New Risk-Based Pricing Rule for Auto Dealers
for Auto Dealers on Tuesday, December 28, 2010 by Mike SamaanADD recently attended a presentation given by Katherine Armstrong, a senior Federal Trade Commission (FTC) Attorney at a seminar held by the Automotive Industry Center for Excellence in St. Petersburg, Fl.
During this presentation elements of the Fair Credit Reporting Act (FACT Act), the Gramm-Leach-Bliley Act and the Consumer Financial Protection Act of 2010 (also known as the Dodd-Frank Bill) were discussed. The following is a brief overview of the Risk-Based Pricing Rule which may affect you.
Under the FACT Act there was a joint rule-making session between the FTC and the Federal Reserve Board implementing the Risk-Based Pricing Rule, which will become effective on January 1, 2011.
In essence, the law will affect any dealer who uses a consumer report in connection with extending credit to an individual on material terms. If the terms offered are less than the most favorable terms available, the dealer must provide the individual with a risk-based pricing notice. The definition of “material terms” is related not only to the APR, but to any determination that varies according to the consumer report (such as a down payment).
There are three methods to determine who should receive a risk-based pricing notice. Read a full explanations of these methods.
That being said, according to Katherine Armstrong, to avoid methodology complication, dealers may give all consumers applying for credit a credit score disclosure notice. ADD hopes to provide a copy of this disclosure statement free of charge to its customers in a PDF that will be located on its website. ADD will notify dealer when this disclosure statement is available. This notice should be provided to the consumer after the credit report has been obtained and before the final deal paperwork is signed. Dealers must provide one of these notices to each applicant associated with the deal.
As always, ADD encourages its customers to seek a legal opinion on these complex compliance issues. ADD does not provide legal counsel and is merely providing awareness of these changes.