2018 GNYADA Membership Directory

more prominent than any of the required consummation disclosures (with the exception of the notice stating that “this percentage may not measure the overall cost of financing this lease” required to accompany the rate), and the lessor may not use the term “annual percentage rate,”“annual lease rate,” or equivalent term. In advertising leases, if the ad includes the amount of any lease payment or the capitalized cost reduction or other payment due prior to or at lease signing (or that no payment is required), or by delivery if delivery occurs after consummation, it must also include a specific reference that the advertised transaction is a lease, the total amount due at lease signing or by delivery if delivery occurs after consummation, the number, amounts, and due dates or periods of scheduled payments, whether a security deposit is required, and a statement that an extra charge may be imposed at the end of the lease term where the lessee’s liability (if any) is based on the difference between the residual value and its realized value at the end of the lease term. There are different rules for open-end credit. Both Regulation Z and Regulation M require that disclosures be given in a clear and conspicuous manner, and also contain special rules for catalog and electronic advertisements, as well as television and radio advertisements. Prescreening You can also“prescreen”a list of leads or even a single lead under the Fair Credit Reporting Act (FCRA). Prescreening is governed by the FCRA and involves giving a credit bureau a list of credit criteria for the credit bureau to produce a list of consumers meeting the criteria. (Under the “prescreen of one”model, the credit bureau applies the credit criteria to a single consumer and indicates whether or not the consumer meets them.) FCRA requires dealers to make a “firm offer of credit” to these consumers, provided the consumers continue to meet the prescreen criteria and meet any additional post-screen credit criteria. FCRA requires specific“clear and conspicuous”disclosures that must be included in the prescreen mailing, including conspicuously disclosing to the consumer how to opt out of further prescreening. The CFPB has issued a FCRA rule regulating the content and format of these disclosures, and the rule includes models that offer a compliance safe harbor. Dealers should apply the models for the most reliable approach to compliance with these disclosure requirements. Prescreening differs from preapproval inquiries in that a consumer who meets the prescreen criteria must receive a firm offer of credit. Persons who do not pass the prescreen criteria do not need to receive adverse action notices unless they otherwise affirmatively apply for credit and are declined. A Wrinkle on Prescreening: “Trigger Leads” Trigger leads are sold by credit bureaus that prescreen customers, but the credit bureaus do not communicate the consumer’s name and contact information (usually a cell phone number) to the prescreen client until another auto dealer pulls the customer’s credit report. In other words, one creditor’s inquiry to a credit bureau regarding a consumer“triggers”the bureau to provide prescreened lead information about that consumer to a second creditor. At that point, the prescreen/”trigger lead”client (typically a lender or another auto dealer in partnership with the lender) will call the customer on the customer’s cell phone and attempt to induce them away from the original dealership that pulled the credit report. That inducement must be a valid firm offer of credit under FCRA because the trigger lead process is a form of prescreening. Often, the client will offer this inducement by claiming to offer better purchase or financing terms on the vehicle or aftermarket products. Some customers literally have been called on their cell phones while still in the original dealer’s F&I office. There is some general uncertainty as to the propriety of the trigger lead process in the context of indirect auto finance under federal and state law. Dealers should consult with legal counsel before participating in a trigger lead campaign.

2 0 1 8 MEMBERSHIP DIRECTORY Hot TOPICS

160