Dealers Must Heed Dodd-Frank Act Component Requiring Changes to Adverse Action, Risk-Based Pricing Notices to Ensure Compliance
CRYSTAL LAKE, IL, July 11, 2011 – Dodd-Frank Act rule changes effective July 21 will require that additional information must be provided to both risk-based pricing and adverse action notices dealerships must often provide to consumers.
Terry Dortch, president of Automotive Compliance Consultants, says this new legislation will require that these documents must also now include:
- a numerical credit score used in making the credit decision
- the range of possible scores under the model used
- up to four factors (up to five if the number of inquiries made is a factor) that adversely affected the credit score of the consumer in the model used
- the date on which the credit score was created; and,
- the name of the person or entity that provided the credit score and contact information.
It is vital dealers understand these two important documents and when they are to be used. They are:
Adverse Action Letters:
Must be sent to anyone who applies for credit and is denied. Or, when the terms are different from that requested. In most situations, the bank with which the dealership has pursued financing for the customer will produce and distribute this notice. However, in situations where the dealer makes the credit decision or denies credit without shopping the application to a bank or finance company, the dealer is required to take the action.
Risk-Based Pricing Notices:
Dealers are required to provide a Risk-based pricing notice to customers who receive credit on material terms that are less favorable than terms offered to a substantial portion of their customers. In the alternative, an Exception Notice must be delivered to all customers that request credit from the dealership prior to the agreement being entered into.
To help auto dealers more easily create and dispatch required notices to consumers who purse credit through them, Automotive Compliance Consultants Inc. offers an automated process to issue adverse action and risk-based pricing notices as part of its management solutions.
Automotive Compliance Consultants specializes in dealership compliance, providing in-dealership consultations and analysis, compliance audits, training and offers solutions for all compliance needs. The Automotive Compliance Consultants staff has extensive experience in the retail automotive industry and focuses exclusively on dealership compliance issues. For more information, contact Terry Dortch at [email protected] or visit www.compliantnow.com.