Once a credit report is obtained by an auto dealer from a potential customer, dealers are considered creditors for ECOA and FCRA purposes, and are subject to their Adverse Action Notice requirements. Generally speaking, an Adverse Action Notice is an explanation to the potential car purchaser of denial of credit, the inability to come to satisfactory terms by the auto dealer offering credit, or the denial of the consumer’s counter offer which ends in no deal.
Recently, we were speaking with a dealer principle and the question of when he had to send out an Adverse Action Notice came up. His understanding was that he didn’t need to send out Adverse Action Notices at all since he didn’t deny people credit, the banks do. Further, the banks send out the letter “on his behalf”. This position is false, and as a result he dealership was exposed.
When Must A Dealer Send An Adverse Action Notice?
In short, auto dealers must send Adverse Action Notices to their customers within 30 days of obtaining a consumer credit application in the following three cases:
When a deal is unwound or a spot delivery deal is re-contracted.
If the dealer receives a credit application but the application is never sent to the financial institution for review (no TransUnion, Experian or Equifax report was pulled through DealerTrack, RouteOne, or other submission system).
When the dealer can’t get the customer financed because:
they did not obtain a satisfactory credit offer from a lender; or
the customer declines the dealer's final offer; or
the two parties don’t come to terms and a deal is not executed.
How Can American Credit Systems Help?
Auto dealers can rest assure that they are fully compliant in this area when using our compliance dashboard. Additionally, our partners at CBC send out Adverse Action Notices on behalf of our customers two times a month. The benefit of sending the notices out two times a month is that it insures the timeliness portion of the requirements are met. For more information on how we can take care of your dealership’s Adverse Action requirements, email us at firstname.lastname@example.org or call us directly at 760-579-6171. Support staff is standing by to serve you!
Credit report access and compliance provided by CBC.