2018 GNYADA Membership Directory

credit extension. Dealers that assess these charges in these instances face potential UDAAP and litigation risks. Consult your attorney for guidance relating to disclosure requirements, best practices and/or legal limitations on usage.

Failing to Obtain the Customer’s Signature If you fail to obtain a customer’s signature on a RISC, Buyer’s Order, or other document, the dealer should not sign the customer’s name.

RECOMMENDED PRACTICES 1. Always have a “permissible purpose” to pull a consumer’s credit report. A signed authorization from the consumer (generally on a credit application) is strongly preferred but not required (except in certain states) when both the dealer and customer understand they are close to completing a credit transaction. Most credit applications, which are usually signed by the consumer, contain language where the consumer agrees that you can access their credit report. Finance sources usually obligate dealers to provide to credit applicants a list of the names and addresses of the finance sources to which the dealer may send their credit application to avoid being deemed a consumer reporting agency under FCRA. 2. Give or send a risk-based pricing notice or credit score disclosure exception notice to every applicant for credit. You can obtain the consumer’s credit score and the distribution of credit scores for the scoring model used from a credit bureau, or a third-party source such as Dealertrack. The only exception is for customers who do not have a credit score, and they should receive the FTC notice for consumers without a credit score. Even if you don’t typically pull credit on applicants, you may have to buy a credit score to give the credit score disclosure notice to all credit applicants to meet your obligation to your lenders. Give the notice to the consumer as soon as possible after getting the credit score information necessary to complete the credit score disclosure notice form. Keep a copy in the deal jacket. 3. Send adverse action notices when required. Remember to send an adverse action notice when you decline credit or when unwinding a spot deal, for example. Note that adverse action notices require inclusion of a consumer’s credit score and credit score disclosures including up to four to five key factors that adversely affected the credit score – if the credit score was a factor in the adverse action. 4. Consider adopting, implementing, and monitoring compliance with an ECOA/Fair Lending policy. Staff training and monitoring buy rate markups can be a part of the policy. One good practice, originally developed by the Department of Justice (DOJ), is to implement a consistent buy rate markup amount for all customers and permit markdowns only, based on significant, non-discriminatory, pre-identified legitimate business reasons. The reasons should be documented in the deal jacket to demonstrate the legitimacy of the action should a finance source or regulator audit the dealer’s practices. This documentation should be a purely internal document and not something to give to the customer. This approach is the foundation of the NADA-NAMAD-AIADA Fair Credit Compliance Policy and Program Compliance Form (“NADA Form”) which closely tracks not only the approach of the DOJ but also provides a list of the specific reasons it approved in the case settlements it entered into in 2007. You can obtain a copy of the NADA Form from NADA.

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