes to fully complete a product sale in the F&I office, from correct ratings to e-Contracting.

Currently, F&I Managers in the dealership need to utilize various systems, portals or software tools to complete a sale. With Transaction Integration, the dealer can support full e-Contracting within the same workflow in the DMS. By using this service, a Provider can virtually eliminate the cost and overhead associated with hosting their own contracting portal.
Not only does the flow stay within one dealership software application, a Provider can also present only eligible products and coverage for a specific vehicle and customer under the conditions of the deal. This allows for an accurate point of sale experience based on specific VIN and driving conditions. A DMS that has enabled Transaction Integration can present accurate and instant product ratings, customized forms printing, electronic signatures, and deal data transfers – all within a single workflow.

In a perfect world, every dealership would use the same software applications in the same way. Today’s reality, however, is that even two F&I Managers that share a printer might utilize different software applications, differently. And as long as they both quote correct rates for eligible products that are printed on the correct contract and automatically register at the time of sale, it should be a non-issue for the Provider regarding what software solution they used. This is where the most significant benefit of Transaction Integration lies. No matter what software the dealer chooses to present F&I Products (e.g. menu, CRM, Desking), Transaction Integration can link to them all in order to complete and print the contract. Providers no longer need to incur large integration or system costs to develop custom integration to all of these systems – they can integrate to one and be done.

Tip: If the Provider is neutral on dealership software preference and only requires real-time integration to the consumer point of sale, then Transaction Integration is the emerging technology to consider.

DMS Integration is an issue that should be carefully considered by F&I Providers and Administrators, and depending on their unique needs, each option or combination of options outlined has its benefits. Regardless of which path is chosen, the end goal is to ensure a successful dealership experience that efficiently maintains the integrity of the data. As the field continues to broaden, Providers and Administrators should carefully evaluate their own needs and feel confident that there are technology tools at their fingertips to help strengthen and grow their business.

As you may recall, the Telemarketing Sales Rule (TSR) went into effect in 2003 to both implement the Telemarketing and Consumer Fraud and Abuse Prevention Act and preserve the Holy Golden Silence. For Boomers like me, the Holy Golden Silence was that period between approximately 5:00 and 7:00 p.m. when nuclear families sat down together to eat dinners lovingly prepared by mothers wearing pearls. Polite people simply did not call other polite people during the Holy Golden Silence. Desecration of the Holy Golden Silence elicited scorn from my father and energetic violations of the Second Commandment.

Telemarketers, of course, are not polite people. They specialized in calling during the Holy Golden Silence precisely because they knew Boomers and their spawn would be sitting near a wall-mounted telephone whose handset was attached to its base via an actual cord.

And this is where teenage girls enter the equation. My daughters have never seen a functional wall-mounted telephone in their lives. Honest. Helping one such daughter with her homework recently, I was actually asked which was invented first, the fax machine or fire? (Answer: Fire. Your grandfather invented it). They live in a wireless world.

So when we sit together to eat dinner, a tradition still staunchly defended at das Gantherhof, a ringing telephone is not the issue. Rather, it is text messaging, to which my daughters are all addicted. During our Holy Golden Silence, I need to banish the iPhones. They text their friends from under the table. They text “pls ps the btr” to their sisters. They may transmit mutant thumbs to my grandchildren.

In short, technology has overcome the TSR. No one calls anymore – or so it seems. If our landline phone rings, we know it’s not someone we want to talk to – people we want to talk to have our cell numbers.

But not all dealerships are technology forward. Some are still rumored to use fax machines. So for those that still use telephone marketing, a brief overview of the Rule may be in order. Here goes.

The Federal Trade Commission (FTC) gives consumers a choice about whether they want to receive most telemarketing calls. Consumers are able to put their phone numbers on a national “Do Not Call” registry. It is illegal for most telemarketers or sellers to call a number listed on the registry. Because a dealership may want to call actual or prospective customers, it is important to know when one may or may not do so.

The TSR – often called the Do Not Call Rule – applies to any effort to sell goods or services through interstate phone calls. This includes dealerships that solicit consumers. It also includes outside telemarketers who solicit sales on behalf of dealerships.

Dealerships and the telemarketers they use are required to search the Do Not Call registry at least quarterly and drop from their call lists the phone numbers of consumers who have registered. The FTC maintains a website that provides this information: https://telemarketing.donotcall.gov/.

A consumer who receives a telemarketing call despite being on the registry will be able to file a complaint with the FTC, either online or by calling a toll-free number. Violators could be fined up to $11,000 per incident.

Fortunately, there are some important exceptions to the TSR. In fact, if it is a dealership’s policy to only contact consumers that fall within an exception to the Rule, the dealership may never need to actually compare a consumer’s name to the names on the Do Not Call registry.

A dealership or telemarketer may call a consumer with whom it has an established business relationship for up to 18 months after the consumer’s last purchase, delivery, or payment – even if the consumer’s number is on the Do Not Call registry. This means that dealerships are free to call a customer for 18 months following delivery of a vehicle in a cash transaction, or for 18 months after the last payment in a financed or lease transaction.

This 18 month period resets every time a customer makes another purchase or payment. Thus, if a customer made his last car payment 19 months ago and he is listed on the Do Not Call registry, a dealership cannot make an unsolicited sales call to that person. But if he gets his transmission replaced at that dealership, a new 18 month period is established.

In addition, a dealership may call a consumer for up to three months after the consumer makes an inquiry or submits an application to the dealership. What this means is that a dealership is free to call a potential customer for up to three months after a sales visit to that dealership, or after taking a test drive. And if a consumer has given a dealership written permission, that dealership may call the consumer even if the consumer’s number is on the Do Not Call registry.

But beware: if a consumer asks a dealership not to call, the dealership may not call, even if there is an established business relationship. Indeed, a dealership or its telemarketers may not call a consumer – regardless of whether the consumer’s number is on the registry – if the consumer has asked to be put on the dealership’s internal Do Not Call list.

Some states have their own Do Not Call registries, so a dealership would do well to check with its local counsel to determine if these laws increase its obligations with respect to calling customers.

Dealerships and their telemarketers are required to transmit their telephone number, and if possible, their name, to consumers’ caller ID services where it is technologically possible. Transmission of callers’ ID information allows consumers to know who is calling (and, presumably, ignore the call).

The following provisions of the Telemarketing Sales Rule also apply to dealerships:

• Dealerships and telemarketers may only call consumers between 8 a.m. and 9 p.m., local time.
• Dealerships and telemarketers must promptly identify themselves as a seller and explain that they’re making a sales call before pitching a product or service.
• Dealerships and telemarketers still must disclose all material information about the goods or services they are offering and the terms of the sale. Misrepresenting any terms or conditions of the sale is prohibited.

To be safe, a dealership should assume that every person who visits or does business with the dealership has signed up for the Do Not Call registry. Then, only call those people if they fall within one of the exceptions to the Do Not Call regulations. If you aren’t sure that an exception applies, you should compare the consumer’s name to those on the Do Not Call registry.

Finally, remember that the Telemarketing Sales Rule primarily applies to sales calls. A dealership is never prohibited from contacting customers to inform them, for example, of recall or other safety-related information.

But to return to our point of departure, technology is moving past telephone solicitations. My daughters and their generation are immune to its fading charms. The real issue for the younger set addresses e-mail and text solicitations: The CAN-SPAM Act.

Yeah, I think I smell another article…

The best e-contracting platform is one that aggregates aftermarket product providers so the dealer can go to one place where he can obtain access to whomever he does business with, and every dealer I talk to desires this type of process because it is their belief that it is faster and easier than putting that 3-ply form into their computer like they do today.

As with most things in today’s economy, the cost for this type of platform is a consideration that is a must. A great approach to reduce expenses for the dealer is to have the administrators and providers assist in covering (or reimbursing) a portion, if not all, of the nominal fee that is associated with running the platform. By doing this, the dealer and provider and administrator secure the “value added” concept because for the administrator and provider, every contract that can be delivered electronically adds value, and of course if the dealer does not see the value in it, there is no value for anyone involved.

Now, to convince a dealer and his F&I Manager that e-Contracting is the way to go, I could go through and list all of the benefits that exist for preparing aftermarket products in an electronic format, but in my opinion the F&I Manager may not necessarily buy into the idea, especially if he/she can stick a 3-ply form in their impact printer that was developed in 1963 and get it done quicker, then that is what they are going to do.

The dealer may fully acknowledge that electronically processing contracts will eliminate errors, additional double or triple data entry in other parts of the dealership, and result in more legible and professional appearing forms. But the bottom-line is you need to deliver all of these benefits (then some), AND make sure the process is faster for the F&I Manager than using the 3-ply form, because for the F&I manager, the other benefits just don’t seem to apply to them and thus they see minimal benefit in using it.

So, we need to deliver value to the administrator and provider while making it an easier and faster process for the F&I Manager at the dealership. Is this like solving for world peace or world hunger? No. It is just a matter of the proper work flow management, supported by the right technology.

Based on feedback I have acquired from the market, I think there is a ‘secret sauce’ that can make this happen – so that every dealer will move away from 3-ply pre-printed forms that are error prone, and often require redundant data entry, yet at the same time not forcing the dealer to go to multiple websites. The ingredients of the secret sauce are as follows:

• Whatever you do, the process needs to be faster than what the dealer does today.
• Dealers are not going to go to multiple web sites because they do business with multiple providers – It is just way too time consuming.
• Don’t make a dealer get a rating for a product unless they need to. If a dealer consistently sells a 1000,000 mile wrap product on all new cars – they should not need to go get a rating on that product. They should just validate the data and print the contract.
• If a rating is needed, it must be fast. For example some providers will supply a rating in as little as 5 seconds or less, while others can take up to 45 seconds (or longer) and I can tell you now – that dog does not hunt. By having a variety of providers available on the platform, you can eliminate those “sleeping dogs” and move the process along in record time. Because lets face it, if a rating is really needed, the process needs to be fast, fast, fast.
• If a dealer is selling multiple products from multiple providers, do not make them review and validate all of the same data on every product – the dealer should never have to validate and review data for any product or provider more than once.
• Make sure the dealer has a good printer and good internet connections. It is amazing to me that a dealership can have millions of dollars invested in IT but they try to save a buck by having a slow internet connection. Successful dealers need the right tools to be successful and the Internet is a critical tool for dealers to have today.

We at F&I Express are practicing these very concepts and have not only been successful with dealership growth, we have successfully signed on with over 15 administrators and providers, and are finalizing a product called F&I Express 3.0 which will enable dealers to use that ‘secret sauce’ by preparing an electronic contract, with no errors, no redundant data entry, with the administrator/provider having a real time transmission of the contract data… and all in less time than it takes the dealer today with the 3-ply pre-printed forms.

I have no question that this is what is needed, this is where the market is going and that at a certain point in the near future – administrators and providers can dramatically reduce their print costs and dealers can throw out their Oki-data impact printers. Amen.

True story: I was in London one year on the Fourth of July, along with a bunch of other American expats. We thought we should celebrate the American Independence Day with a pub crawl, so crawl we did. Late in the evening, we were refused admittance to the Hard Rock Café because it was about one minute to closing time. The Yank at the front of the line loudly exclaimed, “You’ve got to let us in! We’re Americans!”

I somehow escaped that evening with most of my teeth. As for the Ugly American, apparently no one told him that demanding special privileges abroad because one is an American is tacky at best. He was that guy.

In the world of service contract administrators, that guy means something different: it is the fly-by-night service contract company that attracts bad press, plaintiff’s attorneys, and government investigators. In fact, the Federal Trade Commission has weighed in with its publication How to Steer Clear of Auto Warranty Scams.

That publication urges consumers to be skeptical of mail and phone calls warning that the warranty on the consumer’s car is about to expire. The companies behind the calls or mail may try to give the impression that they work for the manufacturer or dealership. Mailings can sound official and dire, with phrases like “Notice of Warranty Interruption” or “Final Notice for Warranty Extension” on the envelope in red ink.

What is being pitched, of course, is not a warranty at all, but a service contract. The consumer who picks up the phone or responds to the mailing is likely to be subjected to a high-pressure sales pitch, dripping with urgency. And if the consumer pulls the trigger and buys the service contract, he may discover the company selling it isn’t around when it comes time to claim benefits. Remember US Fidelis?

The FTC gives consumers concrete advice about how to avoid being scammed, which I paraphrase here:

• If you receive mail or phone calls about “renewing” a vehicle’s warranty, be skeptical. The warranty may still be in force, or may have already expired. Check the owner’s manual first, or call the selling dealership to confirm actual coverage.
• Beware of fast talkers! Most legitimate businesses allow a consumer time to make an informed decision.
• Never give out personal, financial, or other sensitive information unless you are sure who you’re dealing with. There is no reason to give out your Social Security number or bank account numbers to buy a service contract. And letting such information out the door can expose the consumer to yet more fraud.
• Be particularly skeptical of unsolicited sales calls that are pre-recorded, or if your phone number is on the National Do Not Call Registry. If your number is on the National Do Not Call Registry, you should only get calls from companies you’ve bought something from in the previous 18 months, asked for information from in the past three months, or if you have agreed to accept calls from the company the sales person works for.
• To report a violation of the National Do Not Call Registry, or to register a number, visit www.DoNotCall.gov, or call 888.382.1222.

Why consider all this in such detail? Well, by reviewing what the FTC defines as suspect behavior and avoiding, an administrator can reduce its exposure to consumer complaints and government attention (not to mention those pesky plaintiff’s attorneys).

Put positively, advice on how to conduct direct-to-consumer business might look something like this:

• If your company contacts consumers whose factory warranties are soon to expire, be sure your information is correct. Don’t assume, and don’t lie.
• Do not employ fast talkers or high-pressure sales tactics! Truthfully explain features, benefits, coverage and costs. Provide written documentation before a sale is made.
• Do not ask for any nonpublic personal information (“NPI”) that is not absolutely necessary for the transaction, and only when it becomes necessary for the transaction. In the first place, reputable companies don’t solicit such information unnecessarily. And even reputable companies shoulder a significant responsibility to safeguard such NPI. Generally, the less taken the better.
• Follow the Telemarketing Sales Rule. That’s actually pretty involved, and may require a future article.

By avoiding the practices the FTC identifies as marking the unethical or criminal company and taking the opposite steps, your company can avoid being that guy.

What most customers don’t realize is this is not the case in most instances. Dealers now have “fast-lane” (Express Lane) type offerings, generally accept competitor’s coupons and have extended service hours – sometimes, far past the hours of an independent facility.

The question is: how do we educate the customer?

First, we must educate our dealers. Most dealers continue to treat the “fast-lane” customer like they would a warranty claim customer. They don’t let the customer feel the “fast-lane” process. As the dealer’s representative, we must help them to understand the difference. Reminding the dealer that just because it is a “fast-lane” customer, doesn’t mean they can’t make money! Most “fast-lane” facilities have an average customer pay repair order in excess of $65! The dealer must become good at talking the talk of the “fast-lane” mentality. Oftentimes a separate check-in process as well as a pay plan incentive are necessary to get the greatest results with a “fast-lane” customer.

As an agent or an administrator there are products and processes available that can assist you in becoming the dealer’s hero. Here are some examples:

Loyalty programs can assist in driving the service retention within the dealership. One proven version of loyalty program is a Lifetime Powertrain Warranty. This assumes that the administrator has written the contract in a way that assists the dealer in creating a reason for the customer to return to the selling dealer. Some things to look for when offering a Lifetime Powertrain Warranty:

1. Does the administrator provide an email reminder service that reminds the customer about their need to do the maintenance required on their vehicle, along with branding the dealership at the same time?
2. Does the administrator have anything setup to assist the customer in finding out what maintenance service needs to be performed and to remind them that dealership is the best place to service their vehicle?
3. Does the contract “freely” allow a customer to take their vehicle to ANY facility for maintenance or are there parameters that help keep the customer servicing with the selling facility?
4. Is the dealership notified every time that the customer decides to service their vehicle with another facility, giving the dealer the opportunity to call the customer and direct that customer back to their dealership?

We have to remember that once the customer leaves the selling dealer for maintenance service, the chance of them buying a vehicle from the selling dealer drops from 83% to 17% – that is a HUGE swing, making it even more critical that the customer services their vehicle with the selling dealer.

Another program we have found to be a big winner in the service retention area is prepaid maintenance. But, more specifically, a prepaid maintenance “give-away” with an upsell opportunity in the finance department.

The benefits of this type of program are unbelievable.

1. Every customer is provided (in most cases) their first year of oil changes upon purchasing their vehicle. This serves a few different areas of opportunity:
   1. It gives the customer a reason to return to the selling dealer for their maintenance.
   2. If a customer services their vehicle with the selling dealer for the first year, they are more likely to continue servicing with them after the “free” oil changes are gone.
   3. It allows the selling dealer to easily track through the administrator all of the customers that have NOT returned to the selling dealer, allowing the Business Development Center to call and capture those customers (Providing the administrator offers this reporting functionality).
   4. It allows the finance manager the opportunity to talk about something positive and the ability to “extend” the prepaid maintenance program for the entire ownership term at a competitive or reduced price; generally up-selling closer to 50% of the customers to a longer program.
2. If the dealer has chosen to only sell the Prepaid Maintenance Program in the finance department, they still receive some benefits, but as you can imagine, the penetrations are much lower.
   1. Most finance departments maintenance penetrations are between 15-25% if they are not upselling from a “give-away” type program.
   2. Keep in mind that some type of retention is better than none. By offering prepaid maintenance, this will provide at least 15-25% of their customers a reason to return.

3. The dealer can also offer the prepaid maintenance program on the service drive!
   1. Allows the dealer to capture those customers that DIDN’T buy a car from them and now make them a future buyer!
   2. Creates the opportunity to upsell those customers that didn’t take advantage of the upsell to a longer program in the finance office, the second chance to take advantage of the long-term savings available in a prepaid maintenance program.

Every dealership should have some type of program that is geared to bringing the customer back into their service department. Let’s do the math, and you will quickly see why you will be your dealer’s hero.

These numbers are based off an NADA study that showed that 83% of the customers that perform their routine maintenance with the selling dealer will return to them to purchase another vehicle. If a customer ONLY performs their warranty work or nothing at all with the selling dealer, then only 17% will buy their next vehicle from the selling dealer. On national average, only about 23% of the customers service with their selling dealer.

If you could double that with a service retention program, look at the amazing difference in future customer retention:

Over a five year period, the selling dealer would have 1564 MORE customers returning to them to buy a vehicle. The best part – NO ADVERTISING expense is required to sell these vehicles! In addition, the selling dealer has the opportunity to earn profit on the maintenance, plus the other items, like tires, brake pads, windshield wipers and more. This doesn’t include the increased opportunities in the finance office as well!

Now, you have truly become your dealer’s hero!

When the bureau comes back, it is golden – angels bear it back to the F&I manager’s office from the fax machine to the strains of Handel’s Messiah. He has a small jet, a large yacht and an 850 FICO. Spot delivery on a five-pound deal is accomplished and the doctor drives away. High fives everywhere.

Fast-forward 45 days. The GM comes into the aforementioned F&I manager’s office and asks if he remembers Dr. Suburban. The F&I manager swallows hard and says “yes.” Turns out the delivery went to someone who stole the good doctor’s identity and evidently chose not to make the payments. Now the bank that bought the RISC is pushing back the paper on the dealership – something about not following the Red Flags Rule violating the lender agreement. Oh, and there’s no insurance coverage for this loss.

We all know how this story ends. The dealership eats the $60,000 note, the thief sends the Suburban to Mexico and the F&I manager is taking down his certificates and brushing up his résumé. Had the dealership followed the Red Flags Rule, this unhappy event would never have happened – something a plaintiff’s lawyer might mention in the complaint, should things really go south.

So, then, how could adherence to the Red Flags Rule have prevented this situation? The first red flag that should have caught the attention of dealership personnel was the absence of meaningful negotiation as to price. I mean, does anyone pay MSRP these days? This is not to say that all lay-downs are identity thieves, but it stands to reason that someone who won’t be making the payments doesn’t have much incentive to drive a hard bargain.

Electronic identity authentication programs are readily available and inexpensive. These programs run the offered identity against numerous databases to confirm that the identity is indeed real and doesn’t belong to a person who is dead (and therefore unlikely to be needing a new car).

The real trick is to verify that the identity offered actually belongs to the person offering it. One way is to take care in the process of obtaining credit for the customer. Are there any gaps in the credit application? Does the applicant have poor memory about prior addresses or employment history? Those are red flags. Once identified, they need to be resolved.

One way to resolve a red flag is to ask the applicant to produce the credit cards listed on the credit report. It is unlikely that an identity thief would seek replacement cards in the victim’s name – this would create a change of address record that could alert the victim to the identity theft event. Failure to produce the actual credit cards is itself another red flag requiring resolution before a vehicle can be delivered.

A more effective means of preventing delivery of a vehicle to an identity thief is to pose out-of-wallet challenge questions. “Out-of-wallet challenge questions” are those whose answers cannot be derived from a credit report. This generally means questions that go back more than seven years in the customer’s personal history. “In what city did you live in 1987?” is an example of such a question. It is unlikely that an identity thief not related to the victim could answer this type of question.

Out-of-wallet challenge questions can be used as a means of resolving red flags that arise in the financing process, or uniformly in every finance or lease deal. For my money, the uniform approach is better. Using the same process for all non-cash customers is obviously more likely to catch a thief, and avoids the potential for discrimination claims. So you’ll have that going for you, which is nice.

Out-of-wallet challenge questions are widely available and inexpensive, and can usually be obtained from the same vendors that provide identity authentication services as a combo platter.

Of course, whatever process the dealership employs to prevent the damage resulting from an identity theft event must be a part of its written Identity Theft Prevention Program, or ITTP. Another advantage of electronic, web-based authentication and verification programs is that they create a searchable, archived
record of the dealership’s usage and, therefore, compliance with the terms of its ITPP.

Taking these steps can’t prevent theft of an identity, but it can prevent a stolen identity from being fraudulently used at a dealership. The $60,000 Suburban stays on the lot and the chargeback never comes back to bite.

Let me explain. 16 CFR 681 is commonly known as the Red Flags Rule. It applies to most financial institutions and, because most car dealerships originate financing, it applies to most dealerships. Whether or not the FTC officially begins its oft-delayed enforcement of the Rule on Jan. 1, 2011, it has been in effect since Jan. 1, 2008.

The Rule itself contains 4,074 words; I boil the Rule’s requirements down to seven:

1. Policy (an Identity Theft Prevention Program (“ITPP”), to be exact)
2. Training (staff on how to effectively implement the ITPP
3. Detect (attempts at identity theft)
4. Prevent (instances of identity theft)
5. Mitigate (the effects of identity theft)
6. Oversee (service provider agreements)
7. Ensure (that the ITPP continues to work over time)

Yeah, I know – George Carlin’s seven words were far more interesting. But these words carry legal requirements, so they deserve special attention. Today, my attention is drawn to “Mitigate.”

The Red Flags Rule clearly requires dealerships to have a policy in place that mitigates identity theft in connection with their “covered accounts.” In a dealership, “covered accounts” would mean installment sale contracts and leases. But what does “mitigate” mean?

Of all 4,074 words of the Rule, not one – not one! – is spent defining one of its seven basic requirements. Except, maybe, Appendix A, Part IV. That section is titled “Preventing and Mitigating Identity Theft.” The problem is, you can’t tell if the text that follows is addressing prevention or mitigation. And more to the point, if the dealership faithfully followed all of the suggestions in Appendix A, Part IV, no rational person would believe an identity theft event would have been effectively mitigated.

Appendix A, Part IV lists eight possible actions to prevent and mitigate identity theft (nine if you count the last one – “Do nothing”). Of the eight, only four could apply to an installment sale contract or lease: (b) Contacting the customer; (f) Closing the account; (g) Not attempting to collect on a covered account or not selling a covered account to a debt collector; and (h) Notifying law enforcement.

So the problem is, even if a dealership performs those four tasks, is an identity theft event really mitigated?

Logically speaking, by the time a criminal enters a dealership and attempts to take delivery of a vehicle in a victim’s name, an identity theft has already occurred. What is left to occur is monetary damage flowing from that identity theft. If a thief accomplishes delivery of a vehicle by getting it funded in the victim’s name, mitigation is accomplished in a narrow sense by canceling the financing.

But in a broader sense, mitigation hasn’t really occurred: the victim’s identity is still circulating and capable of being misused again and again, and the dealer now owns the paper. Ouch!

For true mitigation to even begin, at a minimum, a fraud alert must be placed on the victim’s credit file – and the dealership is not required to take that step. Curious. Mitigation would also logically imply investigating what other damage has been done using the stolen identity, and then unwinding that damage to return the identity to its pre-event status.

While the Rule does not require it, granting either every victim or every customer access to identity theft recovery service would provide a more meaningful level of mitigation, and certainly a higher level of customer satisfaction. Before we discuss this service, a couple of definitions would be helpful.

Assisted Recovery is the process of a victim attempting to restore his own identity with the advice of a professional. This advice is usually provided through a “how to” manual and, in some cases, telephone consultations. But the actual tasks necessary to restore an identity are performed by the victim.

Blanket Coverage is where ID recovery services are provided to every member of a defined group, such as every customer of a dealership. Because it is essentially group coverage, blanket coverage is less expensive than individual coverage.

Fully-managed Recovery is the restoration of a victim’s identity to its pre-event status performed by professional identity recovery advocates rather than by the victim. It is accomplished by the victim filling out and providing to the recovery advocate a limited power of attorney, which authorizes the recovery advocate to act on the victim’s behalf. Although the victim must cooperate with the process for it to be successful, the heavy lifting is done by professionals, not the victim.

In the vernacular, assisted recovery isn’t worth a 480 BEACON score in a Lexus dealership. A victim doesn’t want to be told how to fix a problem – he wants the problem solved. And the best way to do that is through a fully managed recovery.

Fully managed recovery by a reputable provider is the gold standard. But if provided after the fact, it is quite expensive. Such ex post facto remediation’s generally start in the four-digit range and can go up quickly, depending on the complexity of the case. Blanket coverage – providing the coverage to all finance or lease customers (cash customers aren’t covered by the Rule, but it’s a nice touch) – is the most economical way of providing meaningful mitigation to a dealership’s customers.

Again, this level of mitigation goes beyond the bare requirements of the Rule, but it more clearly accomplishes the Rule’s intent.

Oh, yeah – what about the dealership that had to eat the $45,000 RISC on a vehicle it delivered to the identity thief? Who mitigates that? Answer: nobody. That’s where prevention really comes into play – a good topic for next time.

Now, of course, the setting has changed in character, form and substance, but the idea is the same: for any of us to be successful in our careers, it is critical that we continue our training and education. To retain our current customers and compete effectively for new ones, it is critical to keep ourselves current with sales methods and techniques, software and technology advances, new product and service rollouts and other information and processes necessary to run a business or organization.

Benefits apply to agents, dealers and providers in that the agent is the liaison among the three. If you don’t have well-trained, knowledgeable F&I managers at the dealership who are using the provider’s products, you don’t have providers who are satisfied with the agent’s selling and customer service ability. In a recent article in F&I and Showroom magazine it was said that, “Agents are the critical extension of most technology and product providers – acting as both sales representative and dealer consultants.” I couldn’t have said it better myself.

For agents in the automotive and power sports F&I industry, further training comes in two types: required and voluntary. Now it is obvious what the necessary training for agents and brokers encompasses: pre-licensing courses and examinations with the state in which you are planning to become licensed and sell insurance. Agents and brokers need a sufficient amount of knowledge about insurance fundamentals and the state insurance laws to be able to sell in their respective states. In addition, for agents to maintain their licenses, many states have mandatory continuing education requirement that focus on insurance laws, consumer protection and the technical details of various insurance policies.

The not so obvious training, the “voluntary training” for agents in the automotive and power sports F&I industry are those courses that focus on selling strategies and techniques, business and/or organizational software (word processing, spreadsheets, database and presentation programs), industry-specific software (menu, reporting and integration programs) and product- and services-related training on those you’re promoting.

This is the training that provides you with that competitive edge, and can take your success to the next level. Even those of us who are not agents need to keep up to date on this type of information. Unfortunately, trying to keep current with everything can be very time consuming. And we all know that it is often difficult to get everything done in a day that needs to be done, let alone fitting a training class into your schedule.

The advent of the Internet has definitely made it more convenient to stay current on training, but is it the best way to learn and retain what is being taught? Which is better – traditional in-class courses or online courses? They both have their advantages and disadvantages, and it seems for each advantage, there is a disadvantage.

For example, online classes offer the ability to “attend” the course anytime, and from anywhere. That’s great! But, what if you are someone who travels a lot and the Internet isn’t running correctly at your location? Or, you can’t get Internet access from your computer? Online classes allow you more flexibility from a scheduling standpoint because they are accessible “24 hours a day, 7 days a week,” but there are still deadlines. Suppose you are one who procrastinates and then when you are all ready to review the material or take a test, you cannot access the Internet or the website you need to go to to complete your training?

Lower cost is often cited as a benefit of online courses, but when I checked with a couple local colleges, the fees for online training were more expensive than traditional classroom training. Who is this less expensive for? The trainer? I suppose the cost of the course depends on the type of training, be it college courses or vocational courses.

I have also read that an advantage of online classes is that they are “interactive.” I suppose they can be, but aren’t traditional classroom settings interactive as well? I have attended plenty of courses, training sessions and workshops in my life and they have all been interactive.

I am sure that those who are reading this are summing me up to be an advocate of traditional classroom-style learning. Perhaps! My colleagues definitely thought so. But, that is not why I’m playing devil’s advocate here. My point is that one approach is not better than the other. Wouldn’t it be better to use the advantages of both mediums? The truth of the matter is that I feel a combination of classroom and online training is the best method of training – and, therefore, the best method to look for when considering your training, be it required or optional.

FTC, FRB Issue Ruling

According to the new ruling, finalized by the Federal Trade Commission and Federal Reserve Board, effective January 1, 2011, creditors in the financial services industries are required to supply what is called a Risk-Based Pricing Notice (RBPN) to credit applicants whenever the creditor uses a credit report or score to extend credit that results in loans or credit containing higher interest rates or other terms contrary to what other consumers with optimum credit worthiness would have received.

The ruling of issuing an RBPN came about as a result of a gap created by the Adverse Action Notice, which was only issued to applicants upon the denial of credit. As the law stands, consumers who receive credit or have been approved for a loan with higher APRs or other less-than-optimal terms are given no such notification that their higher loan rates or terms are most likely a result of something on their credit report.

The RBPN is designed, among other things, to improve the accuracy of consumer reports by alerting consumers to the existence of negative information on their credit reports so that, if they so choose, they can attempt to correct any inaccurate information.

Actions for Dealers

The new risk-based pricing rule recommends using one of three methods to determine which consumers should receive the notice:

1. Direct comparison method
2. Credit score proxy method
3. Tiered pricing method

Under the direct comparison method, an applicant’s terms (APR) are compared against other applicants’ terms (APRs). An RBPN would be delivered if the current applicant’s terms are “materially less favorable” than the terms offered to a “substantial portion” of your other applicants.

Unfortunately, it may not be operationally feasible for a dealership to do this and the FTC and FRB recognized this. So, because of the difficulty of applying the direct comparison method, two other alternative (or short-cut) methods as mentioned previously were suggested: the credit score proxy method and the tiered pricing method.

The credit score proxy method requires that the dealership provide an RBPN to every applicant who falls below a pre-determined “cut-off.” And, the tiered pricing method requires that a dealership, which categorizes applicants according to tiers, should provide a notice to everyone who does not fall within the top one or two tiers that comprise no less than 30 percent and no more than 40 percent of the total number of tiers.

Unfortunately, none of these methods offers a simple, user-friendly way to identify who is to receive the notice and who is not. To make things even more complicated, according to Robert Harkins, president of HH&O Consulting Group, “It can be a costly endeavor for a dealership to comply depending on the method chosen.”

Exception to the Rule

Lucky for those of us placed with the responsibility of adhering to yet another government ruling, the FTC and FRB, having been strongly influenced by officials with NADA, offer an alternative (or exemption) to the RBPN. The exemption notice allows creditors the option of providing consumers who apply for credit with a “Credit Score Disclosure Exemption Notice” in lieu of the RBPN.

Among other required information, the Credit Score Disclosure Notice includes the consumer’s credit score, source of the credit score, a range of scores with information on how lenders use their scores and a written or graphic description of the consumer’s position compared to other applicants. The ruling states that as long as dealers provide a Credit Score Disclosure Exemption Notice to every applicant, they are exempt from having to provide the RBPN.

In light of what may seem daunting, the goal here is to help make consumers more aware of their credit standing, especially if the cost of borrowing money is going to cost them more in the long run.

David Robertson, executive director of AFIP, summarized the goal of the ruling: “Whether a dealer uses one of the suggested methods of determining which clients receive a Risk-Based Pricing Notice, or utilizes the Exception Rule by providing a Credit Score Disclosure Notice to their customers, either method moves credit score awareness to the forefront versus the Adverse Action Notice that occurs after the credit is denied.”