Managing risk in data collection and compliance

Instances of auto fraud are on the rise, and some are for incredibly costly transactions. A Texas man has been recently convicted of wire fraud and money laundering that included a $233,000 purchase of a 2019 Lamborghini Urus as well as a Ford F-350 pickup truck, and sentenced to nine years in prison. In June this year, Volkswagen had more than 3 million customers’ data compromised in a data breach. And instances of identity theft have been on the increase across the country. 

Managing data collection and other legal issues that fall under the compliance umbrella are a concern for dealers everywhere. Dealerships have practices in place to protect themselves from liability in these matters, but it depends on staff to use the processes and tools correctly. In many cases, corners are cut or processes ignored simply because implications aren’t clear. 

CBT News online editor and contributor Jason Unrau spoke with Lightico Digital Automotive Specialist Yotam Haroosh who offered insights into compliance and how dealers can protect themselves.

What pitfalls are dealers susceptible to where compliance is concerned?

The sales process has been increasingly digital in auto retail, but there often remains a literal paper trail that can be high-risk for fraud or data breaches. Lightico’s Haroosh says, “Dealers are especially susceptible to paper-based documentation which can take longer to process and verify. In addition, and as a part of that, protracted deals leave more space for error and fraud. By ensuring more efficient, digital process dealers can not only reduce fraud but offer a better customer experience.”

Even five years ago, 84% of buyers would cut ties with a dealership after a data breach. That can be mitigated in part by removing physical paper documents from the process and relying exclusively on secure digital processes.

Are there examples of which manufacturers or solutions providers are doing compliance really well?

Modern retail practices involve the ability to move from online to in-person in the same transaction, but some options are clunky and can aggravate the users – both the salesperson and the customer. For auto loans especially, secure and seamless transactions are so important. Who does it well?

Haroosh offers, “Because customers expect a fast experience, but dealers need to ensure compliance, the loan process needs to be digital. A prime example of this is Westlake Financial which is really leading the way in faster funding, winning more deals, and significantly reducing overhead all while ensuring that their loans are fully compliant.”

What can salespeople, managers, and F&I managers do to better educate themselves?

Being unaware of the expectations, importance, and execution of compliance cannot fly in auto retail. Any instance of non-compliance leaves a dealer exposed to litigation or judgments that could cost millions, not to mention the loss of trust experienced in the community as a result. Education continues to be the best way to avoid costly errors.

“The most important thing is to dispel the myth that being compliant means moving slow or being cumbersome. That used to be the case but today with mobile and digital-first lending tools – from the customer-facing aspect to AI-based risk analysis – dealers and lenders can be compliant and agile,” says Haroosh. “It is also quite important to read! Stay up to date on the latest issues in the industry whether that be new fraud techniques or technologies that are changing the industry. For example, eSign used to be the latest and greatest, well now we’re in 2021 not 2015. Digital document collection, verification of identity, AI for risk analysis and more are all fast becoming (or have already become) table stakes.”

How should data be collected and stored when it can’t be done digitally?

“Well, the real answer is it shouldn’t. We are way past the point of analog file storage. It is expensive, prone to errors and slow. Storing data digitally is faster, more efficient, and safer and prepares you for future changes that can leverage data you have.”

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