Reprinted with permission.
This is a must read ALL THE WAY TO THE BOTTOM article. If you think you understand Adverse Action, you may be quite surprised.
Written By: David R. Missimer
General Counsel – VP
A question often asked is whether a dealership may be sued by a consumer for failing to provide an adverse action notice as required by the Fair Credit Reporting Act. In 2003 the Fair Credit Reporting Act was amended to provide in Section 1681m(h)(8) that no civil actions could be filed by private individuals for Section 1681m violations. The FCRA in Section 1681m provides that a user of a consumer report, in this case an automobile dealership, must provide an adverse action notice to a consumer when credit is denied, not even submitted for approval, or not granted upon the terms requested, and the decision is based on whole or in part on information contained in a consumer report. Within the retail automobile sales industry there have always been questions regarding who in the auto financing scenario has the responsibility to prepare and forward an adverse action notice when required. The position of many dealers was the end lender is making the credit decision and is responsible for sending adverse action notices. The 2003 amendment to the FCRA eliminating any private cause of action against dealers who fail to provide an adverse action notice was deemed as good news until 2006 when a Federal District judge in Virginia decided the case of Barnette v. Brook Road, Inc.
Barnette was a suit by the purchaser of a vehicle from Brook Road, Inc. that went south for a number of reasons. The end result was that the dealership repossessed the vehicle, and Barnette brought claims for violations of the Equal Credit Opportunity Act, Fair Credit Reporting Act, the Virginia Consumer Protection Act, the Uniform Commercial Code, as well as common law actions for fraud, conversion, and breach of contract. Barnette’s claim under the Fair Credit Reporting Act was that the dealership never provided a notice of adverse action. The dealership moved to dismiss the Fair Credit Reporting Act claim arguing that the private right of action for claims under 1681m of the FCRA were eliminated by the 2003 amendments. The judge denied the dealership’s motion to dismiss. In her written decision denying the dealership’s motion, the judge went to extravagant lengths to find that the amendment precluding a private cause of action under Section 1681m only applied to Subsection (h) of the Section and not to all of Section 1681m. The decision in Barnette v. Brook Road, Inc. was not appealed, and was contrary to a vast majority of other decisions on the issue of whether there was any private cause of action for failure to provide adverse action notices under the Fair Credit Reporting Act.
Since the decision in Barnette v. Brook, only one other District Court has followed the Barnette ruling. In 2009, in the Northern District of California, a District Court judge found in Kubbany v. TransUnion that the Barnetteanalysis was persuasive, and held that the exclusion of civil actions in Section 1681m applied to only Subsection (h) causes of action.
Both the Barnette decision and Kubbany decision stand in stark contrast to the overwhelming majority of Federal Court opinions interpreting Section 1681m of the Fair Credit Reporting Act. The 7th Circuit Court of Appeals and over sixteen other Federal District Court opinions have all held that there is no private right of action for violations of Sections 1681m of the Fair Credit Reporting Act. Not only do Barnette and Kubbany stand opposite to the overwhelming majority of decisions on the issue, but there are also opposite decisions rendered by Judges within the same District. In April 2011, Judge Hudson sitting in the United States District Court for the Eastern District of Virginia, Richmond Division ruled that no private right of action exists for violations of 1681m of the Fair Credit Reporting Act. In rendering the decision, Judge Hudson noted that virtually every District Court, and the only Federal Court of Appeals to address the issue had found that there is no private cause of action for violations of Section 1681 of the Fair Credit Reporting Act. Judge Hudson rejected the reasoning of his colleague in Barnette. In 2010, the District Court in the Eastern District of California addressed private causes of action under Section 1681m of the Fair Credit Reporting Act in Baga v. Allstate Insurance Company. Holding that no private cause of action existed for failure to provide an adverse action notice under Section 1681m of the FCRA, the Court ruled that although the 9th Circuit had not addressed the issue, the majority of decisions by California District Courts were consistent in concluding that Section 1681m provides no private cause of action. The sole exception to these decisions in the State of California was Kubbany v. TransUnion.
Given the overwhelming majority of Federal Court decisions that have ruled on the subject, one can only conclude that there is no private cause of action for failure to provide an adverse action notice under Section 1681m of the Fair Credit Reporting Act. The exception would be if a user of a credit report was a named defendant in one of two particular courtrooms, one in Virginia and one in Northern California. So, the answer to the question: Can my dealership be sued by a private individual for failing to provide an adverse action notice under the FCRA?, is no. This question and answer, however, are misguided. A dealership may still be held liable by the Federal Trade Commission for failing to comply with Section 1681m by providing adverse action notices to consumers who are denied credit, or granted credit on terms that are different from that requested, and said counteroffer is not accepted. In addition, even though a private lawsuit may not be brought against a dealership for violating Section 1681m of the FCRA, a dealer may be sued privately for failing to provide adverse action notices under a different Act.
The Equal Credit Opportunity Act requires a creditor that takes “adverse action” on a consumer credit application to provide a “statement of reasons” for the adverse action. The ECOA defines adverse action as a denial or revocation of credit, a change in terms of an existing credit arrangement, or a refusal to grant credit in substantially the amount or on substantially the same terms requested. Therefore, any denial of credit, or a decision on behalf of the dealership not to even submit a credit application, will require an adverse action notice to be forwarded. An adverse action notice does not need to be forwarded under both the Fair Credit Reporting Act and the Equal Credit Opportunity Act. An adverse action notice issued in either instance will cover the creditor under both Acts.
Unlike the FCRA, the ECOA does provide consumers the right to bring a private cause of action when a creditor violates the terms of the ECOA by failing to provide an adverse action notice. Although the purpose of the ECOA is to prevent discrimination against those applying for credit, the Act also contains notice requirements providing that an applicant for credit against whom an adverse action is taken shall be entitled to a statement of the reasons for such an action from the creditor. The law provides that a consumer may bring a civil action against any creditor who fails to comply with any requirement imposed under the ECOA, including failure to provide an adverse action notice. A claim against a creditor for failing to provide an adverse action notice may be brought even if the consumer does not allege any discrimination. In other words, the adverse action notice required under the ECOA is required in each and every credit transaction covered by the ECOA, and is not contingent upon any 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. Regulations 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 definition of creditor under the Statute, and regulations, places most dealerships squarely under the term “creditor”. Only in those situations where an automobile dealer does not participate in credit decisions, but only accepts applications 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, be that by establishing the rate, setting any other term of the credit, or benefiting financially by the issuance of credit, places an automobile 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 Fair Credit Reporting Act, but will subject the dealership to a private cause of action under the Equal Credit Opportunity Act. This liability is not restricted to cases where no adverse action notice is sent by any entity involved in the credit transaction. 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.
Putting aside the exposure to liability from consumer suits, government agencies enforce both the FCRA and ECOA, and can assess fines against entities failing to comply with either act. For automobile dealerships the Federal Trade Commission 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 Equal Credit Opportunity Act. 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 fairly simple for a government agency to audit your compliance with certain aspects of the FCRA and ECOA. Given the current administration’s push to clean up the consumer lending market place, now may be a very good time to assess your dealership’s compliance with the notice requirements of the Fair Credit Reporting Act and Equal Credit Opportunity Act.
David R. Missimer
General Counsel – VP
Automotive Compliance Consultants, Inc.
In a recent story, Automotive News reported on an informal online survey of F&I managers in which 29% responded that salespeople or sales managers fill in credit applications for customers at their stores. They’re just trying to help the customers fill them out the right way. What could go wrong? Plenty.
What happens if a customer claims that the income or time on the job shown on the application does not reflect the truth? How can that come up, you ask? How about a customer’s lawsuit over a deal that was rescinded when the customer’s financing was denied because his income could not be verified? Or how about a claim against the dealership arising from a repossession where the customer claims that he could not afford the vehicle because his income on the credit application was falsified by the salesperson? When matters like this become issues in litigation, it is easy for the customer to claim that he knows nothing about what was entered on the credit application if it is not in his handwriting. He will claim that the amount of income, the time on the job, and any of several other important facts were made up by the salesperson. Sure, he signed the application, but it was just another in an endless line of documents he was told to sign as part of his deal. So where does your dealership stand if this happens?
Certainly, dealers want credit applications to be legible. They want salespeople to work with customers so that all of the appropriate information can be developed. They want salespeople to work with customers so that all of the required information is filled in.
But a salesperson who is filling in the credit application for the customer makes it easy for the customer to claim that the salesperson made up information.
There is an answer. Have all information on the credit application filled in by the customer. Have a salesperson, a sales manager, or an F&I person work with the customer to develop all the pertinent information. Then have the customer sign the application, and initial the income and time on the job. The information on the credit application may be transferred into an electronic screen anyway. Even when it is not, and if the information is not legible, it can be handwritten again in a legible form and signed by the customer, with the customer’s original handwritten application attached to the legible application.
Of course, a customer can always claim that he wrote what he was told to write by a salesperson. But if it is the customer’s handwriting throughout the application, that will be a tough sale to a jury. Requiring a customer to fill in his own credit application disarms a customer who wants to claim that he knew nothing about what was filled in and simply signed as told by the salesperson.
Position: Field Sales Representative/Account Manager:
Credit Bureau Connection provides software solutions to the automotive, lending, and related industries. As an authorized reseller for the three major Credit Reporting Agencies, we specialize in credit report and compliance products and solutions. We are a team of highly motivated people, providing leading edge solutions and a high level of customer service in a dynamic business.
We currently have a career opportunity for a Field Sales Representative/Account Manager. Our growing organization is in need of a highly motivated, energetic, and dependable person to work out of and/or with our team in our Fresno, CA office. This is a full-time position, but will consider part-time and/or independent agent arrangement as well. The successful candidate must have excellent communication skills, a strong work ethic, be goal oriented, be reliable and dependable, and have a good understanding of sales of technology based products and solutions.
Essential Duties and Responsibilities:
- Becoming proficient with automotive credit report and compliance software solutions
- Developing new customer accounts and strategic partnerships
- Managing and developing existing customer accounts
- Achieving agreed upon sales targets
- Providing effective prospect sales presentations via webinars and in-person
- Working with all departments to ensure the company’s quality and service level objectives are met
- Effectively manage customer accounts from sales, implementation, training, to follow-up
- Strong communication and interpersonal skills
- High level of energy, persistence, and a strong desire to succeed
- Ability to quickly learn about our solutions and how they can meet the customer’s needs
- Previous sales and account management experience is desirable
- Proven ability to plan, prospect, develop, and maintain profitable business relationships
- Knowledge of the automotive industry is desirable
- Knowledge of credit, finance, and/or automotive compliance is a major plus
- Excellent organizational and time management skills
- Good understanding of technology, software, and general business software applications
- Able to listen and suggest solutions to meet customer’s requirements
- Know how to provide excellent customer service
- Good driving record and willingness to travel (mostly local)
- Ability to work independently as well as in a team environment
If you are interested and feel these opportunities are a good match for your qualifications, please apply by submitting your résumé and salary requirements to:
Credit Bureau Connection
Attn: Human Resources
575 E. Locust Ave., Suite 103
Fresno, CA 93720
CBC’s single page product flyer.
Click link to download, print, or email.
PDF Version – This is open to anyone to download without modification or alteration.
Click the link to view, print, or save. CBC 3 Fold 2 sided brochure 2013_op
Definitely worth the time. Pretty much covers it.
Did you know CBC provides an Adverse Action letter fulfillment service?
Question: What is an Adverse Action letter fulfillment service?
Answer: CBC will send Adverse Action letters on the dealerships behalf twice a month.
Question: I already have a process in place. What’s the benefit of having CBC send Adverse Action letters for my dealership?
Answer: CBC’s Adverse Action letter fulfillment service:
- eliminates the need to have staff members endure the tedious task of sorting through deal jackets to decide who requires a letter.
- eliminates extra labor costs from staffers taking on he responsibility.
- eliminates probable human error often due to one set of eyes searching through deal jackets.
- provides a potentially huge cost savings if based on the top 3 alone.
- allows you to select the criteria by deal status or credit score.
- sends Adverse Action letters twice monthly on the 10th and 25th.
- supplies a monthly summary report of all letters generated and sent.
- automatically stores an electronic AA letter in the eVault providing a permanent audit trail.
- requires no contract and no set up fees.
- requires only a $25 monthly minimum which is easily surpassed after only 20 letters generated.
Consider this: If you are sending Adverse Action notices internally in the required time frame correctly, you are most likely paying $0.46 per stamp plus an envelope, paper, toner/ink, wear and tear on electronic devices, and LABOR, for someone to print, fold, stuff, address, stamp, and send. Whew! How much does that cost per piece? What happens if an AA letter gets missed? Fines for Adverse Action letters not sent are $2,000.00 per occurrence.
Let CBC handle your Adverse Action letters and we’ll make sure everything’s handled correctly, timely, and compliant allowing your staff to focus on sales, F&I, and office management all for only $1.25 per notice.
Go to CBC’s website.
Fill out the attached form to get started now.
Josh has been an integral part of CBC for over 5 years and is moving on to take on an even bigger role at eBay. We wish Josh the best of luck and he will be greatly missed.
Position: Web Developer/Analyst:
Credit Bureau Connection provides software solutions to the automotive, lending, and related industries. As an authorized reseller for the three major Credit Reporting Agencies, we specialize in credit report and compliance products and solutions. We are a team of motivated people, providing leading edge solutions and a high level of customer service in a dynamic business.
We currently have a career opportunity for a Web Developer/Analyst. Our growing organization is in need of a highly motivated and dependable web-based application programmer for our Fresno office. This is a full-time position, but will consider part-time and/or contract arrangement as well. The successful candidate must have excellent communication skills, a strong work ethic, be reliable and dependable, and have a strong understanding of web-based development languages and processes.
This position is responsible for analyzing requirements, designing and developing applications and modules to enhance and maintain various web applications used in our vertical market applications supporting the credit report and compliance industry. Strong user interface design and development skills along with an understanding of database structure and access techniques are critical components of a successful candidate’s skill set. The primary duties will be working as part of a small team of developers writing web application programs with accountability to our end-users and industry partners. Responsibilities include: coding, testing, documenting, and delivering features with cross-browser compatibility, accessibility and search engine optimization. We maintain a loose agile development environment utilizing methods like peer code reviews, pair programming, continuous deployment & integration, etc, along with participation in scoping, detailed design, effort estimation, coding, testing, debugging, code reviews, maintenance and support, as well as pro-actively looking for ways to improve our products and solutions
- Minimum 2 years experience in web based application development
- Self-motivated with strong problem solving, analytical, and object-oriented programming skills
- Ability to apply logical thinking skills with good communications skills
- Ability to work independently as well as in a team environment
- Ability to write high-performance, reusable code for UI components
- Proficient using PHP, DOM, API, AJAX
- Front-end debugging experience using tools like Firebug/Chrome dev tools
- Understanding of MySQL and SQL query language for database access
- Working knowledge of Internet technologies, including XML, JSON, DHTML, etc.
- Experience with Java and Flash development a plus
- Experience with Adobe products and PDF technologies a plus
- Experience with Linux system and network admin a plus
If you are interested and feel these opportunities are a good match for your qualifications, please submit your resume and salary requirements to:
Credit Bureau Connection
Attn: Human Resources
575 E. Locust Ave., Suite 103
Fresno, CA 93720