How to Make Sure Your Buy Here Pay Here Financing Process is Bank Compliant

buy here pay here financing

Buy Here Pay Here financing compliance doesn’t have to be the constant thorn in your side if you know how to stay ahead

Whether you’re new to the Buy Here Pay Here dealership business model, or you’ve been in the game for years, there’s no question that there’s plenty of money to be made in this niche section of the auto industry. You’re also providing a valuable service to individuals who, for one reason or another, may not qualify for the third-party financing offered by traditional auto dealerships.

Even the most successful BHPH dealerships, though, encounter a lot of red tape. Because you’re not just selling cars but acting as the Buy Here Pay Here financing company as well, you’re held to even more compliance standards than a traditional dealership.

BHPH dealership owners often feel like their every move is looked at under a microscope because other BHPH dealerships have given the industry a bad name. You know you’re offering competitive prices, excellent customer service, and giving “undesirable” borrowers that chance they need, but you’re going to need to ensure your Buy Here Pay Here financing process is airtight and 100% compliant to get the respect you deserve.
buy here pay here financing

Three Federal rules and regulations you need to know to stay in compliance with Buy Here Pay Here financing

When it comes to Buy Here Pay Here financing compliance, there’s no room for error and no tolerance as you try to “fake it ‘til you make it.” You are bound by certain federal and state regulations, depending on where you’re operating. Federal laws that may apply to your BHPH dealership lending include:

Fair Credit Reporting Act (FCRA)

This protects the privacy of credit report information and guarantees that the information supplied by consumer reporting agencies is as accurate as possible.

Equal Credit Opportunity Act (ECOA)

The ECOA protects consumers from several different types of discrimination. You can’t refuse to sell or finance a vehicle based on things like race, religion, sex, age, marital status, and other factors.

Truth in Lending Act (TILA) Reg Z Compliance

The TILA helps consumers make educated decisions about the cost and terms of credit that are presented to them. Your dealership must disclose credit terms in a meaningful way so credit terms can be compared easily.

These are some of the most prominent, but there are many more. You can find a full list of federal rules and regulations on the NIADA website.
buy here pay here financing

How to ensure your Buy Here Pay Here financing process is fully compliant

If your BHPH dealership violates any federal or state laws, you could face penalties that amount to hundreds of thousands of dollars. Don’t let simple oversights or sloppy processes drag your business down. Here are some simple ways to make sure your Buy Here Pay Here financing is always on the right side of the law:

1. Appoint a chief compliance officer.

Just as you hire salespeople and customer service associates, you should also have a compliance officer on staff. Instead of dividing up compliance-related issues among various staff members, you need to have one main person in charge of running the show. Compliance is what keeps your doors open, so an experienced compliance officer is likely the most important person you can hire.

2. Invest in regular third-party audits.

Why do you need third-party audits when you already have a compliance officer? Because two heads are better than one, and while it’s essential to have a compliance officer heading up your efforts, it’s equally important that you have an extra set of eyes from outside the dealership checking out your Buy Here Pay Here financing from every angle.

3. Document your underwriting guidelines.

What are your guidelines for approving a BHPH finance contract? If any of your financing decisions come back to haunt you at a later date and the powers that be want to know exactly how and why a loan was approved or denied, documented guidelines will be your saving grace. You must list all the different factors that make up each lending decision, such as minimum down payment or maximum terms, and stick to them.

4. Keep loan documents up to date.

Laws are changing all the time for BHPH dealers, and all the compliant loan documents you had drawn up last year may not be compliant anymore. Constantly and consistently update all your important documents to reflect any regulatory changes.

5. Use your CRM’s mobile app.

Sometimes, compliance issues can be traced back to simple, avoidable errors. For example, it’s easy to mess up a customer’s license number or a vehicle’s VIN with a typo when you’re trying to get things done too quickly. AutoRaptor’s mobile app lets you scan a customer’s license or a vehicle’s VIN right from your smartphone, and all the correct numbers go directly into the system.

Yes, compliance is a big deal when you’re running a BHPH dealership, but don’t let yourself get overwhelmed. Hire the right people and put the proper processes into place, and it’s possible to make your Buy Here Pay Here financing a well-oiled, compliant machine.


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Patrick H.
Patrick H.