Study Up on Adverse Action, from Dealer Marketing Magazine.
The purpose of articles like this is to help dealers improve their operations, avoid pitfalls, and correct practices that could ruin their dealership reputation, revenue or both. This advice is about the adverse action notice.
As a reminder, an adverse action notice is required when a credit decision is based entirely or in part on information in a consumer report, and:
- Credit is denied
- Credit is not even submitted for approval based upon an application
- Credit is not granted upon the terms requested and no counter-offer accepted
- The deal is later unwound, due to lack of a funding source
The Fair Credit Reporting Act (FCRA) governs the requirement. Many dealers are under the misconception that the regulation is for the finance source—and do not comply. In this day of scrutiny, especially under aggressive consumer watchdog groups and attorneys, dealers not routinely issuing adverse action notices when called for, ask for trouble.
As the FTC moves to keep up with the Consumer Financial Protection Bureau (CFPB) in pursuing enforcement headlines against auto lenders and auto dealers, it is vital that dealership management review how F&I handles and complies with the FCRA and Equal Credit Opportunity Act for Adverse Action notices.