It is now as important as ever to make sure that your dealership has an effective storage and retrieval capability for consumer credit applications that you receive in transactions that do not result in completed vehicle sales. Unless you are able to put your hands on a signed application that includes the authorization to run a credit bureau for every consumer inquiry that you run, you are asking for trouble.
We are not talking here about deals in which you sell or lease a vehicle. Each deal jacket for those deals should have a credit application with appropriate authorization for accessing a credit report. We are talking about deals in which the dealership takes a credit application, accesses a consumer’s credit report, and the sale of a vehicle does not result. Where do those credit applications wind up?
Why should you ask that question? Because many dealers now subscribe to compliance services that issue adverse action notices when a credit report is run unless a dealer sells a vehicle and extends credit. When these adverse action notices are delivered, the recipients may not realize in all cases that they submitted credit applicants. And the concept of a turn-down for many may be quite upsetting. “Why was I turned down?” “What will that mean for me?” When those questions arise, a consumer may visit a credit counselor or attorney. Not believing that they applied for credit may lead them to claim that you had no authorization to run the credit report. The next step is a letter either from the consumer or from a lawyer charging that you improperly ran a credit report. What will you do in that event?
If you have a solid system for maintaining your credit applications on dead deals, you will find the credit application, respond that you have a signed credit history authorization, and that will most often be the end of it. But if you can’t show that the person authorized the access to the credit history, in fact if you are unable to even show that the person came to your dealership or inquired over the internet, then what do you do? Whether you ignore the letter or respond with generalities, you may wind up with a lawsuit.
Here is what you should do:
(1) For transactions that took place in the dealership, have a system for keeping the applications in a manner allowing retrieval for five years.
(2) For internet applications, have an organized system for storage and recovery of each application for five years.
(3) For other applications, such as by fax or phone, keep copies of the faxed authorizations, and keep notes of the phone transactions. However, fax and phone applications may not provide the protections that consumers and your dealership should have. Those who want to do business with you on a remote basis should be encouraged to use the dealership’s secure internet credit application process.
(4) Follow up. Periodically check the bills from the credit reporting agencies. Make sure that you have an authorization for each report that was run. If you do not, find out why, isolate the defect in your system, and fix it.
(5) Whenever you receive a communication from a consumer complaining that you have improperly accessed his or her credit history, respond. Retrieve the application, learn how and when the person authorized access to the credit history, and defend your dealership with specific facts.