Bringing the F&I Providers and Administrators Association (FIPAA) into being was a little like mating elephants: things happened at a very high level, there was a lot of grunting and snorting, and it took two years to get results. But on September 27, 2011 FIPAA was born in Las Vegas, weighing in at a healthy 2,917 pounds. Actually, that is the cumulative weight of the Advisory Council, which is a fine place to begin this story.

The Advisory Council is the body that steers the Association and advises the Board of Directors. The Council met for the first time during the Industry Summit at the invitation of the Board of Directors – David Gesualdo, Adam Kimber, and me. The members of the Advisory Council and the companies they represent are:

Clearly, this is a serious group, and demonstrates the breadth of support for the organization. Pete Biscardi was unanimously elected Chairman of the Advisory Council. Pete states, “The enthusiasm of the working group and the members of the council clearly indicates a commitment to the industry from the highest levels. The efforts of all those involved demonstrates a bi-partisan willingness to create high standards of excellence for our industry.”

Pete agreed to head this working group to address those issues. The first order of business in Las Vegas was to define the scope of membership and dues structure. Without those variables settled, the Association could not move forward.

In the months since the kick-off meeting, Pete’s committee (Brent Allen, Steve Amos, Chris Kerby, and Kelly Price) came to a consensus as to membership levels and dues:

Membership Levels

1. Provider and Administrator (“P&A”) Members
   • Actual F&I product providers (VSC, GAP, etc.)
     • Bright line test: if your company provides a product sold in F&I, you qualify for this level of membership
   • Underwriters of F&I products
2. Industry Members
• Companies that provide services that directly support the business of P&A Members
• Examples would include:
  • Integration providers
  • Menu providers
  • DMS companies
  • Bi-Monthly payment plans
  • Roadside assistance
3. Allied Members
• Companies that touch the F&I function indirectly
• Examples would include:
  • Inspection companies
  • Consultants
  • Lenders

Dues

• P&A Members: $2,000/year
• Industry Members: $1,500/year
• Allied Members: $1,000/year

All companies and individuals that join before the end of the Agent Summit in March will be designated “Founding Members.”

Registration forms are available. Click Here.

Next on the agenda was clarifying goals for the first year of FIPPA’s existence. The initiatives deemed of highest immediate priority were:

Industry Certification Program

Despite everyone’s best efforts, this initiative continues to be called the “Good Housekeeping Seal of Approval.” A more appropriate title will come in time, but the concept is clear: we want to create clear and objective set of criteria that distinguish reputable providers from the fly-by-nights. Suggested requirements for certification include underwriting by companies rated “A-” or better, a certain Better Business Bureau rating, and absence of negative regulatory action. Whatever criteria are decided, certification must be free, or very close to it – we don’t want to create the impression the certification is for sale, or only available to those who are willing to pay for it.

Independent Inspector Training and Certification

Having an objective training curriculum and certification of ability for inspectors is a high priority for the providers that use inspectors in the claims process. Creating the curriculum and a web-based delivery system will easily take a year to complete, but is seen as a natural and important function of FIPAA.

Industry Education and Certification Program

Not everyone is born knowing the difference between Stated and Exclusionary Coverage. And yet there is an immense body of knowledge within the members of the Advisory Council and the companies they represent. Web-based instruction and testing related to industry knowledge was considered a benefit to the industry as a whole, and would provide standardized training of new hires. This training could extend to independent agents in the field, with an additional emphasis on legal compliance – all providers and administrators have a vested interest in having the agents selling their products doing so in a legally compliant manner.

FIPAA Website

It goes without saying that the organization needs a robust website that can facilitate communication and provide “the reputable voice of the industry” to those consumers who seek information about the value of F&I products. Sponsored by P&A Magazine, www.fipaa.org will launch in conjunction with the next board meeting being held at the Agent Summit in Las Vegas, March 12-14.

Two years ago, a number of thought leaders in the F&I industry had the notion of creating an association. FIPAA represents the birth of that notion.

There are plenty of examples of why the auto finance industry needs to police itself, but little has been done to protect a key revenue source for dealers. One provider says it’s time for that to change.

Regulations are a fact of life for businesses in the automotive industry, and providers of vehicle service contracts and other value-added products are no exception. Fortunately, we still have time to take the initiative and institute our own oversight procedures before government regulators intervene. The alternative could be detrimental to business.

Consider the current availability of Guaranteed Auto Protection (GAP) in the state of New York. GAP, which is a valuable product for many buyers, is no longer offered because of the inability of GAP providers to police themselves. As a result, the state has regulated the industry to the degree that it is no longer profitable for agents and/or dealers to sell GAP products in the state of New York.

This example illustrates how important it is for product providers to operate transparently under clear rules. The need for self-regulation has grown from a whisper to a roar as it has become easier to get into the business and harder to identify the “bad apples.” Customers are offered amazing deals via the Internet, TV ads and telemarketing, but soon realize that if it sounds too good to be true, it probably is.

Benefits of Self-regulation

We are already seeing some states, including California and Oklahoma, take a more aggressive regulatory stance and more are expected to follow. Businesses in an industry tend to get lumped together and a bad experience reflects negatively on everyone. One company’s failure is bad for all because little attention is given to the specifics of the failure.

If we as an industry demonstrated a willingness to acknowledge and address the reasons for these regulatory actions, benefits would be realized by the product providers, their dealer clients and the final customer.

Product providers are best equipped to establish rules and ethical guidelines because we have a comprehensive understanding of the industry, both from customer service and security perspectives. In addition, rather than dwelling on the negative, it is of paramount importance that we focus on building trust with consumers by promoting proper ways to conduct business. These efforts will enhance the reputation of the industry as a whole.

A self-regulating body has the ability to be proactive and address issues before they become larger problems. Without leadership and oversight, the knee-jerk reactions that occasionally occur now are often extreme and inappropriate. It is also economically advantageous to regulate ourselves versus having the government do it.

Furthermore, self-regulation provides security to dealers and customers. They can be confident the provider will be around to live up to its obligations. We must remember that at the end of the day, we’re nothing more than promise keepers. There are no loss leaders in this business and every deal has to stand on its own.

Self-imposed regulations make good business sense when considering our commitments to customers. They would be able to base decisions on factors other than simple price comparisons, such as quality, service and stability. A more comprehensive understanding of the product and the provider behind it would create more confidence in purchasing decisions and improve customer satisfaction.

How to Create Oversight and Standards

To effectively address these issues, I propose that we create an industry association. It would oversee ethics issues and establish minimum requirements for companies to operate in the marketplace. Companies would receive something like a “Good Housekeeping Seal of Approval” to denote their good standing with the association.

The Association of Finance & Insurance Professionals (AFIP), which is the sanctioning body for the F&I trade, could serve as a template for product providers. Its mission is to give a voice to F&I practitioners, protect the interests of all parties and support the companies that serve the F&I function. AFIP has been well received by both the industry and consumers alike and has improved compliance and raised the credibility of the dealership F&I office.

To be recognized by this proposed association, providers must have the appropriate insurance backing and demonstrate proper relationships with insurance companies. A critical question to ask is, “Who holds the money?” Claim reserve money should be held by the insurance company, not the provider. Too often, fly-by-night companies hold all the money and when they go out of business, the insurance company doesn’t have the funds to cover the claim, leaving the customer stranded. Insurers must also have a minimum AM Best rating of A- (Excellent) or better.

Other factors to consider include the length of time a company has been in business and how customer service is handled. Is there a real person answering the phone? Do customers get a prompt response? The service after the sale is the most important part of our business and establishing standards through self-regulation is the most viable way to preserve the integrity and expertise we have built over many years.

I encourage administrators, agents and dealers to share your ideas and opinions with me about creating an association and establishing a certification process for the industry. Contact me at (800) 548-1875 or at email hidden; JavaScript is required.