The question arises quite frequently;“When do I have to send an adverse action notice?”. The simple answer is that an adverse action notice needs to be sent each and every time a customer is denied credit, does not accept terms of credit that are different than those applied for, and when credit is not even applied for based upon a poor credit score, or information from a third party. The immediate follow-up question is “Why do we need to send an adverse action notice, when the lender who denied the credit is sending the notice”? This second question is harder to answer from a legal perspective. Generally, the lender that denied the credit will in fact send the adverse action notice. The problem arises, however, when the lender fails to send the notice. If the dealership is relying solely upon the lender to send the notice then there are certain circumstances where they may be held liable when the lender fails to send the notice. As a practical matter situations where the lender who denied credit fails to send an adverse action notice are an exception to the general practice. The problem is that the dealership will not know whether or not the lender failed to send the notice. Therefore, when providing legal advice to a dealership concerning the sending of notices, the answer is to send them in each and ever case as required by the law. This precludes dealership personel having to decide on a case by case basis when to send them and when not to send adverse action notices. That being said, what most dealerships really want to know is when do they need to send adverse action notices in situations other than when a lender has denied credit.
In its simplified form the Equal Credit Opportunity and Fair Credit Reporting Act require adverse action notices to be sent to customers who have been denied credit, the customer does not accept terms of credit which are different from those requested by the customer, the customer is denied a loan based upon information provided by a third party other than the credit reporting agency, and/or the dealership chooses not to submit the deal to a lender based upon information contained in a credit report or provided by a third party, or the dealer chooses not to even negotiate or deal with the customer based upon information provided in a credit report or by a third party. As noted above, in each instance where the deal is submitted to a lender, it is more than likely that the lender will forward the required adverse action notice if credit is denied. Again, the safe practice for the dealership is to forward their own adverse action notices to cover those instances where the lender may fail to send notice.
The dealer will not be able to rely on a lender in those situations where the transaction is not submitted to a lender, or the customer walks after being approved for credit terms that were not applied for. For instance, Mr. and Mrs. Jones seek to purchase a new vehicle at 0% for 60 months. The agreement is submitted to the lender, who based upon the credit score will not fund at 0%, but will do the loan for 60 months at 5.75%. Mr. and Mrs. Jones are provided this information, and decide they will go elsewhere. In this scenario, the lender has denied the original terms of credit, and the customer has not accepted a counter offer. Because there may be some confusion regarding denial, it would be in the dealer’s best interest to forward an adverse action notice to Mr. and Mrs. Jones in accordance with the ECOA and FCRA.
Two situations arise where the dealer can not rely upon the lender to send any adverse action notice. The first situation is where the dealer chooses not to even submit the transaction to a lender based upon information contained in the credit report, or information provided to the dealer by a third party. In this instance, the dealer can not rely on the lender to send an adverse action notice, as the loan has not been submitted to any lender. The burden of forwarding the adverse action notice is 100% on the dealer.
The second situation occurs where Johnny Jones comes into your high-end dealership and wants to test drive an Audi R8. Before you even look for keys and a set of plates, you request that Johnny provide some basic information regarding his credit worthiness. Based upon the information provided and other information obtained, you decline to allow Johnny Jones to test drive the R8. Essentially, the dealership has made a decision not to extend any credit to Mr. Jones. Thus, an adverse action notice would need to be forwarded.
There are other examples where the sole responsibility of forwarding an adverse action notice would be the dealer’s. Each of these examples essentially involves the dealership not submitting the transaction to any lender, or making the outright decision not to deal with the customer based up information contained in the credit report or by a third party. In these cases, no paperwork has been submitted to any other agency or institution, and the dealer must comply with the requisite regulations.
The easiest way to avoid any confusion, and protracted discussions as to whether a notice should be sent or not, would to be to send an adverse action notice each time a customer is either denied credit, refused credit, no credit is even applied for, or the customer does not accept terms of credit provided in a counter offer. If the dealership sends a notice in each and every case, there will be no need to worry whether the lender failed to send notice and all will be well in the world of adverse action notice compliance.
Friday, July 10, 2009
Why run a background check?????
Who are you hiring? Who did you hire yesterday?
In May of 2009 there was an article in the Katy Times about the Harris County Sheriff’s Office looking for two individuals who had defrauded Houston Area Car Dealerships of nearly $750,000.00. The two gentlemen in question were obtaining employment at various automobile dealerships in order to obtain customer information. With the information, the gentleman financed numerous vehicles. After they were done at one dealership they moved on to another, and another.
It is unknown whether the gentleman in question had a criminal background of any kind. With high turnover of employees, it is not unusual for a potential employee to have worked at a number of dealership in the recent past. Given the amount of customer information contained at automobile dealerships, best practices would require that all references and prior employment be checked for each additional employee. In addition, a background check should be done.
Failure to run a background check on new employee hires, may be considered failure to use reasonable safeguards in the protection of consumer information. Not only in the automotive industry, but in other industries more and more identity thieves have been obtaining employment for the soul purpose of acquiring valuable customer information. Even if the employee is not being hired for a job that gives them direct access to customer information, dealership employees at all levels probably have some access. Service Department employees have access to customer vehicles which may contain information in them, and routinely obtain credit card numbers and verifications from customers. Management may worry about the cost of background checks for each and every hire, but the cost of not running the checks could be much higher. Each time a dealership provides a new customer with a privacy statement they are promising the customer in writing that they take reasonable safeguards to protect their consumer information. Reasonable safeguards would include knowing who your employees are, and whether of not you have just hired an individual or individuals that have recently ransacked other dealerships. Don’t end up as a headline. Run checks on all your new hires, from porters to the finance manager.
In May of 2009 there was an article in the Katy Times about the Harris County Sheriff’s Office looking for two individuals who had defrauded Houston Area Car Dealerships of nearly $750,000.00. The two gentlemen in question were obtaining employment at various automobile dealerships in order to obtain customer information. With the information, the gentleman financed numerous vehicles. After they were done at one dealership they moved on to another, and another.
It is unknown whether the gentleman in question had a criminal background of any kind. With high turnover of employees, it is not unusual for a potential employee to have worked at a number of dealership in the recent past. Given the amount of customer information contained at automobile dealerships, best practices would require that all references and prior employment be checked for each additional employee. In addition, a background check should be done.
Failure to run a background check on new employee hires, may be considered failure to use reasonable safeguards in the protection of consumer information. Not only in the automotive industry, but in other industries more and more identity thieves have been obtaining employment for the soul purpose of acquiring valuable customer information. Even if the employee is not being hired for a job that gives them direct access to customer information, dealership employees at all levels probably have some access. Service Department employees have access to customer vehicles which may contain information in them, and routinely obtain credit card numbers and verifications from customers. Management may worry about the cost of background checks for each and every hire, but the cost of not running the checks could be much higher. Each time a dealership provides a new customer with a privacy statement they are promising the customer in writing that they take reasonable safeguards to protect their consumer information. Reasonable safeguards would include knowing who your employees are, and whether of not you have just hired an individual or individuals that have recently ransacked other dealerships. Don’t end up as a headline. Run checks on all your new hires, from porters to the finance manager.
Automotive compliance consultants New Dealer program designed to solve all compliance issues
Compliance Solved
Since 2003 Automotive Compliance Consultants Inc. has consulted with automobile dealerships on compliance issues involving Gramm-Leach-Bliley, EEOC, Patriot Act, OSHA, EPA, Red Flag, and F&I. ACC implemented its WICS Program (walk through, inspect, compliance, security) to audit automobile dealerships on a quarterly basis. In connection with quarterly audits, ACC consultants have trained literally thousands of automobile dealership employees and provided the tools to allow them to institute various compliance programs. One of the cornerstones of the philosophy behind Automotive Compliance Consultants Inc., is that compliance with various federal regulations can not be obtained simply by obtaining a pre- written program or software. Compliance requires training of each and every employee in the dealership, a dedication to regular compliance audits, and instituting practices and procedures which promote and foster a compliant operation.
After years of working with automobile dealers, their employees, and management, ACC has listened to their needs and concerns. As a result, Automotive Compliance Consultants Inc, now offers “Compliance Solved”. Compliance Solved consists of five compliance programs covering GLB safeguard rules, F&I (consisting of reg Z, reg M, code of ethics and proper disclosures), EEOC (consisting of employee training, management training, hiring and retaining process, establishment of written procedures, and over all employee/employer relationships), OSHA complete audits and creation of the MSDS), red flags rule (including software for ID verification), and shredding services by a bonded and insured document destruction company. Each of the five compliance programs is now available for online training by dealership employees at any time. Unlike other online services Automotive Compliance Consultants Inc. knows that in order to obtain compliance, quarterly audits, and interaction with employees and management is necessary. With the ability to train your dealership employees online with “Compliance Solved; consultants are free to perform required quarterly audits, respond to issues raised by management, and to recommend procedures for changes or improvements to any of the compliance programs.
Given the myriad of Federal and State regulations which affect the automobile dealership, compliance is not possible when it remains the responsibility of only a few select employees. Each and every employee needs to know what is expected, what is needed to be compliant, and what the ramifications are for failure to abide by regulations. With “Compliance Solved” each and every employee in your dealership can be trained at times that are convenient for your business. Well trained employees improve compliance, improve customer relations and significantly reduce exposure to hefty fines and damages..
Since 2003 Automotive Compliance Consultants Inc. has consulted with automobile dealerships on compliance issues involving Gramm-Leach-Bliley, EEOC, Patriot Act, OSHA, EPA, Red Flag, and F&I. ACC implemented its WICS Program (walk through, inspect, compliance, security) to audit automobile dealerships on a quarterly basis. In connection with quarterly audits, ACC consultants have trained literally thousands of automobile dealership employees and provided the tools to allow them to institute various compliance programs. One of the cornerstones of the philosophy behind Automotive Compliance Consultants Inc., is that compliance with various federal regulations can not be obtained simply by obtaining a pre- written program or software. Compliance requires training of each and every employee in the dealership, a dedication to regular compliance audits, and instituting practices and procedures which promote and foster a compliant operation.
After years of working with automobile dealers, their employees, and management, ACC has listened to their needs and concerns. As a result, Automotive Compliance Consultants Inc, now offers “Compliance Solved”. Compliance Solved consists of five compliance programs covering GLB safeguard rules, F&I (consisting of reg Z, reg M, code of ethics and proper disclosures), EEOC (consisting of employee training, management training, hiring and retaining process, establishment of written procedures, and over all employee/employer relationships), OSHA complete audits and creation of the MSDS), red flags rule (including software for ID verification), and shredding services by a bonded and insured document destruction company. Each of the five compliance programs is now available for online training by dealership employees at any time. Unlike other online services Automotive Compliance Consultants Inc. knows that in order to obtain compliance, quarterly audits, and interaction with employees and management is necessary. With the ability to train your dealership employees online with “Compliance Solved; consultants are free to perform required quarterly audits, respond to issues raised by management, and to recommend procedures for changes or improvements to any of the compliance programs.
Given the myriad of Federal and State regulations which affect the automobile dealership, compliance is not possible when it remains the responsibility of only a few select employees. Each and every employee needs to know what is expected, what is needed to be compliant, and what the ramifications are for failure to abide by regulations. With “Compliance Solved” each and every employee in your dealership can be trained at times that are convenient for your business. Well trained employees improve compliance, improve customer relations and significantly reduce exposure to hefty fines and damages..
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