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#135019 - 11/28/03 07:32 PM
Dealer Floor Plan Audits
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New Poster
Joined: Oct 2003
Posts: 7
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Our National Bank is starting to offer dealer floor plan financing. Does anyone know where I can find some guidance regarding the appropriate auditing requirements?
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#135020 - 11/28/03 07:50 PM
Re: Dealer Floor Plan Audits
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10K Club
Joined: Aug 2002
Posts: 47,749
Bloomington, IN
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I can't offer any place for guidance but I will offer the following:
An independent person should audit the inventory, do not let anyone that is associated with the floor plan or that are "friends" with the dealer do the audits. Audits should be randomly scheduled and the dealership should never know when you're going to show up for the audit.
If you allow the dealer to hold the titles or COs, make sure they are audited, if the dealer cannot produce the title collect your payoff for that unit before you leave the dealership (especially if the unit itself is not there).
Curtailments should be required monthly no later than after 90 days and paid in full after 180.
If administered correctly floor planning can be profitable, if not hold on to your arse.
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The opinions expressed are mine and they are not to be taken as legal advice.
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#135021 - 12/01/03 09:41 PM
Re: Dealer Floor Plan Audits
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Anonymous
Unregistered
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All I have to say is GOOD LUCK! This is a high risk area. We have been doing it for awhile and are trying to get out of it.
The OCC has a Dealer Floor Plan handbook.
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#135022 - 12/01/03 09:48 PM
Re: Dealer Floor Plan Audits
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100 Club
Joined: Apr 2001
Posts: 205
Dallas
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Dot your i's and cross your t's. When I was a regulator, we had a $100 million bank lose in excess of $1 million (about a year's earnings) on a floor plan deal. The customer kept the titles and sold out of trust. Monitoring and control are the key words when it comes to floor plan lending.
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#135023 - 12/01/03 09:52 PM
Re: Dealer Floor Plan Audits
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100 Club
Joined: Apr 2001
Posts: 205
Dallas
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For audit procedures, check your regulator (the OCC's handbook was mentioned above), I know the Texas Dept of Banking has floor plan procedures at http://www.banking.state.tx.us/podes/examproced/examprocedures.htm, and I know there are procedures and ICQ's in Sheshunoff's manuals.
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#135024 - 12/01/03 10:07 PM
Re: Dealer Floor Plan Audits
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Anonymous
Unregistered
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Quote:
If administered correctly floor planning can be profitable, if not hold on to your arse.
The above quote is the key as I've seen scenarios in which a dealer (used cars) sold vehicles to the sales people that would have had to be paid off as part of the flooring agreement (180 days +). Did you see the movie: FARGO? Now that was a flooring fiasco with the paperwork in the mail!
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#135025 - 12/02/03 03:33 PM
Re: Dealer Floor Plan Audits
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Anonymous
Unregistered
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Just one more thought, when you do your physical inspections of floor plan inventory, randomly lift the hoods to ensure that there are motors in the cars. No joke! I know of a bank that had a floor plan - cars were always there at inspections. Only problem - they didn't have motors! They lost a bunch.
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#135026 - 12/02/03 04:20 PM
Re: Dealer Floor Plan Audits
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10K Club
Joined: Oct 2000
Posts: 27,764
On the Net
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Been there, seen that.
The inventory should include seeing each auto, and randomly starting them, either a sample or all of them. Mark which were started, which didn't start and which were not checked. The next inspection, perhaps 90 days out, should include starting autos not successfully tested the last time.
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AndyZ CRCM My opinions are not necessarily my employers. R+R-R=R+R Rules and Regs minus Relationships equals Resentment and Rebellion. John Maxwell
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#135027 - 12/02/03 07:31 PM
Re: Dealer Floor Plan Audits
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New Poster
Joined: Oct 2003
Posts: 7
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Thank for all of your assistance. I have been able to locate the Texas Department of banking information but I have had no luck locating anything from the OCC, let alone a specific Dealer Floor Plan Handbook. If anyone has a specific location or link I would appreciate it.
Thanka again for all of your insights. It has been very helpful.
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#135029 - 12/03/03 06:36 PM
Re: Dealer Floor Plan Audits
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Power Poster
Joined: Jul 2001
Posts: 3,708
Las Vegas Nevada
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To ALM's comments I'll add, be very careful about cars not being on the lot because they were given as loaners or to test drive. If its a loaner the dealer will have the name and address of who they gave the car to. Go back to the office and call to verify they actually have the car and that it is a loaner and not a purchase.
Get a check for every car thats missing at the time the floor check is made. Don't leave a billing and wait several days for it to be paid. Its payable before you leave the lot.
Get your dealer in the habit of selling the older inventory first. If a car is about to come off the factory 90 day interest payment, and the dealer will start paying interest every 30 days. Put a sticker in the window that tells the sales people to sell this red super duper, instead of the red super duper that just came in on the floor plan.
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#135030 - 04/22/04 05:02 PM
Re: Dealer Floor Plan Audits
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New Poster
Joined: Apr 2004
Posts: 1
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I understand your comments but you failed to mention one very important guideline. KNOW YOUR CAR DEALER! I am a car dealer, used at that, and have been in business since 1954. I have a honest reputation and consider myself professional. Bankers too often look at all car dealers through a filter of distrust instead of taking the time to understand the industry and get to know the dealer. Losses do happen but please do not paint the entire canvas of car dealers with the color of distrust(or worse).
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#135032 - 04/23/04 11:34 AM
Re: Dealer Floor Plan Audits
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Power Poster
Joined: Oct 2003
Posts: 2,548
Southeast
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Some of the hazards of dealing with auto dealers.
bank fraud
Car Dealers Cause Losses
Restitution?
Last edited by Retread; 04/26/04 11:33 AM.
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#135033 - 05/11/04 11:26 AM
Re: Dealer Floor Plan Audits
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Power Poster
Joined: Oct 2003
Posts: 2,548
Southeast
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Another story about a fraud involving an auto dealer. Auto Dealer Fraud
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Politicians are like diapers. They need to be changed often and for the same reason.
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#135034 - 06/23/04 06:20 PM
Re: Dealer Floor Plan Audits
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Power Poster
Joined: Oct 2003
Posts: 2,548
Southeast
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One more reason to check floor plans, and to do it without advance notice. RV Dealer
_________________________
Politicians are like diapers. They need to be changed often and for the same reason.
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#135035 - 07/01/04 11:44 AM
Re: Dealer Floor Plan Audits
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Power Poster
Joined: Oct 2003
Posts: 2,548
Southeast
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Yet another reason to check floor plans. Bank Fraud Charged
_________________________
Politicians are like diapers. They need to be changed often and for the same reason.
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#135040 - 10/30/05 01:15 AM
Re: Dealer Floor Plan Audits *DELETED*
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Anonymous
Unregistered
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Post deleted by Andy Z
Last edited by Andy Z; 10/31/05 02:34 PM.
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#824607 - 09/27/07 03:48 PM
Re: Dealer Floor Plan Audits
Anonymous
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Power Poster
Joined: May 2002
Posts: 6,259
NW IL
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Since there is some good info in this thread, I'm wondering, Andy if you can delete the garbage posts? I found this at the OCC's site http://www.occ.gov/handbook/floorplan1.pdfI am developing an audit from scratch, would anyone be willing to share? Or do most of you go off of the handbook?
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#827274 - 10/02/07 04:01 PM
Re: Dealer Floor Plan Audits
QCL
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Diamond Poster
Joined: Jun 2002
Posts: 1,815
Minnesota
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Just my 2 cents. But, if they do not allow you to shadow during a physical audit to verify the bank is following their own guidelines there could be some concern about your ability to do your own job. Could you give an opinion on the audit if you were not able to verify the process? Maybe you need to indicate that you did not verify the physical inventory due to the management's concern in your audit report, let the audit committee take it from there. If you end up not reviewing the information, make sure you document it.
Don't get me wrong, I understand where management is coming from but they also need to understand that this is part of your job as well.
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Do what you can, with what you have, where you are. ~Theodore Roosevelt~
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