IAS News and Press
Smile! You're on dealer cam
Recording F&I deals protects dealerships and customers
Mar 31, 2003
Automotive News
By Arlena Sawyers (Staff Reporter Donna Harris contributed to this report.)
Picture the scene: A few months after a customer buys a vehicle, she claims the dealership told her she signed a 36-month lease when she actually signed a 48-month lease. Is the customer mistaken or perhaps lying? Or is it the finance and insurance agent's fault? As the dealer, it's your responsibility to fix this mess.
Now what?
When this happened to Forrest McConnell, owner of Honda and Acura stores in Montgomery, Ala., he whipped out a video recording of the closing and watched carefully.
It turns out that the customer was told that the lease was for 48 months.
Case closed.
McConnell is among a growing number of dealers who video-record or audio-record the F&I transactions in their dealerships. He says he finds the practice necessary because plaintiffs' lawyers have been eager to exploit car transactions - particularly in Alabama.
Recordings also uncover bad apples in dealership F&I offices who might expose their employers to legal and ethical headaches because of illegal or unprofessional behavior and practices.
Disgruntled customers and unscrupulous employees have trouble arguing against a video recording.
Recordings protect all
"I'm an attorney. It is better to have a video recording than a written record," says McConnell, who has video-recorded the closings of each vehicle sale for 10 years. He spent about $8,000 for the equipment.
"I did this to protect myself," he says. "When customers complain, it is your word against theirs, and you might not remember what happened."
Herman Ford, COO of Red McCombs Enterprises in San Antonio, says his dealership group has been video-recording F&I transactions for a few years. The company retails about 36,000 new and used vehicles a year.
The company initially met a lot of resistance from employees, Ford says, but the procedure is now mandatory at all of its 13 dealerships. He says the company reviews a sampling of the recordings each month.
The recordings show that employees who best follow the company's policies and procedures are the best producers, he says.
The recordings also show that some customers genuinely don't understand the process or just don't remember correctly. There have been instances in which customers have tried to put one over on the dealership, too.
"The dealer has a responsibility to know what is being said in the F&I department," Ford says.
"Through personal experience, we found that what we were told was different from what was happening."
Fred Miller, director of variable operations and executive vice president at Hall Automotive of Virginia Beach, Va., says his company outfitted 34 offices in the 16-dealership group in mid-February with video equipment. He declines to discuss the cost.
Miller says the recorded transactions protect customers' interests as well as the dealership's.
He says Hall Automotive is careful to comply with all disclosure laws and regulations regarding issues such as credit information and believes that the recordings give consumers peace of mind that the company cares about how they are treated.
"Customer service is a big deal for us," Miller says. "We were concerned with all of the new laws."
Proceed with caution
Although dealerships that record F&I transactions strive to follow the letter and spirit of the law - that's why they do it - glitches can happen. Employees can be ill-prepared, engage in unethical behavior or simply make a mistake.
Jay Smyth, an attorney with Hubbard, Smith, McIlwain Brake-field and Browder in Tuscaloosa, Ala., urges dealerships to proceed with caution.
On the positive side, he says, recordings make clear what was said without relying on memories. Problems arise when a customer feels uncomfortable about being recorded, calling into question privacy issues.
Smyth says dealerships that record transactions should display the equipment prominently. Cam-eras and microphones, for in-stance, should be in full view.
The dealership also should make sure that customers are aware they are being video-recorded or audio-recorded and that both the F&I agent and customer acknowledge that fact on the recording, he says.
"Done correctly, it is a safeguard for dealers and customers," Smyth says.
Pandora's box?
Last year, the National Automobile Dealers Association revised its code of ethics, which includes a guide for financial services. The guide urges full disclosure, documents written in plain language and voluntary customer choices of optional products.
Bill Price, director of legal affairs for NADA, says the dealer group believes greater transparency in dealership operations is a good thing but has not taken a position on the practice of recording F&I transactions.
"It is a complicated situation," Price says. "Focusing on a single technique leaves things out such as customers' and dealership personnel's rights." Dave Robertson, executive director of the Association of Finance & Insurance Professionals, calls making a permanent record of the F&I sessions a Pandora's box.
In their most benign application, he says, recorded sessions can be training tools that F&I employees use to review and learn from actual exchanges with customers or as management tools to monitor whether employees are making full presentations of all F&I products offered for sale.
But whatever the positive factors might be, Robertson says, they are outweighed by the potential for disaster.
"The single greatest pitfall is if the person on camera dispenses inaccurate or untrue information," he says. "Such cases usually occur due to ignorance rather than an unscrupulous intent."
Robertson suggests that dealerships that install the recording equipment also should enroll their F&I managers in the association's Certified F&I Professional training. In addition to teaching regulatory and procedural information, the program requires participants to sign and abide by a code of ethical conduct.
Robertson says the training program reduces the odds that an F&I employee will misspeak and creates proof that the dealership tried to prepare the employee to sell F&I products.
Paul Walser, CEO and owner of the 12-dealership Walser Automotive Group of Minneapolis, began audio-recording F&I transactions last summer.
"If our F&I world had been perfect, we would not have done this," says Walser, who spent less than $25,000 to install the audio equipment in all his dealerships.
The action is part of a May 2002 agreement with the Minnesota attorney general's office to resolve a state investigation related to service contract sales at several of the group's dealerships.
The state began an inquiry after receiving more than 150 written complaints from customers. Walser Automotive does not admit to any wrongdoing.
Under the agreement, Walser Automotive Group dealerships audio-record transactions during which employees "attempt to solicit, market, offer, discuss or sell to any consumer any optional financial, insurance or service product," according to the Minnesota attorney general's office.
The company must audio-record the transactions indefinitely and keep the recordings for three years. In accordance with the agreement, the dealership group sent copies of the recordings to the attorney general's office for four months.
Customers are advised that they will be recorded unless they object; 80 percent do not object, Walser says. Employees are OK with the tapings, too.
"It provides the customer with the sense that we have a legitimate concern about how they are treated," he says. "It forces (employees) to take a look at how they present things; it's a good management tool."
The recording of F&I transactions is on the rise. Here are pointers from dealers, attorneys and others familiar with the practice.
Recording Tips:
- Position the camera and other equipment in plain view. Prominently display signs that say transactions will be recorded.
- Tell the customer that the transaction will be recorded. If he objects, explain why. Have the customer and the F&I agent agree to the recording on tape. Many dealers tell customers that it is being done to protect both parties from misunderstandings.
- Give a copy of the recording to a customer who requests it.
- Know state statutes of limitations for breach of contract and fraud claims. Archive the records for the required period or for the length of a customer's finance contract.
- Use technology that will enable easy storage and quick retrieval of the recordings.
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