How to minimize banking audit visits

What the NH Banking Department is looking for while auditing and what you can do to prevent audits or be prepared to help solve auditing issues.

Disclose negative equity: Make sure your F&I office is disclosing a customer's negative equity on the retail installment contract. Some F&I managers and even dealers are under the impression that banks won't accept contracts with negative equity. Banks will. If they don't, take your business elsewhere.

At some point in the near future, the banking department will begin enforcement procedures against dealerships that are not handling negative equity properly.

Bi-weekly payments

Bi-weekly payments must be licensed as "money transmitters." If you are working with a company that offers bi-weekly payments to your customers, make sure the company is licensed as a "money transmitter." This listing can be found on the banking department's website.

Don't separately disclose admin, or administrative fees on the retail installment contract

Do disclose those fees on the purchase and sale agreement or elsewhere. On the installment contract, you should include the admin fee in the cash price. Best Practice: check all your contracts today to make sure this is being done correctly. I know you've checked before. Do it again because whenever your contracts change, the computers are reprogrammed and the programmer winds up putting the admin fee separately on the installment contract. Don't guess; check it.


The banking department has very broad authority to examine your dealership with or without notice, either randomly or to investigate a complaint.

On our website we've included a request form that some dealerships have received. The document is entitled "Sales Finance Officer Questionnaire," but they have been using it in their examinations of dealerships. The breadth of questions is expansive and the examiners claim they have every right to seek these documents. They may create a dealership-specific questionnaire in the future.

The department can charge you up to $680 per day for examinations. This number changes each year. So it is in your best interests to have what they are seeking readily available to minimize their time in your dealership. If they are doing a quick spot check, they may not charge you.

Make sure you have created and implemented your Safeguards, Privacy, and Red Flag policies/procedures. Not sure what these are? Visit NADA University (see "Getting Started" in the box above, right) to get the guidance for each of these federal rules and the sample written policies.

Fifty-thousand-foot overview 

Safeguards mean you need to secure all your customer data, both the paper format and the electronic; Red Flags mean you need to have a plan in place if someone attempts to steal your customer data (what "red flags" will you be looking for); Privacy Policy means you should be handing this policy out to your credit customers. The Safeguards policy is very important to the banking department examiners.

You must keep all records related to a sale/lease: The banking department demands that all records handwritten or electronic must be kept in relation to a transaction. Handwritten? Keep it. Emails? Keep it. You don't have to keep all in one deal jacket, though that would be the easiest in an audit. However, you do have to be able to retrieve the records easily.