GNYADA 2019 Membership Directory & Services Guide

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. Prequalifying Customers Dealers can use their websites to market credit terms and prequalify customers even before taking a full credit application. Whether a prequalification is treated as merely an inquiry or a credit application depends on what you communicate to the consumer. Please note that the distinction between inquiries and applications in the prequalification context is complicated and fact-specific. Dealers should work with legal counsel to ensure that their communications with consumers in the prequalification process do not inadvertently cross over from an inquiry into a credit application. A consumer can securely provide personal information (e.g., name, address, birth date, Social Security number) over a secure webpage (an https page or by using encrypted data transfer) and give consent allowing the dealer to access their credit report, including their credit score, for prequalification purposes. If you respond by indicating the types of credit programs you offer for which the consumer may qualify and indicate how the consumer can submit a complete credit application, the prequalification process can be treated as an inquiry that does not trigger any risk-based pricing or adverse action notice requirements. You can also communicate to the consumer that your dealership has many credit programs available and that you need additional information from the consumer to be able to prequalify them for one of the programs. Either way, suggest that the consumer come to the dealership or call your Internet sales manager. If you respond that there are no 103 programs for which the consumer can qualify, then you may be considered as having made a credit decision instead of treating it as an inquiry. In that case, you will need to send the consumer an adverse action notice. If you respond with information that indicates the consumer qualifies for specific financing, you have also made a credit decision and must provide the Risk- Based Pricing Notice or alternative Credit Score Disclosure Notice. Sweepstakes Sweepstakes or “games of chance” present additional challenges and are regulated principally by state laws and the FTC. To avoid being an illegal lottery under state law, a sweepstakes generally must not contain one of the following elements: a prize, an element of chance, and the giving of a consideration to enter. The easiest element

2019 membership directory & services guide / hot topics

PG 173