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HOT TOPICS
2015 GNYADA Membership Directory
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charged an additional sum being the daily finance charge from the day the consumer surrendered the trade-in
to the day the dealer gets around to sending in the payoff.
No courts have ruled on this issue yet but the risk of an adverse ruling is out there. If possible, a good practice
would be to obtain a “same-day” payoff quote and charge the consumer that amount with the dealer paying
any additional daily finance charges from delaying to make the payoff. This will cost you some money but until
the class actions are decided, it may be a prudent way to proceed.
You may also have difficulty getting same-day payoff quotes from certain lenders. Dealertrack is integrating
same-day payoff quotes for certain lenders but many lenders at this writing don’t have the functionality yet. In
that case, you may have to calculate the payoff by subtracting the daily finance charge from the 10- or 15-day
notice. Some lenders provide a daily rate to make this easier to do. Dealertrack provides a means to calculate a
same-day payoff by providing the daily interest accrual.
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 when the customer has
applied for credit and both the dealer and customer understand they are close to completing a transaction,
except in Vermont. Most credit applications, which are usually signed by the consumer, contain language
where the consumer agrees that you can access their credit report. Financing sources usually obligate
dealers to either post or provide to credit applicants a list of the names and addresses of the financing
sources with which the dealer does business and to which the dealer may send their credit application. This
is required by the Fair Credit Reporting Act (FCRA).
2. Give or send a Risk-based Pricing credit score disclosure exception notice to every applicant for credit.
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 Risk-based Pricing Rule notice for consumers without
a credit score. 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. Give the notice to the consumer as soon as possible
after getting the information necessary to complete the credit score disclosure notice form. Give the notice
by the earlier of closing the deal or within three business days. Keep a copy in the deal jacket. While not
required, it is a good practice to get the customer to sign the file copy of the credit score disclosure notice
acknowledging receipt.
3. Send adverse action notices when required. Remember the three situations in which you must send an
adverse action notice: a) You take a consumer’s credit application but do not send it to any financing source;
b) You unwind or re-contract a spot delivery deal; and c) You can’t get the customer financed either because
no financing source approves the customer’s credit application on terms acceptable to your dealership or the
customer does not accept or use your final credit offer after negotiations are completed. When unwinding
or re-contracting a spot deal, a good practice is to hand the customer the adverse action notice along with
the new contract when they return to the dealership or when they return the vehicle in an unwound spot
transaction. Note that adverse action notices require inclusion of a consumer’s credit score and credit score