The Compliance Officer Cometh
The Compliance Officer Cometh

With apologies to Eugene O’Neil and his play, The Iceman Cometh, the need for every business organization, including dealerships, to have a compliance officer is a simple business fact. Earlier this year, the Wall Street Journal featured an article that flatly stated that compliance officers are the fastest growing occupation in American business. The reason is simply that American business continues to be more regulated by the year. Failure to observe these regulations has cost many enterprises substantial sums of money in damages and fines.

It has already been established that operating a car dealership is one of the most regulated industries in the U.S. The cost of federal compliance is staggering as indicated in a study commissioned by the NADA entitled “The Impact of Federal Regulations on Franchised Automobile Dealerships.”

It logically follows that every dealership should have a compliance officer because of the need and the fact that a good compliance officer can reduce these costs and liability. And, as is strongly recommended in this column, every dealer should implement a Compliance Management System which requires a compliance officer to be appointed.

A Compliance Management System would include the following:

  1. Establish a compliance program
  2. Establish a board with management oversight
  3. Appoint a permanent compliance officer who reports to that board
  4. Respond to consumer complaints with a protocol
  5. Have routine audits examining how the program is functioning and can be improved.

This article only addresses the appointment and training of a compliance officer as it relates to the various issues in the finance and insurance department. Unfortunately, there are many other compliance areas of which dealers of must be cognizant.

At this point, every franchise, independent, and BHPH dealer, if it hasn’t done so already, should immediately appoint a compliance officer.

The Present State

Presently, dealers should already have written privacy and safeguards programs with an appointed Privacy and Safeguards Compliance Officer. The compliance officer should discharge these privacy and safeguards duties.

Selecting a Compliance Officer

The person selected for the role should be a relatively high-ranking employee of the organization and would report to either the general manager or dealer principal. This person must understand the car business and have the intellectual capacity to understand laws and regulations. This person will need to be educated presently and engage in on-going education as the regulatory environment is dynamic. In addition, this person will be required to draft policies for the store and educate dealership employees. Unless a new person is hired or selected, most stores should select the general manager, sales manager, or controller for this role as an addition to their present duties depending upon the size of the business operation. The compliance office may need a support staff as well.

This person will also need a budget for these procedures. There are ways to control this budget as this article will suggest.

Selecting a Dealer Attorney

As a corollary for selecting a compliance officer, dealers should evaluate their legal counsel. The compliance office will be working with the dealership’s attorney directly. In my attorney general days, dealers were, at times, represented by attorneys who didn’t understand the car business. In one deposition, in particular, a large store was represented by a prominent defense attorney who, through his own ignorance, implicated his client in civil infractions in the deposition. In another case, an attorney caused his dealer client to pay a substantially higher damages amount through his lack of understanding of F&I. Dealers should be certain that the attorney who represents them knows their business. If a dealer attorney is not a member of the National Association of Dealer Counsel (NADC) a dealer should ask why. If a dealer needs an attorney it should seek a member of the NADC. In the alternative, dealers need to educate their attorneys regarding dealer operations.

Education of a Compliance Officer

A compliance officer should have a two-tier track for education. He should avail himself of all the free information in the market place. Secondly, he should consider some form of formalized training.

There is a rich abundance of free materials that a compliance officer should either subscribe to or review.

Free Training Materials

There are many freely available training materials. All dealers and dealer compliance officers should take full advantage of the following:

  • Free industry publications such as this publication
  • NADA and state ADA websites
  • Federal Trade Commission- The FTC provides a number of helpful articles.
  • Federal Reserve Board- The FRB has an excellent in-depth explanation of leasing in its publication, “Keys to Vehicle Leasing” to which this columnist contributed.
  • Consumer Finance Protection Bureau (CFPB)
  • State DMV websites
  • State attorneys general websites- These websites can be especially helpful outlining advertising rules.
  • AWARE (Americans Well-informed on Automobile Retailing Economics)- AWARE is an organization dedicated to educating the public about vehicle finance. It offers excellent articles and is a resource for both dealers and consumers.
  • Vendors- Dealers shouldn’t hesitate to ask their vendors for any compliance materials they may offer. Some vendors have developed excellent materials.

Modestly Priced Materials

In addition to the free legal resources, there are reasonably priced books and manuals worth every penny.

F&I Legal Desk Book

This book is written by the attorneys at Hudson Cook and should be on the bookshelf of every dealer in the U.S. It is written in a question and answer format addressing the most common questions practitioners would ask about F&I compliance. It is the training manual for AFIP.


The NADA produces various guides for franchise dealers which are available for modest cost. They are written by legal experts who are extremely conversant with dealer operations and demystify the legalese.

Auto Dealer Law (ADL)

This organization produces an excellent comprehensive dealer manual which addresses all phases of the store. It is not inexpensive. However, it is quite thorough and written by automotive compliance legal experts.

Training Organizations

There are various training programs offered for dealer compliance purposes. Some are excellent and others, not so much.

AFIP Certification

The Association of Finance and Insurance Professionals, a non-profit organization, has been training dealer personnel for many years. I have personally participated in assisting in this training in two of its modules. I became aware of AFIP in the early 1990’s when I was with the Florida attorney general’s office and recommended it then as a possible licensing mechanism for dealerships. It is an excellent training program.

AFIP’s commitment to compliance officer training continues as a dealer resource with its new Association of Dealership Compliance Officers (ADCO). This new organization promises to help compliance officers discharge their obligations.

Consumer Credit Compliance Certification

The National Automotive Finance Association (NAF) offers this new in-depth program for training and it is designed by leading national attorneys who specialize in these areas.

Mosaic Compliance Services

Mosaic offers training modules and programs regarding dealer compliance.

There are certainly other merit-worthy organizations which offer training programs. However, there are others which are not especially competent. Dealers should investigate any of these training organizations carefully. What experience and training do these organizations offer? Are they current?

A Beginning Checklist of the Laws the Compliance Officer Must Understand

Compliance officers should acquaint themselves with the following list of laws and regulations. Some of them are quite complex but, nevertheless, compliance officers should print these laws from the internet and place them in a folder or binder. As a compliance officer’s understanding progresses he will be able to identify the relevant sections of these laws. The many resources indicated above will translate these laws into more humble and understandable language. A future article will provide further details about developing a checklist or self-audit.

Federal Law

  • The Truth in Lending Act and Federal Reserve Board Regulation Z
  • The Consumer Leasing Act and Federal Reserve Board Regulation M
  • The Equal Credit Opportunity Act and Federal Reserve Board Regulation B
  • The Fair Credit Reporting Act (including the "Red Flags" Rule)
  • The Federal Trade Commission's Used Car Rule
  • The FTC's Preservation of Consumer Claims and Defenses Trade Regulation Rule
  • The FTC's Credit Practices Regulation
  • The Magnuson-Moss Warranty Act
  • The Federal Odometer Act
  • The Gramm-Leach-Bliley Act and the FTC's Privacy Regulations (including the Safeguards Rule)
  • The Internal Revenue Service's Cash Reporting Rules
  • The Treasury Department's Office of Foreign Assets Control ("OFAC") "Specially Designated Persons" List Requirements;
  • The FTC's Do-Not-Call and Do-Not-E-mail Rules
  • The Federal Communication Commission's Telephone Rules
State Law
  • Unfair and Deceptive Acts and Practices (UDAP)
  • Advertising
  • Retail Installment Sales Acts
  • Motor Vehicle Leasing Disclosure Acts
  • Titling and Licensing Statutes
  • Insurance and Ancillary Products
  • Document Storage and Destruction
  • Documentary Fees


Compliance efforts can seem daunting, intractable, and impossible. They are not. They can be managed and managed with reasonable cost. A compliance officer has many options to enable him to protect dealer interests thereby controlling costs and, most significantly, avoiding liability. No matter the size of a store, there should be an organized, educated compliance officer serving as protection to the dealership’s interests.

Govern yourselves accordingly.