2018 GNYADA Membership Directory

Risk-Based Pricing Notices The Risk-Based Pricing Rule (RBP Rule) took effect January 1, 2011, and was amended effective August 15, 2011. Its purpose is to inform consumers that they received worse credit terms than other consumers because of information in their credit reports. Receipt of a consumer’s credit application triggers the RBP Rule notice requirement. A creditor who uses a consumer report and provides credit to the consumer on “material terms that are materially less favorable than the most favorable terms available to a substantial proportion of consumers from or through that person” either has to give these customers a “risk-based pricing notice” (RBP Notice) or give a “credit score disclosure exception notice” (CSD Notice) to all credit applicants. “Material terms” generally means the APR. Compliance with the RBP Rule is difficult and expensive, a fact that was recognized by the agencies that wrote it and evidenced by the inclusion of the CSD Notice exception. The CSD Notice exception permits a dealer to provide all applicants for credit a disclosure of their credit score and certain other information, i.e., the date and identity of the person providing the credit score; the national distribution of credit scores among consumers under the credit scoring model used, disclosed in either a bar chart form or in language indicating where the customer falls in the national range of credit scores; and certain language disclosures about credit scores in general. CSD Notices are easily obtained from consumer reporting agencies (e.g., Experian, TransUnion, Equifax, Credco, etc.), and should be provided to every credit applicant as soon as possible after obtaining the credit score but no later than the consummation of the transaction. If you use multiple credit scores, you must disclose the one you most relied on. If you didn’t primarily rely on one, you can disclose any one of the multiple scores. If a consumer does not have a credit score, you must give that consumer a special form alternative notice stating that no score was available. Notably, the CSD Notice exception does not require disclosing the four to five “key factors”that adversely affected the credit score. The “key factors”disclosure is only required for adverse action notices. What if your dealership doesn’t ordinarily need to pull credit reports or credit scores? Your lender may still expect you to handle this requirement as the initial creditor, and this may require you to buy a credit score anyway. Security Freeze Laws All consumers can now freeze their credit files by contacting most consumer reporting agencies, including the three nationwide credit bureaus: Equifax, Experian, and TransUnion. If a customer freezes her credit file, you will be unable to pull her credit report (including her credit score) unless she “thaws” the credit freeze with the credit bureau. If a customer calls the credit bureau to disable the freeze, the report should be available in a relatively short amount of time. If a customer submits a written request to disable the freeze, the process could take up to several days after receipt of the request. Truth in Lending Act (“TILA”) Requirements TILA, the federal Consumer LeasingAct (CLA, a subsectionofTILA), and their implementing regulations, Regulations Z and M respectively, govern disclosures of credit terms to consumers. TILA and CLA disclosures must be given prior to consummation of the transaction. TILA and state laws also contain disclosure and other requirements for

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