In the context of compliance and credit reporting, I speak with controllers and general managers of dealerships every day. The majority of controllers want to know how they can cut costs in these areas without reducing their finance department’s productivity.
Therefore, this article presents a scenario, then suggests a few solutions where the end result will help you do just that: reduce your middle-line expenditures without compromising the integrity of your finance department.
Here is the hypothetical scenario: Dealership ABC has one rooftop. Its main bureau is Experian, and it also pulls TransUnion and Equifax.
In addition to using Experian as its main bureau, inside of the credit report it pulls FICO version 2, 3, 8, and FICO Risk Score version 2. Mind you, there is a cost associated with pulling each additional score.
On ABC’s website, there are two methods for generating leads. The first is a lengthy form filled out by the customer that sends the data into the dealership’s CRM. This form does not produce a score or report.
In the second method, consumers consent to having their credit pulled by the dealership. When the credit application is filled out, the data is sent to the dealership, which can then run the prospects’ credit.
The problems with this scenario for Dealership ABC are:
- Paying to pull all three bureaus for one consumer;
- Paying for multiple scores on one report;
- Paying for two online tools; and
- Being triggered for compliance on an online submission.
With the first two problems, controllers and their finance departments should come to a middle ground.
On one hand, controllers only want to pay for what’s necessary. Their position is that the finance department should pull one report and one score (on their main bureau) and identify the consumer’s starting credit.
In the event the report comes back with a sufficient score to receive financing, the finance department will not have to pull any more reports. If it needs a tier boost, then it should pull another. This will increase the dealership’s bottom line by thousands of dollars by year-end.
On the other hand, finance departments like to pull all bureaus and scores available to get a well-rounded picture of their prospect. To them, this is the best approach because they can match the prospect up with the right bank straight out of the gate. This process saves time on the finance department’s end because it can pull all scores and reports at once.
Our suggestion: Each dealership has its own ways of doing things. Controllers and finance departments should communicate their respective needs and wants to one another. They should find a middle ground, and stay away from a radical approach on either side.
Finance departments should respect controllers’ “this is a business” and “we are here to make money” arguments because it’s their job to cut costs when possible. Likewise, controllers should give finance departments the tools necessary to do their job effectively without being burdened with excess tasks.
As for the third and fourth problems, it’s well known that consumers are shopping online more and more every day. To neglect this area of marketing would be a loss for a dealer.
The issue here is when a customer consents to pulling credit online, dealers have an obligation to complete compliance work on this prospect. This includes OFAC, red flag, risk-based pricing, and sending an adverse action letter in the event a deal is not consummated.
Also, the dealership is usually paying for the online web-lead capture tool in addition to the credit bureau submission tool.
To mitigate both the added compliance work and the double payments, dealers should use a single soft pull tool on their website. An effective soft pull tool permits a dealer to capture the lead and pull a credit report with a simple five-line form.
Although the dealership receives the full Experian credit report, the soft pull does not trigger compliance because it is not inquiry for financing. It is simply an inquiry on whether or not the customer would be approved for credit.
The form should not require a Social Security number because consumers are less likely to give out sensitive information.
An additional benefit for dealers of using a shorter, soft pull form: More leads will be generated because it does not require the cumbersome task of filling out a full credit application.
Dan Daniel is the director of strategy at American Credit Systems, where he focuses his efforts on developing and executing corporate initiatives. American Credit Systems offers discounted credit reporting and compliance services, and has solutions for the problems presented in this article. Contact us today to schedule a demo: [email protected], (760) 579-6171, or www.americancreditsystems.com.