Max Zanan, Author of “Perfect Dealership” Talks Auto Finance Compliance

Max Zanan

Auto dealers are often very focused on making sales, and rightly so. But along the way, dealers must also be sure not to neglect the compliance side of doing business. While compliance may not be as sexy a topic as sales, it has the power to greatly impact dealerships’ reputations and financial standing.

Dealership Compliance: A Matter of Trust

Car dealers haven’t always had a negative reputation, but unfortunately today there is a dominant perception among the public that car dealers should be approached with caution. This perception is not altogether fair, as it’s in large part due to bad apples getting most of the attention from the press. But fair or not, this reality means honest dealers need to go the extra mile to prove their trustworthiness.

Therefore dealers must constantly communicate that they are doing the right thing.

This begins by having a written compliance program that dealers are accountable to and consumers can see in practice. For example, dealers need to reassure customers who are worried about exposing sensitive information that their data is safe. To assuage those fears, dealers can show that their paperwork is shredded when it’s no longer needed, or stored safely in a digital system.

Ultimately, a car is a car is a car. When customers choose a dealer, they are looking for a place where they feel comfortable and at ease. It’s trust that sells the car, and customers should be reassured that the dealer is worthy of their trust every step of the way: from the website, to the first interaction, to the closing and payment.

New call-to-action

How to Prevent Bad Compliance Practices

Dealerships that don’t fully implement compliance best practices stand to lose a lot. In the past, dealerships could simply expect to deal with a complaint being filed. In today’s age of online reviews, unethical deals, lack of sufficient security procedures, or even the appearance of laxity can all be blasted on social media. The more negative reviews a dealership receives, the more difficult it becomes to attract new customers and monetize.

In addition, penalties are severe for non-compliant behavior. Even seemingly benign oversights, such as leaving NPI (non-public information) like social security numbers and income out in the open, can result in hefty fines and the fallout of potential identity theft.

To prevent these issues, dealerships are advised to conduct thorough background checks, perform drug tests, and call references when hiring staff. Higher-level executives in compliance-sensitive positions, such as finance officers, are typically well known in the industry. A local lender may be able to tell if they are problematic.

Once hired, the onboarding process should include sufficient compliance training using real-world scenarios and specific, easy-to-follow procedures.

Finally, a compliance officer, not a sales manager, should be employed to periodically check that policies and procedures are being followed.

How to Prevent Fraudulent Business

Compliance risks, of course, don’t just come from within the dealership. They also come from fraudsters who are engaging in increasingly sophisticated schemes. Unfortunately, many dealerships still believe identity theft will never happen at their dealership and are surprised when it does. Lenders advance money to dealers assuming the dealers did all the checks. Therefore in cases of identity theft, the dealer must face the financial consequences including chargeback.

There are plenty of measures dealerships can take to prevent bad actors from wreaking havoc. Dealers should be trained to watch out for these red flags when interacting with potential customers:

  • Time pressure: For example, the customer says, “I want to buy this car, but only if I can leave within 30 minutes.”
  • Lack of negotiation: Can suggest that the buyer has no intention of making payments, or isn’t using their own credit card.
  • No down payment: Combined with other warning signs, this can be a giveaway that the purchaser will never make monthly payments.
  • Out-of-state: A customer may go to an out-of-state dealer to purchase a hard-to-find, rare car. But a customer who goes to a different state to purchase an ordinary car should prompt further questions.

Alert and experienced dealers who notice red flags are perhaps the most critical part of preventing fraud. Here are a few other useful fraud-busting resources:

  • Technology: Technological solutions that work with existing processes can add an extra layer of protection. For example, Fraud Fighter can automatically identify false ID cards, counterfeit money, and fake payment cards.
  • Other dealers: Some fraudsters scam multiple dealerships in a single day. Calling other dealerships in the vicinity to share information about scams, or ask about a suspicious buyer can all prevent bad actors from doing repeat damage.
  • Lenders: Dealers should rely on their captive lender from information, techniques, and other support in combatting fraud.
  • The OFAC (Office of Foreign Asset Control): This Treasury Department agency produces a Specially Designated Nationals and Blocked Persons list where criminals, drug dealers, and people from blocked countries can be found.

Concluding thoughts

At times, stringent compliance and anti-fraud measures seem to take time away from the more exciting sales process. But developing regular procedures and standards for all dealers, employing a compliance officer, relying on other dealerships and lenders, and adopting intuitive technology can all help make the important job of anti-fraud compliance easier to undertake.

About Max Zanan

Max Zanan is a seasoned automotive industry expert with 20 years of experience in sales, F&I, compliance, and dealership management consulting. His goal is to help car dealers improve profitability while increasing customer satisfaction and retention. Zanan published best-selling books—Perfect Dealership, Car Business 101, and The Art and Science of Running a Car Dealership. Zanan is a thought leader, organizer of the Perfect Dealership Conference, keynote speaker, and frequently quoted in trade publications such as Automotive News, Fixed Ops Journal, and Auto Dealer Today. Learn more at

New call-to-action

New call-to-action