A Completed Credit Application is the Best Kept Secret at a Dealership

When you complete a sale with a customer, the furthest thing in your mind is that you may have to sue the customer months or years in the future.  Most of your focus usually is on what steps you can take to make sure you do not violate the law or how you can minimize the chance a customer may prevail against you in a lawsuit.  Today, we’ll address what you should do to prepare in advance for possible litigation against a customer.  Luckily for you, your dealership’s standard credit application is a great tool that can come in handy should you have to sue a customer.

A plaintiff’s lawsuit does not end merely with ‘winning’ a verdict in court.  The real success of the lawsuit can be measured by the plaintiff’s ability to collect all or part judgment the court awards.  A judgment is not that effective if you can never collect on it.  Many plaintiffs find it frustrating to expend legal fees to obtain a favorable judgment only to learn that they cannot collect it.  To effectively collect a judgment, you will need to be able to locate the customer and have details on the customer’s assets that may be liquidated or frozen to satisfy the judgment.  Your best tool to obtain the information you’ll need is your credit application.  Many salespeople and managers take shortcuts in completing the credit application, either by taking a ‘five-liner’ to gain just enough information to access the customer’s credit file, or fill out only what the bank asks to have completed.  Instead, use the credit application as an interview tool to gain as much information on the customer as possible.  You should aim to have each credit application filled out completely, and monitor each member tasked with gathering the customer’s credit information.  Typical credit applications have sections related to past employment, credit references (usually space for 3-5 individuals) and itemization of bank accounts, assets, etc.  A credit application, fully completed, may provide you with enough information to track down the customer and attach what assets he or she may have.  As an ancillary to preparation for possible litigation, the completed credit application gives your F&I manager great information to tailor an F&I presentation.  For example, if the customer discloses that he has little to no savings in his accounts, the F&I manager could use that information to sell the benefits of GAP coverage or credit life/disability insurance.  If you use a Customer Relationship Management (“CRM”) system to complete credit applications, your provider may aggregate this information into a wealth of reports you can use to hone your marketing efforts.  Increased diligence in completing the credit application benefits the customer because doing so helps detect fraud and identity theft.

Does your dealership require staff to complete credit applications?  What are some best practices for accomplishing this?

Gender Based Hiring Decisions? Really?

A sales manager recently started a peculiar discussion on a leading automotive industry message board and blog when he asked community members to provide feedback on their experiences with hiring female Internet Sales Managers and the work habits of these particular employees. The respondents were all too willing to navigate this veritable minefield. One vendor stated that “this should explain my thoughts when it comes to hiring women” and provided a link to his company’s webpage, which showed that only 3 of the 33 employees were men. Another came from a General Manager of a dealership, who wrote, “our female [Business Development Center] agents substantially out performed their male counterparts…I will not hire a male for this all important role ever again.”

 A Google search turned up similar articles and discussions on the topic of hiring women for sales positions at dealerships. One such article, posted on AskPatty titled “Women in the Car Business; Their Time has Come!” describes efforts that the author, as a representative of AskPatty, has undertaken to increase employment of women in the automotive industry. These efforts included aiding dealerships with hiring female salespeople “through sites such as Career Builders and Monster.Com” and paying “special consideration” to female applicants.

According to Title VII of the Civil Rights Act of 1964, it is unlawful for businesses to make hiring decisions regarding new employees in ways that discriminate because of applicants’ race, color, religion, sex (including pregnancy), and national origin. This includes relying on stereotypes or assumptions based on applicants’ classification in one of the above-referenced groups. If your business shows similar hiring preferences, and employ more than 15 people, you may violate the law. You cannot claim, in defense of a preferential hiring practice contrary to Title VII that you intended to rectify past societal wrongs or wished to diversify your workforce. Constitutional law is quite clear; it is not the role of the private employer to craft “affirmative action” programs.

If your business is currently utilizing hiring practices that favor one class of person over the other, please seek legal advice on whether your practices violate state or federal law.  Your well-meaning intentions to diversify the composition of your staff to reflect the buying public could lead to serious legal troubles.   

*Image courtesy of Car Deal Expert*

Tips to Minimize Risk of Consumer Initiated Credit Card Chargebacks

Consumers are becoming more comfortable with disclosing their credit card
information to counterparties either over the phone or on-line. Part of this reason is the
explosion of websites such as Amazon and eBay. The convenience of these websites
hinges on the ability to make instant payment for the goods. The other reason consumers
have become more comfortable using their credit cards in this manner is the protection
that card issuers have given consumers against fraudulent purchases. In our industry, it is
common for a consumer to purchase parts or other merchandise, for example, over the
telephone or on websites like eBay. More and more, consumers are also using credit
cards to secure availability of a particular vehicle or finance approval without physically
visiting the dealership.

However, as you are aware from years of experience dealing with the credit card
companies, the relationship the credit card company looks to protect is that with the
consumer, and not necessarily your business. Businesses see accepting credit cards to
pay for purchases by consumers as a necessary evil in a modern world focused on
convenience and fluid transactions. As you evaluate ways to make transactions more
convenient for the consumer, remember to analyze your processes for handling credit
card payments. Failing to take simple steps can leave your business facing costly
chargebacks.

You create potential liability for your business when you accept payment by
credit card when the credit card is not present. An example of this type of transaction,
called a “Card not Present” or “MOTO” transaction is a consumer that authorizes the
dealership to charge his or her credit card over the phone to submit a down payment or
deposit on a vehicle. Another example is a consumer that orders a part from your parts
department and pays for it over the phone, using a credit card. In both instances,
employees often fail to have the consumer sign the slip if or when the consumer
eventually visits the dealership. Perhaps unbeknownst to you when you consummated
your merchant agreement, your business agreed to warrant the legitimacy of the
cardholder and the transaction to the bank that issued the card. If the consumer later
claims that the Card Not Present/MOTO transaction was unauthorized, the bank can
charge back the transaction. Because you do not have the consumer’s signature on the
payment slip, you will likely lose in these kinds of disputes.

The credit card industry is experimenting with services that will address some of
this liability as it relates to on-line sales. In the meantime, here are some processes you
can implement to help protect your dealership when conducting potential Card Not
Present/MOTO transactions:

1.  Ask the consumer for the Card Verification Value 2 (“CVV”) printed on the card.
Usually, this three-digit sequence is printed either on the front or back of the card,
near the card number or signature. If a criminal stole the credit card number,
but does not have physical possession of the card itself, this will thwart many
fraudulent transactions. Ask your website provider to help create a form on your
webpage, if you accept credit card payments there, that captures the CVV and
stores it securely. If you store the CVV somewhere, make sure your processes
comply with the law, such as the Red Flags Rules.

2.  Have the consumer provide his or her billing address, and do not ship goods
to any address but the billing address. For a fee, Visa or Mastercard provide a
service where you can verify the billing address. Consider obtaining this service
as an extra safeguard.

3.  Have the consumer sign for the product at the time and place of deliver, whether
that place is your dealership or the shipping address. If the consumer claims that
he or she never received the goods, this should firmly rebut that statement.
For sales of vehicles, cancel the previous charge taken over the phone and run the
transaction again in the presence of the consumer. Have the consumer sign the
credit card slip and retain this in your records. When doing so, make sure to have
the permission of the bank financing the consumer’s transaction, allowing you
to accept a credit card transaction for a down payment. Many banks agreements
expressly prohibit this practice and those that allow it often require prior notice.