Auto Dealer Monthly Magazine is the daily operations publication serving the retail automotive industry. This automotive publication serves dealer principals, officers and general managers with the latest best practices.
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dealership operations / compliance claim of actual discrimination. Regulations under the ECOA and case law define a creditor, for purposes of the Act, as any person who regularly extends, renews or continues credit, or any person who regularly arranges for the extension, renewal or continuation of credit. Regula- tions further define a creditor as "a person who, in the ordinary course of business, regularly participates in a credit decision, including the terms of credit." The defini- tion of creditor under the statute, as well as regulations, places most dealerships squarely under the term "creditor." One Key Exemption Only in those situations where an automobile dealer does not participate in credit decisions and only accepts applica- tions and refers the applicants to creditors may the dealership be exempt from providing an adverse action notice. Any participation by the automobile dealership in the credit decision—whether by establishing the rate, setting any other term of the credit or benefiting financially by the issuance of credit—places a dealer under the heading of creditor as defined by the ECOA and various regulations. As a creditor under the ECOA, it is the responsibility of the automobile dealership to issue adverse action notices when required by the Act. Failure to issue an adverse action notice will not subject a dealership to a private cause of action under the FCRA, but will subject the dealership to a private cause of action under the ECOA. This liability is not restricted to cases where no adverse action notice is sent by any entity involved in the credit trans- action. There are cases in which a dealer has been found liable under the ECOA for failure to issue an adverse action notice despite the fact that the end lender issued an adverse action notice. Courts ruling on the subject have found the obligation is on each creditor to issue the adverse action notice. Therefore, adverse action notices issued by the third-party lender do not absolve a dealership from issuing its own adverse action notice. Keeping Safe Putting aside the exposure to liability from consumer suits, government agencies enforce both the FCRA and ECOA and can 41 Can my dealership be sued by a private individual for failing to provide an adverse action notice under the FCRA? assess fines up to $10,000 per violation against entities failing to comply with either Act. For automobile dealerships, the FTC has the authority to enforce compliance with the FCRA and the ECOA. The ECOA requires creditors to maintain paperwork in the form of: • Credit applications; • Credit reports; • Documents verifying an adverse action notice was provided; • The reasons for denying credit; and • Any written statements submitted by a consumer alleging any violation of the ECOA. These documents must be kept for a period of five years from the date the credit decision was made. Retention of these documents will make them available to defend any claim filed by a consumer. Required document retention also makes it simple for a government agency to audit your compliance with certain aspects of the FCRA and ECOA. Given the current presidential administra- tion's push to clean up the consumer lending marketplace, now may be a very good time to assess your dealership's compliance with the notice requirements of the FCRA and ECOA.