Los Angeles, CA – 700Credit, a leading provider of credit reporting and compliance products and services announces automated adverse action letters for dealers. The law on adverse action is inconsistent and difficult to understand. The source of the problem is overlapping laws, regulations, and legal and regulatory decisions. Accordingly, for the benefit of our clients, our legal and compliance department has produced a summary advisory and best practice solution.
Previously, several commentators recommended that as long as every credit application was off-loaded (sent) to a lender, the dealer did not have to issue adverse action notices. Based on our review of the laws and regulations and recent case decisions, we do not agree. In our view, if you are making financing decisions at your dealership based on the applicant’s credit history, you are obligated to give notice of adverse action, unless you send your applicant to a top tier lender or lenders only.
The consequences of violating the federal laws can be significant. The laws allow punitive damages of up to $10,000 in individual actions, and punitive damages up to $500,000 in class actions. In addition, a successful ECOA plaintiff can recover attorneys’ fees and costs. The statute of limitations under the FCRA is five years.
Our legal and compliance department has developed an adverse action solution which follows industry best practice (and the best liability protection) to keep you in compliance with federal and state laws and regulations. Each notice is warehoused in our system for 5 years for record keeping, to be retrieved in the event your compliance is audited or challenged in court. We can completely audit the process for you, or you can choose to administer it yourself.
