Recent actions by state and federal regulators have highlighted the importance of properly dating the retail installment sales contract and other paperwork associated with the purchase of a vehicle or vessel. A common problem, called “backdating,” occurs when the dealership dates the deal paperwork prior to the date the dealership actually received bank approval and delivered the vehicle. For example, suppose a customer visits the dealership on 4/1. The sales staff begins working the deal on 4/1 by entering the consumer’s information into the dealership management system (“DMS”) and provides the consumer a quote to purchase the vehicle. For any number of reasons the dealership does not obtain final approval from the bank until 4/7. The consumer is then contracted and takes delivery of the vehicle on 4/8. In this example, if the sales staff at the dealership dates to contract and paperwork on any day other than 4/8, they have backdated the contract and violated state and federal law. Another example of backdating occurs when the sales staff dates a contract some time in the past in order to take advantage of manufacturer incentives that were more favorable on that previous date. Backdating deal paperwork in this manner subjects your dealership to incentive audits, chargebacks and possible breach of the sales and service agreement with the manufacturer.
Many causes of backdating are easily avoided. First, make sure that everyone responsible for processing deal paperwork is properly trained on why backdating is a problem and the consequences the dealership may face if backdating occurs. Management should regularly audit deal paperwork to check for compliance. Finally, contact your DMS to see whether your provider may have solutions to help minimize the risk of your staff erroneously backdating a contract. For example, most dealership management systems (“DMS”) pre-print the date on the retail installment sales contract. You can determine whether the date pre-printed is the date the consumer is entered into the DMS or on the date that the F&I manager converts the quote into a deal and prints the paperwork.