Compliance for commercial equipment dealers

Most equipment purchases are for commercial use and it is generally assumed that many statutory guidelines and regulations are not applicable to the sale and financing of commercial equipment. However there are a significant number of regulations that do require compliance from key stakeholders of the commercial equipment sales and financing businesses — specifically the dealers at the forefront of all equipment financing transactions.

Dealers need to be aware of the regulations to follow at the point of sale. Understanding their compliance duties not only ensures a smooth, hassle-free operation but also results in a successful business.

Whether on the federal or state level, regulations can feel burdensome and painful for dealers. However, undergoing a compliance audit for not meeting those requirements is far more painful. That is especially true if compliance violations result in fines, which can add up quickly and reach millions with just one repeated failure. The only thing worse than the fines is the complete loss of trust from customers, which is a lot more difficult to fix than the issues you may need to address in your handling of customer data and personal information.

It is critical to develop and implement policies and procedures to ensure that the dealership operations comply with applicable laws, regulatory requirements and industry standards. What follows is a list of important regulations that equipment dealers must know and be prepared to take action on to protect their dealerships and their customers. What’s more, certain states, like California, have developed their own guidelines and regulations for dealers operating in their state to follow.

• The privacy rule requires dealers to ensure the privacy of their customers and protect the security and confidentiality of their personal data.
• The Federal Trade Commission’s (FTC) disposal rule requires companies that collect consumer financial and personal data to dispose of the data in a secure format that ensures customer privacy.
• The red flag rule requires that dealers have a written identity theft protection plan designed to detect and protect against the common warning signs of identity theft.
• A dealership must file Form 8300 whenever a cash payment of over $10,000 is received.
• Dealers are expected to check customers’ names against the Specially Designated Nationals List, a list of people and groups targeted by the Office of Foreign Assets Control.
• Regulations mandate that lenders and dealers cannot discriminate on the basis of race, color, gender, religion, national origin, age, or because one’s income is derived from public assistance.
• Businesses are required to have an emergency action plan to facilitate and organize employer and employee actions during workplace emergencies.

This list is not the entirety of the regulations that dealers need to consider. There are additional regulations at the state level, and new ones being proposed during nearly every legislative cycle. There are many more at the federal level as well, but not all are applicable to all dealerships. Being aware of the regulations in place there will help you organize your business better and stay ahead of the curve.

Vijay Patil is the co-founder and Chief Operating Officer at commercial equipment financing software platform Trnsact. He previously established Yamaha Motor’s captive finance operation in the U.S. and set up and managed risk management and credit operations for Mitsubishi Motors Credit of America.