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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, which the creditor is obligated to honor, provided the consumers continue to meet the prescreen criteria and meet any additional post-screen credit criteria as well as provide any required collateral. 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. Additionally, prescreening is generally initiated by the creditor whereas preapprovals are generally initiated by the consumer. 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 products created and sold by credit bureaus. Recall from Topic 3 that a consumer provides his or her consent to have his or her credit report pulled as part of the loan application process. When the credit report is pulled during the loan application process other competing lenders are notified that the consumer is shopping for credit. 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 competing d 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. The FTC has stated that the practice can be beneficial to consumers because it can help them more easily identify other terms and loan offers. Although the FTC’s guidance was issued in the mortgage context, it reasonably follows that the agency would look favorably on the practice in the auto lending context. While there have been efforts to ban trigger leads legislatively, no effort has yet been successful as of the date of this publishing. To be sure, dealers should consult with legal counsel before participating in a trigger lead campaign.

2020 MEMBERSHIP DIRECTORY & SERVICES GUIDE HOT TOPICS

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