Channel | Industry

Cover Your Acetabulum

P&A executives can promote the legal and ethical sale of the products they provide by insisting on compliance training for their employees and clients.
By: James S. Ganther

Cover Your Acetabulum

If you’re old enough to read this article, you know what “CYA” means. For those of you who aren’t, it stands for “cover your acetabulum.” (That’s the large bone that contains your hip socket.) If you thought it meant something else, shame on you.

But for purposes of this article, CYA stands for “certify your associates,” and it’s closely related to the other definition. To explain how certification can accomplish the cover function, I need to go way, way back to when I was in law school — and that was so long ago, there were only six commandments.

The Law of Evidence

One of the things you learn as a 1L (first year law student) is the law of evidence. There are four general types of evidence: demonstrative, documentary, real and testimonial. When you’re trying to make your case or prove your defense, you want all the admissible evidence you can muster.

Admissible evidence needs to be both relevant and reliable. Relevant evidence is that which tends to prove the point for which it is offered and does not carry with it the infirmities that render evidence inadmissible, such as hearsay, unnecessarily prejudicial, privilege, and so on.

Reliability runs to the trustworthiness of the evidence offered. Are there enough points on the fingerprint to make a reasonable identification? Can the document be authenticated? Does the witness have an obvious bias?

What difference does all this make to an F&I provider? A great deal of difference if you’re ever sued. Consider the law of negligence: Negligence arises when one party breaches a duty to another and damage results.

An F&I provider owes a duty of care with respect to the content of its training. If the provider’s employees offer training to dealership personnel, it needs to be accurate. If it is inaccurate, and the poorly trained F&I Manager misrepresents the features and benefits of the product to a customer and the dealership gets sued, you can bet the provider will get sucked into the litigation. And then the law of evidence becomes you best friend — or your worst enemy.

Consider a provider whose employees regularly train dealership F&I personnel by going over each product contract in person, line by line. Sounds good, right? The testimony of the provider employee would support the theory that proper training occurred. … At least until the F&I manager takes the stand and contradicts everything the provider employee said. Both witnesses would have obvious bias. It’s what we call a he said/she said situation, and that’s not a good position to be in.

But what if the provider had a system in place of certifying that every F&I manager who pitches its products to the car-buying public was trained on the terms of each product contract? That type of documentary evidence goes a long way in supporting the testamentary evidence of the provider’s employee.

Get Prepared

So how does one go about creating a certification program? The first step would be to develop the content. That means finding an engaging way to explain all of the salient points about each of your products, pulling those points directly from the contracts that embody them. From long experience, I can testify (relevantly and reliably) that this is the hardest part.

Once the content is developed, step two is to present it. That can be done in a “live” format, either onsite at the dealership or at the provider’s home office, or at some neutral site, such as a Holiday Inn Express. Or it can be presented online. Each method has its advantages.

Live presentations – especially those at the provider’s home office or some other location away from the dealership – ensures that the instructors have the students’ undivided attention. Online presentations are generally less expensive and can be completed at the student’s convenience.

But whichever method of instruction is used, an examination that covers the material terms of the product contracts is essential. That’s the third step, and it is vital. You’ve got to be able to prove what it is that you taught and that the student actually learned it. For that, you need a test.

What should be the minimum passing score? Seeing that you are entrusting your company’s reputation to the F&I managers that take your training, I strongly suggest 100%. In a court of law, “80% compliant” is not a position of strength.

And once all three of these steps are completed, embody the accomplishment with a document that testifies (there’s that word again) to the student’s accomplishment. Present a certificate, suitable for framing (or better yet, framed). Require any dealership employees who want to represent your products to be certified before they are granted that privilege.

If these steps are taken, if the quality or content of your company’s training ever come into question, the appropriate employee (“custodian of records in the ordinary course”) can testify that the F&I manager in question was certified to sell your products, and explain what that certification entails. The records custodian can also produce the test records that confirm the F&I manager understood the content of your training.

Want to take your certification program up a notch? Make the certified F&I managers recertify annually. This doesn’t necessarily mean running them through the entire training program again, but it certainly means requiring a test that confirms they haven’t forgotten what they learned. And if the terms of any of your product contracts changed since the initial certification occurred, that information needs to be conveyed and tested before the new contracts get offered to the public.

All of this discussion surrounds the concept of a provider-specific certification program that revolves around product knowledge — a very good thing. But that is not the only thing that would profit from being certified. Another fine topic for certification is a working knowledge of the laws that govern dealership operations.

Providers are subject matter experts on their own products. They are unlikely to be experts on the law, as most of their executive teams had the good sense to avoid law school. So for this certification you need to look outside.

Fortunately, there is no shortage of certification programs to meet this need. So which one is best? To decide, consider the following:

  1. What does the program cover? There are some excellent certification programs, for example, that address Fair Credit issues in great depth. But “a mile wide and an inch deep” is not the best approach for the F&I industry. A meaningful compliance certification also should address such items as cash reporting, conditional delivery, the Equal Credit Opportunity Act, Red Flags, Safeguards, Magnuson-Moss, Regulations M and Z, and unfair and deceptive trade practices, among others.
  2. Who wrote the content? What are the authors’ credentials? Is the certification developed by attorneys or former dealership personnel? Whom would you trust more?
  3. How does it keep you current? You always want the F&I personnel who represent your product to use the current form and promote the current benefits. Guess what? Laws change, and it’s the current ones that need to be taught. Confirm that any certification program has an affordable mechanism to keep its participants abreast of the changing legal environment.
  4. How easy is it to deploy? Is the certification offered online, or must candidates attend offsite training? Can the candidate access the content at his own pace and convenience, or at someone else’s?
  5. How much does it cost? Not to put too fine a point on it, but if it costs so much that no one wants to pay for it, what’s the point? Does the certification program provide discounts (or commissions) to the providers or their agents?

Regardless of who occupies the White House, retail automotive and its supporting ecosystem will remain a highly-regulated industry. Training F&I personnel on the specifics of the products they sell and the laws that govern their activities, and certifying that those training initiatives have taken place and been effective, is in everyone’s best interest.

This article was written by:

- has written 14 posts on P&A Magazine.

Jim Ganther is president of Mosaic Compliance Services. He is an attorney and a member of the National Association of Dealer Counsel.

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The views expressed by the authors and those providing comments are theirs alone, and do not necessarily reflect the views of P&A Magazine or any employee thereof.

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