It appears that audit activity has increased, as least for some manufacturers. This could be coincidence, or it could be a concerted effort by the manufacturer to seek to recover revenue. Regardless of the reason, there are various protections in state law that govern a manufacturer’s attempt to recoup funds on previously paid claims.
At the outset, it is important to remember that a manufacturer typically has the right to review the dealership’s records, which may include an audit of paid claims (whether incentive or warranty). However, that right is not absolute and many states include strict limitations on the “look back” period as well as the audit and chargeback process. The failure to follow this process can negate the audit findings and any potential chargeback.
For example, the lookback period in many states is limited to 12 months from the date of the paid claim. That means a manufacturer may not go beyond that period in an effort to audit prior claims. Notwithstanding that limitation, we have seen instances in which auditors have attempted to do so. The failure to contest the dates of the lookback period could lead to an inflated audit amount.
Additionally, most states have a detailed process by which a manufacturer must provide notice of the audit findings and allow the dealership to respond before an audit is finalized and/or any chargeback is imposed. Finally, a dealer that does not agree with the findings may protest the chargeback.
The above parameters (along with many other smaller details) are the legal framework that undergirds the audit and chargeback process. While that is extremely important, there are also simple practices that can make an audit go smoothly. For example, a dealer should consider having a designated point of contact for the auditor, which all information flows through. A dealer should also consider providing a designated work station with hours of access for the auditor, so that the dealership staff knows who is there, and so the auditor has no need to wander. Finally, a dealer should consider having the lookback period printed out so all parties know how far back the auditor may go, and also providing the auditor with any claims/repair orders that have been requested by the auditor in advance. The above suggestions can help to narrow the focus of the audit, the interactions with the auditor, and ultimately, the potential for a chargeback.