NY 0315 by NIADA

M A R C H / A P R I L

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PROTECTING YOUR DATA

FOCUS ON THE BASICS

COLLECTION & PAYMENT PROCESSING TRENDS

REACTIVE VS. PROACTIVE SERVICE

Driving Force NEW

YORK

I N D E P E N D E N T

AUTOMOBILE

DEALERS

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M A G A Z I N E

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FEATURE STORY

IN AN AGE OF RAPID CHANGE, FOCUS ON THE BASICS Start by Evaluating Your Value Proposition BY CHET HEUGHAN

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M A RK E T WATCH

Buyers Still Want Fuel Efficiency Despite $2 Gas FUEL ECONOMY REMAINS INFLUENTIAL FACTOR

second-most common reason why a model is rejected by shoppers at dealerships in favor of another model (16 percent). “Consumers know that, although gas prices are low today, the cost of fuel will likely increase during the time they own their vehicle,” said Arianne Walker, senior director of automotive media and marketing at J.D. Power. “Clearly, consumers are considering the total cost of ownership when selecting their new vehicle.” J.D. Power noted low gas prices are among the factors suppressing demand for hybrid/electric vehicle models. Firm analysts noted several developing trends, including the following: • Hybrid/EVs currently account for only 3.5 percent of new-vehicle sales, down from 3.8 percent in 2013, with more than 70 hybrid/ EV models vying for that small slice of the market, according to LMC Automotive. • Buyers of traditional gasolineengine vehicles avoid hybrid models due to cost at much higher rate (24 percent) than they avoid

BY AUTO REMARKETING STAFF

gasoline engines due to cost (16 percent). • Gen Y consumers – born between 1977 and 1994 and a seemingly likely target market for hybrid vehicles because they are known to embrace eco-friendly practices – who buy gasoline engines avoid hybrid models at even greater rates for being too expensive (27 percent). The U.S. government’s new Corporate Average Fuel Economy standards require automakers to obtain an average fuel efficiency of 54.5 miles per gallon across their new car and light truck fleet by 2025. “Factors such as fuel prices and consumer demand may make these tough standards even harder to achieve, as you can’t mandate what people want to buy,” Walker said. “Gen Y, the largest demographic group in U.S. history, comprises approximately 26 percent of the market, and their demand for larger vehicles will increase as their income increases and their households grow, putting further pressure on the ability for automakers to meet the strict

federal mandates on gas mileage.” J.D. Power also mentioned two other key findings from its 2015 U.S. Avoider Study: • Exterior look/design is the top reason shoppers avoid a particular vehicle (30 percent), followed by cost and interior look/design (17 percent each). • Vehicle technology is becoming increasingly important among consumers, as new-vehicle buyers indicate they avoided a model because it lacked the latest technological features at a rate of 15 percent in 2015, up from 4 percent in 2014. The 2015 Avoider Study is based on responses from nearly 30,000 owners who registered a new vehicle in April and May of last year. The study was fielded between July and September.

THE NEW YORK DRIVING FORCE

MARCH/APRIL 2015

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Even though gas costs about $2 a gallon in many parts of the country, potential buyers still might not be too keen on those fuel-thirsty rigs in your inventory. The J.D. Power 2015 U.S. Avoider Study indicated that fuel economy remains the most influential factor among the majority of new-vehicle buyers in determining which vehicle they select. Fuel economy stayed as the leading factor for a fourth consecutive year despite gas prices falling to their lowest levels since 2010. The study, now in its 12th year, examines the reasons consumers purchase, reject or do not consider – or avoid – particular models when shopping for a new vehicle. According to the study, 14 percent of new-vehicle owners cite gas mileage as the most influential reason for selecting the vehicle they ultimately purchased. At the segment level, gas mileage is the primary purchase reason among buyers of compact, small and midsize cars and compact MPVs. Consequently, fuel economy is the

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Inside M A R C H / A P R I L

06 PROTECTING YOUR DATA

08 FOCUS ON THE BASICS

10 COLLECTION & PAYMENT PROCESSING TRENDS

12 NY REGULATORS SHUT DOWN CONDOR CAPITAL

THE NEW YORK DRIVING FORCE

MARCH/APRIL 2015

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REACTIVE VS. PROACTIVE SERVICE

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18 COMPLIANCE OVERDRIVE

ASSOCI AT ION NE W S

NYIADA Announces 2015 Coupon Book

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WHAT’S NEW

NIADA Announces 2015 CMD Schedule

CLASSES ACROSS THE COUNTRY

The Certified Master Dealer program is one of the industry’s most respected training programs. NIADA recently announced its schedule for CMD classes in 2015. Class locations include Harrisburg, North Carolina; Reynoldsburg, Ohio; Lakewood, Colorado and Dallas, Texas. For more information visit www.niadaeducation.com or contact Georgia Brown at georgia@niada. com or 800-682-3837.

ADVERTISERS INDEX

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OFFICE

For information on how to become a member of NYIADA, please contact Paula Frendel 855.694.2324 pfrendel@gmail.com

NIADA HEADQUARTERS NATIONAL INDEPENDENT AUTOMOBILE DEALERS ASSOCIATION WWW.NIADA.COM WWW.NIADA.TV 2521 BROWN BLVD. ARLINGTON, TX 76006-5203 PHONE (817) 640-3838

FOR ADVERTISING INFORMATION CONTACT: TROY GRAFF (800) 682-3837 OR TROY@NIADA.COM. The New York Driving Force is published bimonthly by the National Independent Automobile Dealers Association Services Corporation, 2521 Brown Blvd., Arlington, TX 76006-5203; phone 817-640-3838.Periodicals postage paid at Dallas, TX and at additional offices. POSTMASTER: Send address changes to NIADA State Publications, 2521 Brown Blvd., Arlington, TX 76006-5203. The statements and opinions expressed herein are those of the individual authors and do not necessarily represent the views of New York Driving Force or the National Independent Automobile Dealers Association. Likewise, the appearance of advertisers, or their identification as members of NIADA, does not constitute an endorsement of the products or services featured. Copyright (c) 2015 by NIADA Services, Inc. All rights reserved. STATE MAGAZINE MGR./SALES Troy Graff • troy@niada.com EDITORS Jacinda Timmerman • jacinda@niada.com Andy Friedlander • andy@niada.com MAGAZINE LAYOUT & GRAPHIC ARTIST Chantae Arrington • chantae@niada.com ART DIRECTOR Christy Haynes • christy@niada.com PRINTING Nieman Printing

YOU COULD SAVE $5,000 IN AUCTION FEES!

Paula Frendel, executive director of NYIADA, is proud to introduce NYIADA’S electronic coupon book for 2015. This year’s coupon book features $5,000 in auction coupons for buy/sell fees in NY, NJ and Penn. Coupons are from 18 area auctions. Participating auctions include Manheim, ADESA and various independent auctions. Not a member? Contact Paula Frendel for membership at 855-694-2324 or NYIADA.PFRENDEL@GMAIL.COM. NYIADA membership pays you back $5,000 in auction fees! ADESA Long Island, ADESA Syracuse, ADESA Buffalo, ADESA New Jersey: • (Two) $100 off buy fee. • (Two) $100 off sell fee. (Total $400 from each auction for a grand total of $1,600) Manheim New York Skyline: • (Two) $50 off buy fee. • (Two) $50 off sell fee. Manheim Newburgh New York: • (One) $100 off buy fee. • (One) $50 off sell fee. Manheim Albany: • (One) $100 off buy fee. • (One) $100 off sell fee.

Rochester-Central Auto Auction: • $200 off buy fee. • $200 off sell fee. • Entry fee ($35). Rochester-Syracuse Auto Auction: • (One) free buy. • (One) free sell. State Line Auto Auction: 12 monthly coupons for registration. Buffalo Auto Auction: • $100 off buy fee. • $100 off sell fee.

Manheim Bordentown –TBD

ABC Lancaster: $50 buy fee, one per month, total 12 coupons. Garden Spot Auto Auction: (Five) $50 off buy fee.

Manheim Pennsylvania: • (One) $100 buy fee. • (One) $100 sell fee.

Bloomberg Auto Auction: • (Two) $50 off buy fee. • (Two) $50 off sell fee.

Manheim Philadelphia: • (Two) $50 buy fee. • (Two) $50 sell fee.

BSC America, Bel Air MD: (One) $50 off registration.

NI A DA .T V NE W S

World Automobile Auctioneers Championship LIVE WEBCAST FREE TO VIEW

The 2015 World Automobile Auctioneers Championship will be webcast live from Manheim Nevada on Friday, April 17th starting at 11 a.m. Eastern Time and is free for all online viewers. There will be various competitions throughout the day that will culminate in the naming of a world champion. Last year’s winners were Ben DeBruhl from Fredericksburg, Virginia (auctioneer), Phillip Gee III of Shelby, N.C. (ringman) as well as TJ Freije and Bobby McAdams of Indiana (team). Watch the journey of auctioneers, ringmen and teams from

across the globe as they strive to earn the 2015 coveted title. Cheer on your hometown favorites and catch all of the fun and excitement of the 2015 World Automobile Auctioneers Championship at your leisure, exclusively on these four websites: www.niada.tv www.niada.com www.autochampionship.com www.autoconsumer.tv For additional information, visit http:// autochampionship.com/event/ or contact Paul C. Behr at (303) 807-1108.

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M A N AGEMEN T M AT T ERS

Protecting Your Data GUARD YOUR MONEY AND CUSTOMERS FROM DIGITAL HACKERS

The list of companies and corporations that have fallen prey to data hacks in the last year is lengthy – Target, JP Morgan Chase, Home Depot and eBay, just to name a few. These companies, along with millions of people throughout the world, find themselves dealing with the most sophisticated criminal in today’s society: the digital hacker. Ten years ago, no one understood the financial profits one could achieve through hacking. As a result, digital hackers often hacked into computer networks for the simple pleasure of proving they could. Times, like technology, have changed, as today’s hackers hack for the same reason thieves steal: to take your money. The last thing you want as an auto dealer is to be a victim of a cyber-attack. Not only could the hackers gain access to your bank account, but you could also face legal penalties for failure to protect sensitive client information. As a result, it’s more imperative than ever that dealers take

BY NEXTGEAR CAPITAL NEWS STAFF

necessary steps to ensure that their data, as well as their customers’, remains safe in the digital sphere. Here are some simple tips that may help protect your data. Don’t open/click suspicious looking file attachments. One of the newest trends in the hacking world is spear phishing, which is an email spoofing fraud attempt in which the hacker seeks access to confidential information. In some cases, the hacker will do extensive research on an individual to discover known acquaintances. With this information, the hacker will then send an email that looks like it’s from someone you know with an attachment or a request to click a link, which results in the hacker gaining access to your computer. Once the hacker has access, they can install a key logger to monitor your keystrokes in hopes of discovering passwords and other confidential information. Therefore, if you receive an email from someone you know that looks even remotely suspicious,

do not open it. Instead, contact the person directly to inquire whether they actually sent you an email. Make sure your software is up-to-date. We have all received those annoying little pop-ups on our computer screen stating it’s time to update software. Don’t ignore this message! One of the functions of these updates is to patch security vulnerabilities that could compromise your system. Don’t use the same password for every website. Say you had just one key that unlocked the doors to your house, car and office – and it was stolen. My guess would be you’d feel pretty vulnerable, right? Using the same password on every website is along those same lines. If hackers gain access to that one password, they now have the keys to everything you do online. There are tools out there to assist in password creation. One free tool is LastPass, which generates complex passwords and remembers them for you in

the future. Unfortunately, there’s no way to completely eliminate the risk of cyber-crime. However, by following the simple safeguards above, you can help boost the protection around your data and keep it from falling into the wrong hands.

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M A RK E T WATCH

Manheim Reports Strong Year-End Close for Used Car Market USED VEHICLE VALUES RISE IN Q4

Wholesale used vehicle values increased in the fourth quarter by nearly 2 percent to finish 2014 slightly higher than the previous year as consumer demand for used car and trucks remained strong. The Manheim Used Vehicle Value Index, a measure of wholesale prices adjusted for mix, mileage and season, ended the year at 123.9, a 1.8 percent increase from a year ago and 2.1 percent higher than the third quarter. An improving job market and attractive financing helped boost the retail market for new and used vehicles. The strongest demand for used vehicles in the fourth quarter was in the $13,000-$15,000 range, a higher sweet spot than a year ago. Sales of certified pre-owned vehicles, late-model vehicles still backed by a warranty, also hit record numbers in 2014. “The used vehicle market finished another solid year,” said Manheim chief economist Tom Webb. “Consumers continue to

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see great value in purchasing used vehicles, even at higher price points. Dealers continue to see used vehicles as an important and profitable part of their business.” Fourth-quarter wholesale pricing for vehicle segments included: • Compact Car prices were down 1.1 percent in December, compared to the same period last year, as consumers moved to CUVs and mid-sized cars. • Midsize Cars had been one of the weaker segments during the year but saw values end December 2.2 percent higher than the same period last year. • Luxury Car values fell 0.4 percent on a year-over-year basis, holding their prices despite an increase in supply from offlease vehicles. •P ick-ups and Vans remained the strongest segment with pick-ups up 6.1 percent and vans up 3.1 percent on a year-over-year basis. Often purchased for business use, demand for these vehicles has

increased during the year. • SUV and CUV also continued to be a popular segment, up 2.8 percent in December compared to the same period last year. Consumers have been moving to compact and mid-size CUVs, which offer a balance of room and fuel efficiency. With new car sales volumes expected to plateau, the upcoming year will be critical for the auto industry. As long as automakers keep incentives low for new car sales, used vehicle values should remain stable. An incentive war, however, would lower new car prices and also put pressure on dealers to lower used car prices. “The growth rate in the U.S. auto market is expected to slow down and level off in 2015,” Webb said. “The big question is whether automakers will be satisfied with their respective slice of the pie. If they aren’t satisfied and resort to heavy incentives, prices and profits will fall.”

WITH NEW CAR SALES VOLUMES EXPECTED TO PLATEAU, THE UPCOMING YEAR WILL BE CRITICAL FOR THE AUTO INDUSTRY.

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DE A L ER BES T P R AC T ICES

In an Age of Rapid Change, Focus on the Basics

THE NEW YORK DRIVING FORCE

MARCH/APRIL 2015

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START BY EVALUATING YOUR VALUE PROPOSITION

We are surrounded by distractions on a daily basis. If we are to believe the media, one day the economy is tanking, the next the economy is thriving. Everything is shifting to mobile and we are all way behind the curve in adjusting dealer practices to accommodate new trends. You get the idea. The net result is that these extreme examples take our focus away from where it should be. In reality, the key to long-term success in any business is to maintain a focus on the basic question around the value you are delivering to the customer. This is certainly true for independent auto dealers. With this central question guiding your actions, you may constantly reevaluate your basic value proposition to ensure you are delivering the products and services your customer needs in a way that is still relevant. What does this mean?

Let’s start with the automobiles themselves. Do you have the right mix of cars versus trucks, full size versus compacts, and are you carrying inventory that runs across different price points? Just because historically you sold more trucks than cars doesn’t mean that same mix will produce the same result in the future. Keeping up to date on the demographics of your area and the traffic surrounding your dealership can help you make decisions on which vehicles you should keep on the lot. Another treasure trove of information can be found in your dead deal files. Many deals die because you simply did not have the right vehicle on the lot to fit the customers’ needs, or the client couldn’t meet the requirements of the lender, such as a max payment amount. Consider factors such as fuel prices. We all know that when fuel prices are high compact vehicles with better gas mileage tend to sell faster and with better margins. Another play you will want to strongly evaluate is your online presence. Facebook and Twitter can give you great feedback, but what about your website? Do you check it regularly to make sure it’s operating correctly? Can customers find the information they’re looking for and is it readily available? Do you have checks in place to make sure all the links within your website work correctly on a weekly basis? Making sure customers can shop for vehicles and financing 24/7 is a must. One of the best ways to increase sales is to make sure you are accessible to the customer around the clock. The only way to do that is with a working website that offers customers the opportunity to browse your inventory, ask

BY CHET HEUGHAN

questions and apply for credit any time, day or night. So once you establish that you have the right vehicles and a great sales and distribution model, what’s missing? The right people can make or often break your business. Hiring top performers is not a luxury anymore. It’s a critical necessity in a small dealership. Having someone who can not only deal with problems but can identify opportunities to grow your business is a must. It all starts with hiring the right people. Not only should you be checking past employer references and personal references, but also checking with some of your lenders and vendors. This will help you identify top performers or potential problems. Being comfortable with technology is a must. Having an employee that has great relationships with your vendors and lenders is just as important as having an employee that can post great sales results each month. We all know that the right relationships can make or break your business. Create the right compensation plan. Making sure that your compensation plan supports the behavior and actions that drive your business goals is essential. It’s important not to create plans that inadvertently put your employee or your business at a disadvantage. If you do not properly evaluate the plan, your sales team will subsequently exploit every hole in the plan to their benefit. Remember the sales plan you lay out for your employees drives their behavior, not what you tell them in a sales meeting. Customer feedback is a great tool. If you are not completing post sale surveys with your customers you are passing up a great opportunity to learn more about your business and how to make it better. Many large dealerships pay thousands of dollars to consultants for information that could otherwise

LIVING IN THE AGE OF THE INTERNET AND SMARTPHONES, THE RATE OF CHANGE IS GROWING EXPONENTIALLY. THE NEED TO CONSTANTLY REEVALUATE YOUR BUSINESS HAS ALSO GROWN. UNDERSTANDING THE MOST BASIC ELEMENTS OF YOUR VALUE PROPOSITION – THE VERY POINTS AT WHICH YOUR SALES AND DISTRIBUTION METHODS IMPACT YOUR CUSTOMER – IS A GREAT PLACE TO START.

be obtained through a simple five-minute survey from each customer. Online services like Survey Monkey make creating and distributing surveys simple and seamless. Interpreting the data from your surveys can help you determine if you have the right employees with the right attitude for long-term success or if you’ve hired people who just want to exploit each customer for the maximum dollar amount benefit and move on to the next dealership. Living in the age of the Internet and smartphones, the rate of change is growing exponentially. The need to constantly reevaluate your business has also grown. Understanding the most basic elements of your value proposition – the very points at which your sales and distribution methods impact your customer – is a great place to start. CHET HEUGHAN IS DIRECTOR OF APP ONE RISK MITIGATION SERVICES, INDIRECT LENDING FOR WOLTERS KLUWER FINANCIAL SERVICES. FOR MORE INFORMATION, VISIT WWW.WOLTERSKLUWERFS.COM.

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F& I M AT T ERS

4 Collection & Payment Processing Trends to Watch BILLINGTREE PROJECTS UPCOMING TRENDS

the liability shift of Europay, MasterCard and Visa (EMV) will take place in the U.S. They explained this mandate means any company that processes card payments is required to offer a chip-and-PIN payment system – or risks being liable for counterfeit fraud. Europe rolled out EMV in 2004, switching liability to merchants in January 2005. Now 10 years later the U.S. is using the same approach to convince merchants to leave magnetic swipe behind. “Compliance remains a strict requirement for merchants switching to EMV and PCI DSS will continue to be an important consideration after making the move to the new payment method,” BillingTree said. Tokenization. In explaining what BillingTree described as “the combat fraud king,” Visa chief executive officer Charles Scharf recently told attendees at the Bank of America Merrill Lynch 2014 Banking & Financial Services Conference

BY SUBPRIME AUTO FINANCE NEWS STAFF

that tokenization is “the single biggest change that’s been made in payment networks easily over the past 15 or 20 years.” With the emergence of new payment options such as EMV and mobile, BillingTree contends there will be fresh concerns about fraud prevention. “But tokenization is the combat fraud king, covering a range of payment channels targeted by fraudsters – card present, card not present and mobile,” BillingTree said. “2015 will see big players like Visa and MasterCard pushing their tokenization services to payment processors of all sizes – incorporating a range of emerging payment methods.” Goodbye passwords. Hello biometrics? BillingTree acknowledged iris scanners and fingerprint readers might seem more suited to espionage movies than the payment processing industry. But if Visa and MasterCard have their way, BillingTree said both could soon become commonplace.

“These innovative technologies are known as biometrics. Plans are in place for current online authentication systems such as MasterCard SecureCode and Verified by Visa to possibly be phased out in the near future,” BillingTree said.

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BillingTree offered four trends the payment processing solutions provider thinks will impact the industry in the coming year. The projections cover a wide array of elements auto finance executives might or might not already see on their radar, as well. Payments really are going mobile. BillingTree indicated that in North America, the number of mobile transactions has almost doubled since 2013 to 17 percent of all transactions. The company mentioned 1 million people signed up for Apple Pay in the first 72 hours after its October launch. BillingTree mentioned Google Wallet, which has been in the marketplace since 2012, has also come to the forefront of consumer thinking. “Payment processors and collectors must incorporate mobile payment options for an increasingly mobile customer base in 2015,” the company said. EMV is coming. In October, officials noted

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INDUS T RY NE W S

NY Regulators Shut Down Condor Capital

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COMPANY SURRENDERS LICENSES

Condor Capital is no longer originating and servicing vehicle installment contracts for dealers who cater to subprime customers in New York or more than two dozen other states. Just before the holidays, the New York Department of Financial Services submitted a final consent judgment to be approved by the Empire State’s court system to settle the department’s lawsuit against Condor Capital that first sprouted last spring. New York Superintendent of Financial Services Benjamin Lawsky sent the order against Condor, a subprime auto finance company based in Long Island, and its sole shareholder, Stephen Baron. Among other violations, Lawsky claimed the defendants deceptively retained millions of dollars owed to vulnerable borrowers and overcharged them for interest in violation of the Truth in Lending Act. Under the terms of the final consent judgment, Condor and Baron will make full restitution plus 9 percent interest to all aggrieved customers nationwide, which officials estimated to be $8 to $9 million. Furthermore, Baron and Condor Capital are ordered to pay a $3 million penalty and admit violations of New York and federal law. Following a sale of its remaining loans in a manner that ensures appropriate consumer protections, NYDFS said Condor Capital will surrender its licenses in all states, which include: • Alabama • California • Colorado • Connecticut • Florida • Georgia • Iowa • Illinois • Indiana • Kansas • Kentucky • Maine • Maryland • Michigan • Minnesota

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• Missouri • Mississippi • North Carolina • Nebraska • New Jersey • Ohio • Oklahoma • Oregon • Pennsylvania • Tennessee • Texas • Virginia • Washington • West Virginia

Lawsky noted the lawsuit against Condor and Baron was the first legal action initiated by a state regulator under section 1042 of the federal Dodd-Frank Wall Street Reform and Consumer Protection Act, which empowers state regulators to bring civil actions in federal court for violations of Dodd-Frank’s consumer protection requirements. “We will not tolerate companies that abuse New Yorkers and other customers – particularly vulnerable subprime borrowers who can least afford it,” Lawsky said. “This case demonstrates that the Dodd-Frank Act provides a powerful new tool for state regulators to pursue wrongdoing and obtain restitution for consumers who were abused,” he continued. “We hope other regulators across the country will consider taking similar actions when warranted,”. NYDFS first filed a complaint and obtained a temporary restraining order against Condor and Baron on April 23. The state’s court system granted the NYDFS’ motion for a preliminary injunction and appointed a receiver on May 13. Officials indicated the receiver will remain in place until Condor’s loan portfolio is sold, the penalty and restitution are paid, and Condor has surrendered all of its licenses. As of Dec. 19, the receiver has paid more than $5 million in restitution. As part of the final consent judgment, officials explained Condor admitted to violations of Dodd-Frank, the Truth in Lending Act, the New York Banking Law, and the New York Financial Services Law. Furthermore, officials added Baron admitted to violating DoddFrank by providing substantial assistance to Condor’s law violations. NYDFS charged that Condor concealed from its customers

BY SUBPRIME AUTO FINANCE NEWS STAFF

and the department the fact that thousands of its customers had refundable positive credit balances (such money owed by Condor to a customer as a result of an overpayment of the customer’s account). Officials determined Condor retained these positive credit balances for itself and maintained a policy of failing to refund positive credit balances except when expressly requested by a customer. “Condor did not notify its customers when positive credit balances remained in their accounts at the conclusion of their loans,” NYDFS officials said. “Furthermore, Condor programmed its website to terminate customers’ access to their account information once their loans were terminated, even if the customers had positive credit balances in their accounts.” In addition, the agency asserted that Condor represented to the New York State Comptroller that it had no unclaimed property when in fact Condor was required to report its customers’ positive credit balances to the comptroller. And NYDFS said the company committed other violations associated with contract terms. Officials said Condor also violated the Truth in Lending Act by calculating the interest it charged its customers based on a 360-day year and applying the resulting daily interest rate to its customers’ loan accounts each of the 365 days during the year. They explained this practice resulted in a difference in its customers’ APR in excess of the one-eighth of 1 percent tolerance permitted under the Truth in Lending Act. “Even more egregiously, after being informed by regulators that this practice violated the Truth in Lending Act, Condor on multiple occasions attempted to add an additional one-eighth of 1

percent interest back to customers’ accounts,” officials said. NYDFS pointed out one other compliance area where Condor Capital failed to meet regulatory protocols. Officials claimed Condor also endangered the security of its customers’ personally identifiable information. Among other information security lapses, they discovered Condor left stacks of hard-copy customer loan files lying openly around the common areas of Condor’s offices. “Condor also failed – despite repeated directives from the department – to adopt basic policies, procedures, and controls to ensure that its information technology systems (and the customer data they contain) were secure,” NYDFS officials said. NYDFS noted the final consent judgment submitted to the court requires Condor’s CEO to pay damages to any customer who the department determines suffered identity theft as a result of Condor’s mishandling of their private information. As SubPrime Auto Finance News reported last spring, the company’s website indicated Condor Capital was founded in 1994 by a management team with more than 50 years of auto financing experience. According to Condor’s most recent annual report filed with NYDFS, at the end of 2013, Condor held more than 7,000 loans to New York customers with total outstanding balances of more than $97 million. That report showed Condor’s 2013 loan portfolio contained aggregate outstanding loans of more than $300 million nationwide. For the year, Condor reported net after-tax income of approximately $7 million on operating income of approximately $68.7 million, DFS said.

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SA L ES M AT T ERS

How Introducing Objections Removes Objections

THE NEW YORK DRIVING FORCE

MARCH/APRIL 2015

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REACTIVE VS. PROACTIVE SERVICE

Do you know the difference between reactive and proactive service? Understanding it will make a big impact on your sales career and your customers’ experience. Let me use a common example of going out to dinner to illustrate. Imagine arriving at a new restaurant you’ve wanted to try with your friends. You walk inside and are immediately struck by the great design, décor and ambiance. You get seated and after a couple of minutes you notice you don’t have a menu, so you ask the waiter walking by for menus. He replies politely, “My pleasure!” and with a smile hands you and your friends some menus. Have you noticed anything not quite right yet? The menu offers a wonderful, diverse selection: prime steaks, fresh seafood and homemade pasta. Even the pricing is a pleasant surprise. As you discuss the options with your friends, you reflexively reach to grab a drink of water. But there isn’t any on the table yet. You ask your friends, “Have they come by to take drink orders yet?” Your friends say no. Once again, you stop a passing waitress and ask her to bring drinks. She responds with, “I’m

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happy to take your drink orders. Your waiter is Mike and he’ll be right with you.” She takes your drink orders and brings them back right away. What is missing from this experience? Now you start to notice something about this place. Despite the amazing ambiance, superb food choices and smiling staff, something is not quite right. Mike shows up, apologizes for the delay and takes your orders. As he walks away from the table you notice your glass is almost empty and try to get his attention, but he’s gone. You flag down a waiter walking by and ask him to have Mike bring you a refill. Mike brings out the refill and the food too. It’s piping hot and smells delicious. The table is ready to dig in when you all notice there is no silverware on the table. By now you feel irritated. Once again, you signal for Mike and ask for silverware. He offers his apology and brings it with a smile. As the night continues, you ask for refills, dessert menus and finally the bill. It is not just about serving the client. It’s about the type of service you provide. In this restaurant staff members were friendly, courteous and willing to get everything that was requested when it was requested. But your experience will never be excellent if you constantly have to ask for things. Some salespeople are just like the waiters in this restaurant. They wait for the customer to bring up a concern or offer an objection. Then, they try to overcome them. This is providing reactive service. Reactive service is service in response to a request. Once the request is made, the salesperson reacts to it or satisfies it. Reactive service is the most common kind of service salespeople provide. How could you tell if you provide reactive service? If you constantly hear any of these things from a customer on the lot, it’s one of the signs that your service is reactive: • I’m just looking. • This is my first stop.

• I just want your best price. • The car is not for me. • I don’t have much time. • I just need a trade-in value. • All I need to know is payments. • J ust tell me about your programs. • You don’t have what I am looking for. • I ’m only gathering information. Do you like hearing these things and then having to overcome them? I didn’t think so! And there is a better way! The better way is to become proactive instead of being reactive. Proactive service is offering service prior to a request. Being proactive means anticipating instead of waiting for something to happen. My Sellchology training philosophy is based on the idea of being proactive. How would it change your experience if that restaurant paid attention to your table and brought menus, offered refills and made sure you had everything else to enjoy your dinner before you had to ask for it? It would have transformed your experience! A salesperson who offers proactive service does not wait for the customer to bring up common issues or objections. He learns to anticipate them and to bring them up first! By doing this you can completely transform the entire buying experience for you and your customer. Just as every waiter should know that a customer will need menus, silverware and refills, so should a salesperson know that customers will mention price, shopping around or being pressed for time. Instead of waiting for the customer to bring up these concerns, you do it first! I call it becoming a pro, a proactive salesperson. Anyone can become a pro by learning how to positively introduce common questions or objections. What can you expect to happen if you learn to do this? Proactive salespeople see these results: • Objections are minimized or removed entirely. • Customer experience is transformed. • Salesperson no longer feels rejected.

BY JONATHAN DAWSON

OBJECTIONS ARE REMOVED OR MINIMIZED, CUSTOMER EXPERIENCE IS TRANSFORMED, AND THE SALESPERSON BECOMES A SOLUTIONS PROVIDER. Here is an example of reactive vs. proactive approaches when greeting a new customer on the lot: Reactive: Offer to help with vehicle selection but the customer says, “No, thanks, I don’t have much time now.” Result: You’ve just heard an objection you now have to overcome. Proactive solution: Say this first, “I know your time is valuable. What would you like to accomplish with the limited time that you have and how can I help you do it?” Result: Customers cannot bring up the time constraint because you already acknowledged it! Plus, you came across as a professional who wants to offer a solution based on their needs. Nobody wants to talk to a car salesman but everybody wants to talk to someone who has solutions! This is the simple beauty of learning how to become a proactive salesperson: Objections are removed or minimized, customer experience is transformed, and the salesperson becomes a solutions provider. Virtually all sales situations are better handled with proactive service. Take the list of common objections you hear and start practicing the proactive approach – mention it first in a positive manner. JONATHAN W. DAWSON IS FOUNDER OF SELLCHOLOGY, WHICH IS ALL ABOUT SELLING THROUGH PSYCHOLOGY, AND MORE SPECIFICALLY, PROACTIVE PSYCHOLOGY. JONATHAN’S PASSION IS PROVIDING “TEACHING THAT TRANSFORMS.” HE HAS BEEN TEACHING AND TRANSFORMING SALESPEOPLE FOR OVER A DECADE. HIS APPROACH COMBINES CUSTOMER FOCUSED SELLING, CONSUMER DRIVEN MARKETING AND PEOPLE FOCUSED LEADERSHIP. THIS ARTICLE ORIGINALLY APPEARED ON NCM’S UP TO SPEED BLOG (HTTP://BLOG.NCMINSTITUTE. COM) AND IS REPRINTED WITH PERMISSION.

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P RODUC T S & SERV ICES

Equifax Launches Platform to Aid 3rd Party Verifications QUICKLY DELIVERS THE NEXT GENERATION OF SOLUTIONS BY SUBPRIME AUTO FINANCE NEWS STAFF

quickly deliver the next generation of solutions to their customers. Recent partner CreditMiner, a consumer qualification solution provider, announced it will be leveraging Equifax real-time technology platforms and data to empower delivery of their products. “CreditMiner is committed to providing automotive retailers with transparent and financial-driven solutions that allow dealers to increase profitability and decrease exposure to compliance burdens and potential violations,” said Don O’Neill, vice president of sales and marketing at CreditMiner. “Equifax is a trusted brand and is renowned for innovation,” O’Neill continued. “We are excited to partner with their automotive team and look forward to delivering on our commitment to our customers.” Equifax also mentioned AutoConnect can provide third parties access to unique data from the company, such as verification of income and employment, which is accessible through an API designed for the auto industry. Equifax

vice president of marketing for automotive services Scott McMahon stressed this availability can open up new opportunities for partners who deliver solutions to dealers, lenders and OEMs and help to propel their business forward. “Innovative and secure, the AutoConnect platform will be a cornerstone of all our auto marketing solutions – including the ones we have launched and those that we are developing for future deployment,” McMahon said. “Our ongoing investment in AutoConnect will enable growth for our partners’ business, with particular focus in the upfront marketing, online and consumer qualification space.”

Equifax Expands Automotive Team In other company news, Equifax recently expanded its automotive services team. Industry professionals Angelica Jeffreys and John Giamalvo joined Equifax to add decades of real-world automotive

expertise to an already seasoned team of industry veterans. Jeffreys came on board as vice president and automotive dealer leader and Giamalvo is now vice president of dealer services. “Expanding our team is a direct reflection of both our successes in 2014 and our continued commitment to support the automotive industry, and we plan to stay in lock-step with the market’s upward trajectory,” said Gary Hughes, general manager of automotive services at Equifax. “Automotive Services at Equifax is dedicated to finding innovative ways to solve for real-world pain points – because our auto solutions are built by auto people who have spent their careers working directly in the business,” Hughes continued. “We expect 2015 to be an even stronger year for auto and we’re confident that with Angelica and John’s extensive backgrounds, our auto business will have the best tools and consumer insights needed to succeed in a highly competitive market.”

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Equifax unveiled its newest technology platform during the recent National Automobile Dealers Association convention. Equifax said AutoConnect can enable partners to deliver credit, marketing, risk and verification solutions seamlessly to their clients. “AutoConnect will help partners pursue opportunities across all segments of the automotive ecosystem,” said Kathi Mehall, vice president of technology for automotive services at Equifax. “It uses auto-specific APIs (application programing interfaces) based on the Standards for Technology in Automotive Retail (STAR) to help streamline partners’ implementation and deployment of Equifax data and services,” Mehall continued. With the automotive industry experiencing significant growth and evolution in the consumer online shopping experience the last several years, Equifax explained that it’s making this crucial investment to deliver a platform as well as capabilities that allow partners to

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INDUS T RY WATCH

P RODUC T S & SERV ICES

GPS Popular with Dealers INILEX STUDIES CHALLENGES OF AUTO INDUSTRY

GPS technology is surging in popularity among car dealerships, which are increasingly using it for inhouse applications such as lot management and stolen vehicle recovery, according to an auto industry study released by Inilex, the makers of SkyLINK. The study also found that dealers consider GPS-based theft-recovery devices one of the highestvalue aftermarket products.

BY USED CAR NEWS

believe it is smaller – although they report consumer and federal challenges. When asked to identify their single biggest F&I sales challenge, auto dealers highlighted lack of financing, and unwillingness by customers to purchase ancillary products they perceive as lacking tangible benefits. In addition, plans by the Consumer Financial Protection Bureau to increase regulation of F&I products is changing the way dealers approach F&I sales – with more than one in three dealers saying they will change their F&I approach or products offered to ensure value and profitability. Dealers named GPS theft-recovery devices as the second-most valuable product they can offer customers, after service contracts. Dealers also noted that GPS theftdevices deliver high value to their F&I departments.

INTEGRATION ALLOWS AUTOMATIC INFORMATION SHARING BY USED CAR NEWS

Dealership technology provider AutoStar Solutions has announced the integration of its AutoStar Fusion dealer management system with DealerSocket’s customer relationship management. AutoStar’s latest two-way integration allows dealers to automatically share 27 separate pieces of vehicle, sales and customer information between both systems. These instant updates dramatically reduce the need for data entry and streamline the sales process. Through this new integration, dealers can immediately send buyer, co-buyer, and co-signer information from DealerSocket CRM directly to AutoStar Fusion DMS. The integration also sends any completed residence and employer information for each contact into the system, helping dealers complete the sales process without the need to enter data twice. Every night, AutoStar automatically syncs inventory and sales information from its Fusion DMS to DealerSocket CRM.

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The study of 306 new and used car dealers across the United States covered the challenges dealerships are currently facing, which are increasing despite their

confidence in the overall auto industry. Lot management is still a challenge for dealers, with one-third reporting they have been unable to locate a vehicle when preparing to take a customer for a test drive, and a whopping 86 percent encountering a dead battery when getting ready for a test drive. Additionally, 22 percent of dealers had at least one vehicle stolen in the past year. The study found that investments in pre-loaded theft-recovery devices appear to pay off, as 33 percent of dealers were able to recover a stolen vehicle using a GPS device. Most auto dealers are optimistic about the market conditions for aftermarket sales – 51 percent believe the market opportunity for aftermarket product sales is greater than it was five years ago, while just 15 percent

AutoStar Partners with DealerSocket

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COMP L I A NCE OV ERDRI V E

Five Tips for Avoiding Fraudulent, Deceptive and Unfair Advertising Practices

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DON’T RISK YOUR DEALERSHIP’S REPUTATION

The past year has been extremely active on the regulatory compliance front in the automobile sales and financing industry. In addition to actions by the Consumer Financial Protection Bureau, the Federal Trade Commission continues to take enforcement actions against dealers. The FTC’s activities in 2014 were likely just an indicator of what will continue throughout the coming year. The mission of the Federal Trade Commission is to work on behalf of consumers to recognize and stop fraudulent, deceptive and unfair business practices. Given the increased focus on auto dealer practices, it is a good time to review internal processes to ensure compliance with relevant rules and laws that exist to ensure dealers represent financing and leasing terms accurately and clearly through any advertising efforts, from television and print to social media. Here are five key tips you will want to consider to avoid fraudulent, deceptive and unfair advertising practices. Promotional Half-Truths “Nothing down!” “Everyone qualifies for credit!” “Get out of your lease for $1!” All of these promotions and, of course, many more have been criticized by regulators in the last few years for not being truthful. In the last example, which is one of the most recent, an auto dealer settled with the FTC after facing an enforcement action that charged it used deceptive ads to promote the sale and lease of vehicles. This specific case cited violations of Consumer Leasing Act, Regulation M, Truth in Lending Act and Regulation Z provisions of misrepresenting material costs. In other words, presenting “just part of the story” in an advertisement won’t fly with regulators. Your dealerships should confidently advertise the special credit and incentive offers you are able to extend to customers, as long as you can demonstrate that claims like these are completely true, and true in

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every case. Details in Fine Print When considering the requirement you include the “full story” in any ad, remember if there are any exceptions to your promotions to make them prominent. Any advertising that offers enticing prices, lease or finance terms, and promotions, and then uses small text to add caveats or limit the headline offer should be avoided. In another real example from late last year, FTC action against several dealerships and their advertising company noted violations for frequently focusing on only a few attractive terms in the ads while including details and exceptions in fine print, through distracting visuals or with rapid-fire audio delivery. Ads were called out for promoting low monthly payments or attractive annual percentage rates and finance periods while concealing other material items, such as the fact that the low payments were actually for leases, not sales; major limits existed on who could qualify for discounts; and offers included significant added costs. The qualifications and limitations should be prominent so your target audience clearly understands the terms. Truth-in-Lending Advertising Requirements The Truth-in-Lending Act and Regulation Z (12 CFR 1026.24) require specific disclosures be given certain levels of prominence when triggering terms, such as “finance charge,” are used. One of the highest fines recorded last year was for an advertisement failing to display credit disclosures “clearly and conspicuously,” as required by the TILA. All promotions should be reviewed for these advertising disclosure requirements by your compliance department. Responsibility ultimately falls with your dealership. Don’t assume that your marketing firm or advertising agency knows the specifics of these requirements. Penalties for enforcement actions have not been lessened in any recent cases due to claims of

lack of awareness of the rules or by shifting responsibility to the advertising agency. All Forms of Media Consider all the forms of media distribution you are using for your promotions. In addition to print and TV advertisements, ads on websites, Facebook, Twitter and other social media outlets are subject to scrutiny. In many cases ads are being communicated in English and in other languages in local and regional media. Make sure all promotions in all languages and forms of media are following the same guidelines. It’s important to understand what constitutes examples of

ADVERTISING REQUIREMENTS EXIST AT THE FEDERAL AS WELL AS THE STATE OR LOCAL LEVEL, AND THESE RULES CAN VARY SIGNIFICANTLY. ANY LEGAL REVIEW OF YOUR ADVERTISING SHOULD CONSIDER THE FULL SCOPE AND BREADTH OF RULES THAT MAY APPLY.

BY CHIP ZYVOLOSKI

misleading ads and acceptable ads for various forms of media. What might make sense in a print ad for a newspaper likely won’t work in a Twitter campaign without significant adjustment. Your compliance department should be well-versed in how to apply state and federal advertising rules to various media, including how to properly make discount claims, specific rules for email advertising, claims related to “green marketing,” Internet advertising, satisfaction guarantees and the list of various disclosure “trigger” terms. Reputational Risk Advertising is subject to regulatorycompliance review and risk, but the bigger risk may be to your business’s reputation. Nothing is more important to the long term success of your business than your reputation with the public. Beyond any potential enforcement actions, your dealership may suffer an even greater loss if you develop a bad reputation when potential customers are disappointed or feel deceived upon finding out that advertised deals are less than expected. Fines and citations can be paid for and resolved, but it is difficult, even impossible sometimes, to restore public trust that has been damaged. Summary We have seen over 20 enforcement actions in the indirect auto lending industry in recent years by the FTC in an effort to protect consumers. Advertising requirements exist at the federal as well as the state or local level, and these rules can vary significantly. Any legal review of your advertising should consider the full scope and breadth of rules that may apply. Making sure advertisements are in compliance with the full spectrum of rules and laws to which your dealership is beholden is part of the relationship you should have with your legal counsel. Beyond the steep cost of any penalties, perhaps the most important consideration is that the reputation of your dealership is ultimately at stake. And that’s not something you want to put at risk. CHIP ZYVOLOSKI IS A SENIOR ATTORNEY FOR INDIRECT LENDING AT WOLTERS KLUWER FINANCIAL SERVICES. FOR MORE INFORMATION, VISIT WWW.WOLTERSKLUWERFS.COM/INDIRECT.

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