Checklists are the bane of managers who are required to complete them. 

Most dealerships utilize compliance checklists for both sales and F&I managers to ensure they have completed the necessary steps to create a compliant deal jacket. Most of the topics on the checklist are around forms, usually just a check to make sure the required form is in the file. Some examples include menus, contracts and voluntary protection-product enrollment forms.

Other sections of the checklist may include vetting of the document, not simply that the document has been obtained. For example, is the form of identification valid and current?

Vetting red flags usually falls in one or the other category, and managers seem encouraged to make sure a printout of the red-flags report is in the file.

Unfortunately, this means that some potential red flags are not adequately checked and cleared, leaving the dealership at risk of a potential recourse deal.

There is always a red-flags report in the cases I’ve worked on involving identity theft. A common theme in these cases is that the report contained some nuanced information that might have prevented the sale to the thief.

Typos in the Address

An address discrepancy is high on the list of potential hits for a reason. Identity thieves do not want mail going to the victim early in the theft germination process, so they alter the address ever so slightly. If the real address is 819 Main St., the thief may provide 818 Main St. or 817 Main St.

When I see this overlooked nuance in compliance reviews, the manager who checked off on the checklist that red flags were cleared has a typical rebuttal. It is usually a variation of, “It’s close enough. The customer just fat-fingered it when they submitted the online credit app.” 

Using the Wrong Address

Other times I see an address discrepancy when the red-flags search is conducted on the previous address or a business address. This sometimes happens when the salesperson enters the customer’s address from the driver’s license and the customer has moved on up to another address. 

This will usually trigger a red flag that the address does not match the address in the credit bureau or other database.

If the manager checks off on the checklist that the red flags were cleared, the rebuttal makes me think there is an online red-flags rebuttal chatroom managers visit to find reasons for not properly clearing red flags. In this scenario, the chatroom participants must recommend, “Just write ‘previous address’ on the report and manually clear the red flag.” Again ... oops.

Credit Freezes

With the continuing rise in identity theft, a growing number of consumers are freezing their credit bureau files. This is one effective approach combined with other approaches to protect one’s identity from being stolen.

With a credit freeze, the consumer prevents inquiring minds from viewing their credit reports. The consumer manages the length of time that the file is thawed.

A red flag is generated when a consumer’s profile is frozen. Managers understand the process of helping a consumer thaw their credit file because the potential finance source is going to require it to be thawed.

Many managers have the credit report thawed and run a report. They overlook the nuance that the thawed file may generate a different red flag, such as an address or Social Security number discrepancy or an alert that must be addressed. The bottom line is that a new red-flags search must be run after thawing the credit file.

Compliance Dashboard

The different systems dealers use to vet red flags provide a compliance dashboard. This dashboard provides a snapshot of the red-flags activities, including the number of requests and the number and percentage of deals for which red-flags checks were completed.

The potential issue for dealership executives who rely on the dashboard to manage the dealership’s red-flag effectiveness is that the managers can manipulate the report by manually updating every deal with a potential red flag without properly clearing the red flag. This nuance in the dashboard means anyone vetting the efficiency of the dealership’s red-flags program must do a deeper dive beyond the dashboard.

Continued good luck and good selling.

Gil Van Over is executive director of Automotive Compliance Education (ACE). He is also founder and president of gvo3 & Associates and author of “Automotive Compliance in a Digital World.”