What is NADA and Why Are NADA Guidelines Important?

Compliance refers to the adherence to legal and regulatory requirements governing the F&I sector. By failing to comply with legal regulations, dealerships can face harsh penalties, such as fines or even closure. The National Automobile Dealers Association (NADA) created compliance guidelines to ensure that they incorporate consumer protection laws and financial regulations into dealership daily operations.

This article will teach you how to follow NADA's guidelines to comply with F&I rate and product pricing regulations. By doing so, you can reduce legal risks and increase profits.

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What is NADA and Why Are NADA Guidelines Important?

NADA advocates for the automotive industry and its consumers. It creates various guidelines, reports, and forecasts to keep dealerships compliant with regulations.

You are subject to NADA Guidelines if you…

• Are a dealer for any franchised new or old automotive vehicles
• Are a finance manager
• Sell additional insurance products
• Are a NADA member

Pricing guidelines help all dealerships stay compliant, not just automotive. This includes RV, Powersports, Implement, and Marine dealerships.

While dealership guidelines are beneficial, adherence to NADA compliance guidelines is voluntary. NADA does not have regulatory authority from a legal perspective. The guidelines are resources NADA offers to protect and ensure ethical practices within dealerships.

In the finance department, compliance guidelines help guide daily operations to ensure compliance for each F&I deal. With more discrimination cases in F&I sales, finance managers should protect themselves by following recommended guidelines.

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2 Key NADA Guidelines for Dealerships

Below are two pricing guidelines that NADA recommends automotive dealerships understand:

1. Rate Deviation Guidelines

The rate deviation guideline establishes a consistent interest rate markup set by the dealership's compliance officer. Dealership employees must follow the standard rate markup policy and report any deviations and reasons for applying them.

2. Voluntary Product Pricing Guidelines

VPP regulations set rules for dealerships related to voluntary protection plan pricing. These rules focus on fair pricing to make sure customers are treated equally. Utilizing tools like menu presentations can help the dealer or finance manager practice fair and consistent pricing. Some examples of extra protection products that should follow product pricing guidelines are extended warranties, service contracts, GAP insurance, and add-ons. This pricing guide explains how to comply with regulations. Additional third-party software, like MenuMetric, can help dealerships follow these rules.

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How to follow Rate Deviation and Voluntary Product Pricing guidelines:

NADA suggests dealerships monitor rates, VPP markup changes, and reasons for finance manager price or product adjustments. By reporting deviation information, the dealership can follow compliance regulations by providing documentation if presented with legal concerns. These compliance guidelines help prevent unethical selling practices.

A common unethical business practice is deviation based on discrimination against a protected class. This group includes race, gender, national origin, sex and religion. Guidelines for rate deviation compliance follow financial and legal rules to protect dealerships from legal actions related to financing.

MenuMetric has rate and VPP deviation tracking in its metrics solution to simplify compliance. This tool helps dealerships and finance managers easily track deviations and follow NADA guidelines electronically.

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What happens if you do not comply with NADA Rate Deviation or VPP guidelines?

Suppose finance managers do not follow NADA's guidelines. If this happens, dealerships could face legal trouble for unfair pricing or discrimination in interest rates. Finance managers may not comply for various reasons, such as needing a reporting software to make the process easier. Not following rules can lead to fines, penalties, warnings, or dealerships' temporary or permanent closure.

As you can see, failing to comply with compliance regulations can be extremely costly. Fortunately, MenuMetric's solutions can help with NADA-approved rate and price deviation tracking..

How to make Compliance Guidelines part of your finance department routine

Reporting rate or price deviations can seem time-consuming, but incorporating it into daily operations is crucial.

Here are some tips:

• Schedule a reminder after completed deals so that it becomes a part of the financing routine.
• Create a compliance checklist.
• Make sure the finance department is aware of the recommended guidelines. This includes reporting and legal regulations.
• Keep compliance records for every deal. Saving electronic or physical records provides a simple way to prove compliance if you have any legal concerns related to rate or price deviations.
• Regularly check rates and prices to ensure they are correct and promptly record all reasons.
• Use a third-party electronic form to fill out and submit compliance information to dealership management quickly.

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Ensure Compliance with MenuMetric

MenuMetric's software can ensure your dealership maintains profitability while satisfying customers and adhering to compliance guidelines.

Use our reporting tool to ensure fairness and compliance at your dealership. Our reporting tool will help you avoid breaking the law and follow compliance regulations. Contact us today or schedule a demo to discuss NADA compliance for your dealership.

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Sources:

https://www.nada.org/regulatory-compliance/voluntary-protection-products-model-dealership-policy

https://www.nada.org/nada/consumer-vehicle-values