Compliance Archives - Storytailer

Compliance: Can You Be Harassed By A CRM?

February 4, 2015 By Arnold Tijerina

For the past 2 years, one of the items on my daily to-do list has been grading Internet leads for DealerKnows Consulting. This process involves assisting DealerKnows in monitoring the progress of their clients through monitoring the ISM’s lead handling within the CRM. This provides valuable insight into what exactly is happening with leads (i.e. is the store following the process installed through DealerKnows and, if not, what exactly is happening) and indicating where additional training is needed.

In one particular client ‘s CRM, I started noticing one of the employees tasked with responding to, and communicating with, Internet leads inputting questionable notes into the CRM. Keep in mind; he was not doing anything inappropriate in his communication with the customer but, at times, expressing his frustration and/or opinions of customers through notes in the CRM.

Notes like:

F$@k this bitch!
Screw this mooch!
What a stroke!
I hope this customer gets fired for being an a$$hole!

Now, I was in retail a long time. I understand his frustration. That being said, I mentioned to him and his manager that he shouldn’t be using derogatory terms in the CRM. First, this particular store works as a team (ie. the leads aren’t solely one person’s responsibility). Whoever is working when a call or email needs to be made handles it. In the past, this team was a bunch of guys. Recently, a female was added. I mentioned it again within the context of the fact that the notes bring negativity into the lead for the next person who looks at it. In addition, it could offend someone else looking at the lead within the CRM. Even a female member of DealerKnows chimed in that the notes offended her.

The real question, however, is not one of appropriateness but rather one of compliance and liability. I was curious as to whether there could be harassment or employment issues. In that spirit, I decided to contact an expert in automotive dealer compliance. I contacted the founder of Dealer Compliance Consultants, Jim Radogna, a longtime auto guy with over 15 years experience in just about every dealership management position, over 6 years experience in assisting dealerships with compliance as well as an avid writer and frequent speaker in the automotive industry.

His answer was simple:

“It doesn’t matter where offensive material resides. It can be comments in a CRM that others can view – on a computer screen, mobile device or hanging on a wall – if anyone sees it and is offended by it, it can create a hostile work environment and put the dealership at risk.

People often have such different perspectives on behaviors that it is easy to offend someone through ill-considered attempts at humor, teasing or sarcasm. Remember that only the impact, and not the intent, matters in determining if a reasonable person would consider the behavior to be harassment.”

I was in retail. I get it. Sometimes customers can be frustrating. Sometimes we (being salespeople, managers, etc.) express our frustrations verbally and, perhaps, everyone on the team (or within hearing distance) is okay with the language or sentiment.

The bottom line is that allowing or condoning this type of behavior only accomplishes two things:

1. It permanently etches that customer in a negative light for any future employees. Think about it… perhaps the employee who inserted the notes gets fired (not that anyone EVER gets fired or leaves dealerships) and a new employee is tasked with going through and/or following up with these leads. Do you think these notes will encourage them to follow up or discourage them? Would they be quicker to mark them “Lost” and move on? What happens if you want to do some data mining and try to resurrect some leads? Negativity is a virus. It spreads easily. Allowing anyone to cultivate negativity in your business is simply a recipe for failure – not only for them but also for all of your employees.

2. It creates liability for the dealership. Allowing anyone to continue with this behavior transfers liability to you and, as a manager, to the dealership. Those notes may seem harmless now but when a harassment or hostile workplace environment lawsuit is filed, it could get quite expensive. In addition, by allowing these types of notes, you could technically be cultivating a PERMANENT hostile workplace environment. If you fired the offending employee today and two years from now another employee comes across these notes (perhaps by getting a new lead from the same customer… not like that ever happens) and is offended, what then? What if that that customer eventually buys the car and your dealership uses your CRM for service and a service advisor, cashier or other employee is exposed to those notes?

Imagine this scenario: An employee writes something offensive in Sharpie on the wall in the bathroom. It doesn’t offend anyone and nobody cleans it off. Three years later, a new employee comes along, reads the note and is offended.

What then?

It makes no difference WHEN the notes were made or whether the person who wrote the note(s) works there any longer. It is still the dealership’s responsibility and it would still be held responsible (and liable) for the existence of the notes.

My advice is simple:

If you wouldn’t hang it on the wall in your office for anyone to see, don’t put it anywhere – and that includes inside your CRM.

Jim Radogna: Avoiding the Eye of Mordor in Social Media

December 22, 2014 By Arnold Tijerina

Just like in the blockbuster series “The Lord of the Rings”, the Eye of Mordor is always open. Until now, its focus has been on larger battles and more interesting things. Then a Hobbit found a golden ring and slipped it on his finger. And the Eye started paying attention to this little being that had avoided the Eye’s gaze… until now.

The intersection of advertising, marketing, and compliance is not easy to navigate. It seems as if each week, rulings are being rendered from one of the myriad of regulatory bodies making it more difficult for dealers to know what they should – and should not – be doing in regards to social media in order to stay compliant. In an effort to bring clarity to an increasingly confusing and misunderstood topic, I sat down with Jim Radogna, the president of Dealer Compliance Consultants, to get some answers.

Arnold Tijerina: I believe dealers aren’t vigilant enough ensuring that social media performed on behalf of the dealership meets the same compliance rules and standards that all of their other advertising requires. It’s sort of like an afterthought to them. What are your thoughts?

Jim Radogna: Very true. First, many dealers aren’t aware that advertising regulations apply to social media every bit as much as traditional media. Advertising regulations don’t go away despite the fact that social media tends to be a low-key, casual type of communication. In fact, The FTC recently updated its document Dot Com Disclosures: Information About Online Advertising. The primary focus of the publication, which was first issued in 2000, is to inform advertisers that consumer protection laws and the requirement to provide clear and conspicuous disclosures applies to the online world in addition to the offline world.

So in a nutshell, if inventory is posted or prices/payments are quoted on social media it’s likely that the posts will be deemed to be advertisements and will be subject to state and federal disclosure and truth in advertising regulations. Lack of space is no excuse either. Even if you’re advertising on Twitter and are limited to 140 characters, you must include a clear link to any necessary disclosures.

Next, even if the dealer is aware of these facts, it’s likely that dealership employees and/or vendors posting to social media do not have the same level of awareness.

AT: I’ve interacted with some dealers who operate under strict compliance conformity across all advertising – including social media – and others that don’t feel the need to adhere to the same rules when it comes to Facebook, Twitter, Pinterest, etc. It certainly wouldn’t seem to be unreasonable to assume that most dealers know compliance rules for their advertising. Why do you think they view social media differently?

JR: Until recently, virtually all enforcement actions for non-compliant advertising have been focused on traditional media, so this is a brand new area. In my experience, most dealers have a limited understanding of what constitutes “advertising” in the eyes of the powers that be. When dealers place an ad in the local newspaper, on the radio or TV, it’s pretty evident to them that they’re advertising and that they need to be diligent in following state and local compliance guidelines. But they don’t tend to think of social media as formal “advertising” because their intention isn’t to advertise their products and services on the social networks as much as to engage with customers, brand themselves and showcase their inventory. It really is an innocent mistake in many instances. The problem is that any time they mention prices, payments, interest rates, or the availability of financing etc. – anywhere – certain disclosure requirements are triggered.

So, a dealer or ad agency that is diligent about being compliant in their advertising may have their attorneys or a compliance consultant, like myself, review every one of their ads, mailers, TV commercials, and radio spots before publication, but not even think about having their social media posts reviewed because they simply don’t realize that these are considered “advertising”.

Another area where dealers are vulnerable on social media is transfer from traditional media. Here are a few examples: The dealer may have a full page print ad in their local paper that is fully compliant, but when they post a reduced-size pdf of the ad on Facebook, all of a sudden the fully-legible and compliant disclosure on the bottom of the newspaper ad is now unreadable. Instead of being 10-point type, it’s now 4-point type because of the size reduction. Another example is the TV commercial that’s posted on YouTube and shared on the social networks. Again, the disclosure on the bottom of the screen may be easily readable on TV but becomes indecipherable on a computer or mobile device.

AT: A recent FTC ruling regarding personal bias disclosure across all social media platforms seems to have lead some dealers into believing that simply adding a notation that the content is an “Ad” or “Sponsored” – whether in the ad or with the use of hashtags such as #ad and/or #sponsored – is enough to be compliant. To my knowledge, while the FTC ruling is certainly applicable when it comes to employees sharing dealership offers and specials on their personal social networks, it doesn’t negate obligation by the dealer to add necessary disclaimers. Do you agree?

JR: Absolutely. Dealers may face liability if employees use social media to promote their employer’s services or products without disclosing the employment relationship. The FTC requires the disclosure of all “material connections.” These connections can be any relationship that could affect the credibility a consumer gives to statements, such as an employment or business relationship. So if employees, friends, family or vendors post on a dealer’s behalf, they should clearly disclose any relationship they have with the company. It’s all about transparency and full disclosure.

AT: As social media use by dealers grow, what are the most important things that dealers should be aware of in regards to how they use social media?

JR: There are a number of legal considerations that every company should be aware of when establishing their social media policies and procedures, such as social media use in employment decisions; posting of online reviews, testimonials and endorsements; ‘fake’ and paid-for reviews; advertising on social media; potential overtime claims; harassment, discrimination and defamation claims; copyright and privacy issues.

AT: Should dealers be concerned by how their employee’s use social media and, if so, how do you recommend that dealerships protect themselves and/or decrease liability in this regard?

JR: It’s important for dealers to craft a social media policy that’s both practical and legally defensible. They can protect themselves by insisting that participants in their social media programs comply with the law and training them how to do it. The FTC specifically says these steps may limit potential liability and will be considered in any prosecution. According to FTC guidelines, “The Commission agrees that the establishment of appropriate procedures would warrant consideration in its decision as to whether law enforcement action would be an appropriate use of agency resources. The Commission is not aware of any instance in which an enforcement action was brought against a company for the actions of a single ‘rogue’ employee who violated established company policy that adequately covered the conduct in question.”

AT: The FTC has been increasing the attention it is paying to business and social media and has recently been vocal about their intentions to enforce compliance regardless of where the advertisement resides specifically mentioning social media. How do you believe this increased action and attention by the FTC will affect dealers in the future in regards to social media?

JR: What’s become abundantly clear through recent federal and state advertising enforcement actions against dealers is that regulators are trolling through the digital world to find dealer violations. For instance, the FTC has cited many ads recently from websites and YouTube. It stands to reason that social networks are their next logical target. Let’s face it, it’s far easier for regulators to perform digital searches for violations than to read countless newspaper ads or listen to radio commercials.

My suggestion is to train every employee and every vendor that posts to the dealer’s social networks or may post on the dealer’s behalf on their own networks. Next, constantly audit all posts, either internally or by utilizing a qualified professional, to ensure compliance. Dealers are ultimately responsible the actions of their employees and any vendors they hire.

AT: Thank you, Jim. I appreciate your taking the time to help bring more clarity about this topic to dealers.

Before founding Dealer Compliance Consultants, Jim Radogna developed a strong background in dealership operations, having spent over 15 years in dealership management. His experience includes working in diversified roles including sales manager, F&I director, general manager, and training director. In addition, he served as compliance officer for a large auto group, where he developed and integrated a comprehensive compliance program. Being well-versed in all aspects of dealership operations, Jim and his team have used their knowledge and industry experience to develop unique, no-nonsense compliance and reputation management solutions for automobile dealerships of all sizes. These programs are designed to not only protect dealerships from liability but also greatly enhance the company’s reputation, increase profitability through consistent processes, and increase customer satisfaction and retention.

Jim is a sought-after speaker and frequent contributor to several automotive industry publications including Dealer Magazine, WardsAuto, Auto Dealer Monthly, DrivingSales Dealership Innovation Guide, AutoSuccess, and F&I Magazine.

Shame on Chevrolet & How the Homogenization of Dealerships By Auto Manufacturers Is Dangerous

April 25, 2014 By Arnold Tijerina

It recently came to my attention that a Chevrolet dealership in Indiana had a visit from a Chevrolet “architect” who instructed them that they must remove pictures of athletes that they sponsor and recognize and, worst of all, the American flags they had proudly displayed around their dealerships. This is the worst kind of hypocrisy and is a slap in the face to Americans.

Maybe they don’t remember that the U.S. Government helped the automaker to the tune of almost $50 BILLION. In the end, the USA Today reports that the U.S. Government may actually LOSE $10 BILLION of taxpayer money by doing so. It has only been four months since the U.S. Treasury Department exited the automobile industry with the sale of their remaining stock in G.M. It also wasn’t too long ago that the United States actually OWNED ~61% of the company itself.

Apparently, the divorce is final.

Not only does this infuriate me but it’s also bad for dealerships. Most dealerships survive on regular and repeat business especially in their service departments. The ONLY thing that they have to differentiate themselves from their competing Chevrolet franchise is their personality and the customer experience they provide. The homogenization of dealerships around the country (and the world) only serves to strengthen the brand and does absolutely nothing for the franchise.

Think about it. You may be a loyal patron of many stores… Rite Aid, Walgreens, Nordstrom… you name it. If you haven’t noticed, those companies do their best to make their stores identical as well. They do it because it offers a familiar and consistent experience across all locations and serves to make the customer more comfortable shopping with them… NO MATTER WHICH LOCATION IS CONVENIENT. If you’re a loyal Walgreens customer, you don’t necessarily care which location you go to when you need something they sell. You just go. This is a normal practice amongst large retail chains.

Automakers who are forcing design and décor compliance on its dealers (which most of them do) accomplish this by dangling big carrots of money in the form of financial subsidies to build new showrooms. I would argue that this DETRACTS from a dealership’s personality. It makes you less different than your competitors. It gives consumers LESS of a reason to choose you over the next dealership. All of a sudden, dealerships are like Walgreens, McDonalds, or any other retail chain. Over time, dealerships will be less able to differentiate themselves to consumers. When everything looks and feels the same… well, it must be the same.

You already have to battle your own brand for visibility in your digital marketing. Go ahead and try to rank over your brand on Google. See how much you’d have to spend to get the first position in a PPC campaign over your brand in your market. Some manufacturers are requiring dealers to do business with only certain vendors. If you look at many of these “required” vendors, their strategy is to push the same content for those dealerships. Many manufacturers create websites for their dealers (whether they want them or not) which puts dealers in a position of battling… well, with themselves. Then they force dealers to buy leads from them and regulate how quickly you respond and even what you say in some cases.

This homogenization is not only happening in our physical world but it’s slowly creeping into our digital one as well.

The fact that Chevrolet, a company that was owned by the United States less than a year ago because they couldn’t pay the bills and is also currently running to a U.S. Bankruptcy Court judge begging the court to “enforce a bar on lawsuits stemming from ignition defects sold before its 2009 bankruptcy…” to ask franchisees to remove the American flag from their showrooms is the epitome of hypocrisy and screams ingratitude. The bottom line is that Chevrolet has been asking a lot from the United States government and its taxpayers for the last few years while, at the same time, forcing its franchisees to remove the very symbol of the same.

Don’t mistake these concerns as only regarding Chevrolet (or General Motors), however. As a franchise owner, you should be very concerned that your manufacturer is forcing you to become less you and more them. You sell the same cars as all of the other franchise owners of your brand so the ONLY thing you have to differentiate yourself is WHO you are. Manufacturers don’t care if your customers are loyal to YOU. They only care that the customers are loyal to THEM.

The more your business – both physically and digitally – becomes THEM, the less consumers will care about YOU.

[P.S. I can confidently say that U.S. Veterans of the Armed Forces – including your employees, customers and members of your community – won’t be really happy with this policy. One can only guess if this will affect their perception of your dealership and/or brand.]

Who Is Tapping YOUR DMS?

January 5, 2012 By Arnold Tijerina

There is a lot of controversy in the automotive industry regarding which vendors are pulling data (customer or transactional) from a dealer’s DMS and then re-selling it to vendors like TrueCar and others. (I guarantee you that TrueCar is not the only vendor that’s using your data against you, FYI)

[Note: For non-automotive industry readers: DMS stands for Data Management System and is what contains all customer, financial, vehicle and transactional data (ie. all that information on the credit application you filled out when you bought that car). There are dealer vendors (website companies, 3rd party services like TrueCar.com, Edmunds.com, Cars.com, etc.) that are given access to this information for various reasons.]

Consumer privacy laws and red flag compliance keep getting stricter and stricter when it comes to customer personal information and how it needs to be protected. This is all well and good but I’d argue that most consumers don’t care about their personal information. They may say they do but actions speak louder than words.

An industry acquaintance shared a website yesterday that assists people in seeing, and cleaning up, which apps and websites are accessing your various social media accounts. (You can find it at http://mypermissions.org/ )

As I played around with it, there wasn’t much in there that surprised me but I’m also very diligent about which apps I allow to access my information and I periodically monitor them to remove permissions for apps or websites I no longer use. Even though I do that, there were a few in there that I was surprised to see. I guarantee you that a normal consumer has way more apps and websites accessing their personal information than I do – games, iPhone apps, websites with social media log-ins, plug-ins etc. Most require (or ask) to access your personal information to use their service. How convenient is it to use Facebook Connect? It’s super-easy but, every time you do, you are giving yet another website or app permission to access your personal information – essentially trading your information for convenience and/or the ability to utilize that particular website.

As I thought about this collection of different social media sites – Facebook, Twitter, G+, LinkedIn, etc. – it started to feel more and more to me like this was MY OWN PERSONAL DMS.

These accounts – singly and collectively – contain more personal information about me than any other source including the government.

Those social networks are free to use, but are they really? In one sense, they do exactly what your vendors are doing to your dealership’s DMS – selling your personal information for profit. Most consumers know this on some level and have chosen to allow that access in exchange for their information on some level. Sure, there are times when a consumer outcry occurs – say when Facebook changes a privacy setting – but those quickly go away mostly because the consumer modifies the permissions again (ie. who can see your posts or other activity on Facebook).

So consumers do care about protecting their information, posts, etc. from people on an individual level, what they’re not shielding themselves from or thinking about is what companies are getting their personal data (either from the sites themselves or from outside apps and websites that they’ve allowed access) and what those companies are doing with it.

So, while we’re in an uproar about what vendors are getting access to customer data and what they are doing with it, keep in mind that you also have your own personal DMS and, just like you should care who has access to your customer’s information, you should care about who has access to your own.

Buy Here ‘Cause They Suck

November 2, 2011 By Arnold Tijerina

Most dealerships and businesses in general know that it’s bad practice to bad-mouth your competition. That being said, I know of and have heard plenty of salespeople and managers using their online reviews to help close a deal by comparing them to their competitors online reviews. This practice is similar if not exactly the same. You are leveraging negative comments about your competitor left by other people (who you are representing as real – we all know fake reviews exist) to your positive reviews (you aren’t really showing people any negative reviews about your dealership, are you?) in an effort to “sell” yourself and your dealership. So, while this isn’t talking bad about your competitor directly, it is indirectly, and what you say can now get you in some deep water.

In a precendent setting ruling, an Alabama car dealership has been awarded $7.5 million dollars due to slanderous comments made during a close to consumers by both the salesperson and sales manager. Apparentley, the dealership’s competitor was owned by an Iranian-born but naturalized U.S. citizen. The sales manager told at least one couple while attempting to close a deal that the competitor was “helping fund insurgents there and is also laundering money for them.” The salesperson was also accused of telling the same couple that the dealer was “funneling money back to his family and other terrorists…” and that he has a “brother over there and what you’re doing is helping kill my brother.” It is also reported that the competitor was frequently referred to as “Taliban Toyota”.

The jury awarded the Alabama dealer $2.5 million in compensatory damages and $5 million in punitive damages after deliberating for 3 hours.

While this is certainly an extreme example, it bears watching where the “line” is. This had more to do with a leveraging of race, stereotypes and bigotry but there’s no telling what future lawsuits outcomes would be utilizing this ruling as precedent.

I find it astonishing that, it appears, the sales manager, at least, is still employed at the dealership based on the statement that neither of them were available for comment per a “dealership spokesman”.

I think there are now 7.5 million reasons to add prohibiting the “bad-mouthing of your competitor” to your employee handbook.

The Case Of The $30 Million Rims

June 11, 2011 By Arnold Tijerina

(Originally published at Dealer magazine)

Last week, a California Court of Appeals judge determined that a dealer violated several California state laws and ruled in favor of the plaintiff in a class-action lawsuit that will have huge ramifications for dealers within the state. The ruling was the result of some poor decisions from start to finish. Ultimately, this ruling will allow 1,500 car buyers the right to have their purchase contracts rescinded, which is estimated to potentially cost the dealership upwards of $30 million.

The story began in 2004 when Reginald Nelson purchased a vehicle from Pearson Ford (now Kearny Pearson Ford) in San Diego, CA. The car cost $9,995 and was spot-delivered without financing being secured. The customer also did not have existing auto insurance, so a binder was purchased for $250. This was added to the purchase price of the vehicle as well as some rims that were promised the customer. The insurance binder was on a “due bill,” but it is unclear whether the rims were. (My guess is that the rims were initially on a due bill but, once the approval came through, either the profit was reduced or the structure didn’t meet the approval’s financing restrictions. So, to keep the car on the road, the rims were taken out of the deal.) Six days later, the dealership contacted Reginald asking him to return to the dealership to fill out more paperwork. The paperwork reflected a change in the financing terms per the actual approval received by the dealership and was dated the date the vehicle was spot-delivered. Mr. Nelson signed the new contracts.

In interviews with Mr. Nelson, he says that he repeatedly tried to get the rims he was promised by the dealership but the dealership would not give them to him. Eventually, this led Mr. Nelson to contact an attorney. Unfortunately for the dealer, he contacted Hal Rosner, a consumer-advocate and auto law expert attorney specializing in automobile transactions and dealerships.

Mr. Rosner immediately identified several things that the dealership did that were not in compliance with state laws:

1. The second contract was backdated to the date Mr. Nelson took delivery of the vehicle, not the date in which he signed the new contract.

2. The insurance binder was added to the price of the vehicle, not itemized separately on the contract.

Both of these are violations of the state’s one document rule. Through discovery, Mr. Rosner was able to determine that these violations had occurred many times at this dealership. The 1,500 occurrences that Pearson Ford manipulated were all illegal. “That’s more than once a day for five years that they’re telling people, ‘We gave you the wrong financials,’”said Rosner. “That’s hardly an accident.” Rosner was able to get the lawsuit converted into a class-action in March 2007.

Prior to the class-action trial, Pearson Ford made a settlement offer of $500,000 which was accepted. After the settlement was approved, both sides asked for their attorney’s fees to be paid by the opposing party. The trial court awarded attorney’s fees to Mr. Nelson and denied them to Pearson Ford. Upon further review, the judgment was vacated and trial moved forward.

The initial trial court found no violation save for a “technical violation” and awarded restitution in the amount of $50 per class member ($75,000). Both parties disagreed with the ruling (for different reasons) and it was taken to the California State Court of Appeals.

The California State Court of Appeals found that both actions described above were, in fact, violations of the Automomobile Sales Finance Act, the Unfair Competition Law and the Consumers Legal Remedies Act by backdating the contract and including the insurance in the cost of the vehicle, effectively costing Mr. Nelson an additional $27 in interest plus the sales tax on the $250 insurance binder wrapped into the vehicle purchase price (then approximately $19). This ruling effectively will give the 1,500 class members the right to have their contracts rescinded.

Keep in mind that these contracts are at least 7 years old, some much older. Assuming some of these vehicles were used at the time of purchase, this dealership will have to buy back contracts IN FULL for vehicles that could be 10+ years old.

I personally know that the practice of backdating contracts is common in Cailfornia, as is wrapping in insurance into the purchase price. In the past 3 years or so, dealers have slowly been changing those practices, but this ruling sets a dangerous precedent. I’m sure there are plenty of civil attorneys itching to get their hands on a consumer with a backdated contract right now.

This story started as a credit challenged consumer, with no car insurance, that wanted some rims for the 1998 Infiniti I30 that he bought from the dealer. This vehicle was already 6 years old when he purchased it. Had the dealer honored their promise to the consumer and given him his rims, legal action probably would never have happened. Once legal action happened, the dealer argued against paying the plaintiff’s attorney’s fees on top of an accepted settlement offer.

Those rims and $46 ultimately put the dealership on the hook for an estimated $30 million.

Those have got to be the most expensive rims in history.

Click here for ABC news 10 story: Pearson Ford Ordered to Buy Back Over 1,500 Vehicles

Click here for a Copy of Appeal Court Ruling