Financial Compliance Checklist for Auto Dealers

Auto dealerships face strict regulations when offering financing or handling payments. Non-compliance can lead to fines, lawsuits, or license issues, significantly impacting business operations and profitability.

The following checklist covers key financial compliance areas—credit laws, financing disclosures, payment processing rules, and tax handling—to help dealerships maintain regulatory compliance while optimizing their financial operations.

1. Licensing & Registration Requirements

Proper licensing is the foundation of financial compliance for auto dealerships:

Finance-Related Licensing

If your dealership offers vehicle financing or arranges loans, you may need licenses, such as a Sales Finance Company or Retail Installment Seller license, depending on your state. These licenses are legally required to handle consumer credit transactions. Review your state’s rules regularly to ensure compliance.

Helpful Resources: Car Dealer License Guide

Dealer Bond Requirements

While not strictly a financial license, a dealer bond is a financial guarantee required for your dealership’s licensing. It protects consumers and the state from fraud, misrepresentation, or contract violations, such as failing to transfer a title or paying fees. Most states require it, so ensure your bond is active, meets state minimums, and is renewed on time.

Helpful Resources: For dealer bond requirements, check with your state, such as the Department of Motor Vehicles or the Secretary of State, for the most accurate and up-to-date information.

2. Consumer Credit Compliance

Credit laws protect consumers during financing transactions by ensuring transparency, fairness, and equal treatment.

For auto dealerships that offer financing or assist customers in securing loans, compliance with lending regulations is crucial. Requirements, such as transparent loan terms, fair lending practices, and responsible use of credit information build customer trust and reduce legal risk.

Here are a few key laws every dealership should understand when offering or facilitating financing.

• Truth in Lending Act (TILA):
• Provide consumers clear written disclosures of loan terms, APRs, and financing costs.
  
  
• Ensure all advertising containing financing terms complies with disclosure requirements to prevent misleading information.
  
  
• Provide consumers the right to cancel certain credit agreements within a specified period to allow reconsideration of financing decisions.
  
  
• Maintain proper documentation of all required disclosures.
  
  
• Equal Credit Opportunity Act (ECOA):
• Implement non-discriminatory credit evaluation processes.
  
  
• Provide timely notices of credit decisions to applicants within 30 days and explain reasons for any adverse action.
  
  
• Retain credit application records for at least 25 months after notifying the applicant.
  
  
• Fair Credit Reporting Act (FCRA):
• Only access a consumer’s credit report with a permissible purpose and proper consent.
  
  
• Provide required disclosures when adverse actions are taken based on credit information.
  
  
• Credit information furnished to bureaus must be complete, accurate, and promptly corrected when necessary.
  
  
• Inform consumers if they receive less favorable credit terms based on their credit report.

For detailed guidance on FCRA compliance for auto dealerships, see resources provided by the National Automobile Dealers Association (NADA).

3. Finance & Sales Documentation

Thorough documentation is essential for legal protection, building customer trust, and avoiding compliance issues. Maintaining accurate records of financial transactions helps safeguard your dealership and ensures transparency.

In addition to the required disclosures referenced above, key areas include:

• Sales Agreements & Loan Documents:
• Use accurate, compliant forms for all transactions.
  
  
• Ensure consistency between advertised terms and final documentation.
  
  
• Maintain complete records of all financial transactions.
  
  
• Transaction Components:
• Properly document rebates, trade-ins, and down payments.
  
  
• Maintain precise records of all pricing and value determinations.
  
  
• Ensure transparency in how these components affect final payment terms.

4. Payment Processing & Fees

How dealerships handle credit card transactions carries substantial compliance and financial implications.With processing fees cutting into profits, implementing fee strategies that align with regulations is essential.

RevUpX offers comprehensive merchant services, including compliant zero-fee credit card programs with surcharge and cash discount options that meet card brand rules and state laws. Backed by industry leaders Fiserv and CardConnect, RevUpX helps dealerships maintain compliance while optimizing payment operations and enhancing overall transaction efficiency.

Key compliance areas for payment processing include:

• Card Brand Rules:
• Follow specific guidelines for implementing surcharges or cash discount programs.
  
  
• Ensure proper disclosure of any convenience fees.
  
  
• Maintain compliance with state-specific regulations on payment processing.

For detailed information on payment program requirements, consult card network official guidelines: VISA Rules and Policy, Mastercard, Discover, and American Express.

• Payment Card Industry Data Security Standards (PCI DSS) Compliance:
• Implement required security measures for handling payment card data.
  
  
• Conduct regular security assessments.
  
  
• Train staff on proper handling of payment information.

5. Financial Reporting & Tax Compliance

Financial reporting and tax obligations create a complex landscape for auto dealerships.

With vehicle transactions involving substantial sums and multiple tax considerations, meticulous financial reporting isn’t just good business practice—it’s essential for regulatory compliance. Dealerships must maintain accurate records that satisfy both tax authorities and industry regulations while ensuring financial transparency for stakeholders. Key areas of focus include:

• Sales Tax Management:
• Calculate and collect appropriate sales tax for all transactions.
  
  
• Maintain systems for proper tax remittance.
  
  
• Stay current on changing tax regulations.
  
  
• Financial Documentation:
• Keep detailed records of all financial transactions.
  
  
• Organize documentation for potential audits.
  
  
• Maintain consistent recordkeeping practices.
  
  
• Revenue Recognition:
• Follow proper accounting practices, especially for in-house financing.
  
  
• Document financial activities in accordance with appropriate accounting standards, such as the widely used Generally Accepted Accounting Principles (GAAP).
  
  
• Implement systems to track ongoing financial obligations.

6. Consumer Privacy in Financial Transactions

Auto dealerships handle sensitive customer financial data daily—from credit applications to financing agreements—placing them in a position of trust with serious privacy obligations.With data breaches on the rise, protecting this information is not only a regulatory requirement but also vital to maintaining customer trust and safeguarding the dealership’s reputation.

To meet these obligations, dealers must implement and maintain the following data privacy and security practices:

• Gramm-Leach-Bliley Act (GLBA):
• Implement safeguards to protect customer financial information.
  
  
• Limit access to sensitive financial data.
  
  
• Maintain secure systems for data storage and transmission.
  
  
• Privacy Notices:
• Provide required privacy notices related to financial services.
  
  
• Inform customers about information-sharing practices.
  
  
• Document customer consent for information use when required.

7. Internal Financial Controls & Audits

Internal controls prevent both compliance issues and fraud by ensuring financial processes are properly managed, monitored, and documented.

Establishing clear procedures and conducting regular audits helps detect errors early, reduce risk, and promote accountability within the dealership. This includes:

• Duty Segregation:
• Implement separation of duties in handling money, contracts, and financial records.
  
  
• Create checks and balances within financial processes.
  
  
• Maintain oversight systems for financial activities.
  
  
• Regular Audits:
• Conduct periodic financial audits to ensure accurate recordkeeping.
  
  
• Verify compliance with regulatory requirements.
  
  
• Address any identified issues promptly.

Partner with Experts to Ensure Compliance

Navigating financial compliance can be complex for auto dealerships. Partnering with experienced service providers such as RevUpX can help ensure your payment processing systems remain compliant while optimizing profitability.

In particular, RevUpX is well-versed in the regulatory landscape surrounding payment acceptance. Our tailored merchant services solutions are built to meet compliance requirements while helping dealerships reduce costs and improve margins.

Learn more about how RevUpX can help your dealership maintain financial compliance while improving your bottom line. Contact RevUpX today to explore our tailored merchant services solutions for your auto dealership.

Disclaimer: This checklist provides general guidance and is not a substitute for professional legal advice. Regulations may vary by location and are subject to change. Consult with qualified legal counsel regarding specific compliance requirements for your dealership.