Compliance is something all companies have to adhere to in some form or fashion. Dealerships are no different when it comes to being compliant to several policies and procedures. What happens when a company, or for the sake of this blog post, a dealership is not compliant? Well, not being compliant usually follows up with specific fines and penalties. For dealers, here are some compliance fines you may have to face.
(Source: Credit Bureau Connection)
OFAC
The fines for violations can be substantial. Depending on the situation, criminal penalties can include fines ranging from $50,000 to $10,000,000 and imprisonment ranging from 10 to 30 years for willful violations. Civil penalties range from $250,000 or twice the amount of each underlying transaction to $1,075,000 for each violation.
Are you aware that if you do not run an OFAC (Office of Foreign Assets Control) search on everyone you sell a car to (cash or finance) and they are found to be on the FBI's list of known terrorists, drug lords, wanted criminals, etc. you can face up to $10,000,000 (10 Million) in fines and possible prison time?
That's only one of the six main compliance requirements that ALL automotive, marine, motorcycle, RV dealers, along with brokers, independent lenders, and others MUST comply to if you do business in the United States. More and more dealers across the country are being audited by federally funded FTC or Office of Consumer Credit Commissioner auditors. It has been announced that the FTC intends to increase enforcement in 2012 and beyond.
Privacy Notice
Penalties for non-compliance: Civil penalties of up to $10,000 per violation for officers and directors personally liable, and for the financial institution liable, penalties of up to $100,000 per violation. Criminal penalties include imprisonment for up to five years and fines.
Risk Based Pricing
There are hefty fines the FTC can impose if a dealer fails to comply with the risk based pricing notice, though consumers can’t sue you directly for noncompliance. The FTC can recover $3,500 for each knowing violation in a civil lawsuit, or it can bring an enforcement action to recover up to $16,000 per violation. States can sue for injunctions of $1,000 per violation for each breach of an injunction.
Adverse Action Notice
Penalties for non-compliance are stiff. A knowing violation of the regulation results in a $2,500 civil penalty for each violation, & "each violation" could potentially be interpreted as being 1 violation per customer. If the dealer is unlucky enough to receive a "cease & desist" letter from the FTC, they could be facing additional penalties up to $11,000 per violation.
Credit Application
You must have a signed credit application prior to pulling a credit report. Fines may vary per offense.
Red Flags Rule
Non-compliance violation per-occurrence is $3,500
