Compliance Benchmarks For Your Dealership's Service Department
By: Keith E. Whann
My recent article, titled “Financial Benchmarks Help The Bottom
Line, But Compliance Benchmarks Protect It!,” dealt primarily
with benchmarks for legal and regulatory compliance related to
the advertisement and sale of a motor vehicle. Now, its time
to take a look at your service department! If you are like most
dealers, it’s been some time since you had the paperwork and
signage in your service department reviewed and updated. This
area of the dealership is often overlooked from a compliance
perspective. Inconsistent disclosures in service paperwork, missing
information and contradictory signage posted in the service department
are common errors and easy targets for state regulators and consumer
attorneys alike. Just last month a dealership was ordered to
return $138,000 to consumers and pay $42,000 in civil penalties
and attorney’s fees as a result of claims that it used noncompliant
repair orders and imposed inappropriate charges in connection
with repairs and services it performed. The following is a list
of suggestions to help you set legal and regulatory compliance
benchmarks for your service department:
Paperwork: Dealers should
have their service paperwork reviewed and updated on a regular
basis. Start by reviewing the repair
order and other service related paperwork to ensure that they
contain all of the information and disclosures required by
applicable law. One of the most important things to remember is
that the
dealership’s service forms must work together and contain consistent
disclosures. The dealership should obtain permission from its
customers prior to road-testing their vehicles, ascertain whether
they wish to have parts removed from their vehicles discarded
or returned, and advise them of additional charges that may
be incurred for miscellaneous materials and partially completed
work or for restocking of returned parts.
Customers should
also
be provided with the appropriate estimate choice form before
any services/repairs are performed and a system should be
in place to obtain proper authorization for any additional services/repairs
that become necessary. The dealership’s warranty and return
policies should also be clearly communicated to customers and
be
consistent
in all of the service paperwork, such as the repair order,
repair invoice and after hours repair authorization. If you perform
a repair at no charge or a reduced charge to the customer
when you are not obligated to do so (a “goodwill” repair), don’t
forget
to utilize a form indicating that the performance of the
goodwill
repair does not create any additional dealership obligation
or warranty in connection with the repair or service.
Signage: Signage posted in the dealership’s service
department is necessary not only to make appropriate disclosures
to
customers, but also to comply with safety-related laws and
regulations. Signage advising customers of their right to receive
an estimate
choice, additional fees that may be incurred in various
circumstances and the dealership’s warranty and return policies
should
be
consistent with the information provided to customers in
the service paperwork
and be posted in the area where customers commence the
service transaction. You should also have signs that restrict the
access of customers to certain areas. In those areas where
employees
are performing services and repairs, signage should be
posted explaining the proper use of safety equipment and the safety
equipment, such as first aid kits, eye wash stations and
goggles,
should be located in close proximity to the signs and easily
accessible.
Service Department Policies and Procedures: All
service employees should receive information about the service
department’s
policies and procedures, as well as appropriate training.
Remember to
address which employees have access to service records,
keys to customer vehicles and other customer information
and property.
For example, every dealership should have a Privacy Policy
that accurately reflects the dealership’s business practices
with
respect to collecting and sharing customer information
and a comprehensive written information security program
that
describes how the dealership protects the confidentiality
of the information
it collects. Don’t forget about protecting the confidential
information
you collect and store in your service department.
While
the dealership’s service department often operates separate from
the sales department, it is an integral
part of the dealership’s
overall financial
success. Make sure the paperwork you are using, the fees you are
charging and the signage that you have posted in your dealership’s
service department are
in compliance. Doing so will help to limit your potential liability
and increase your overall profitability.
The information
contained herein has been provided by Keith E. Whann and Deanna
L. Stockamp of the Law
Firm
of Whann
Associates, LLC, and is for
general information
purposes only. You should contact legal counsel for specific application.
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