Last year, the Consumer Financial Protection Bureau (CFPB) issued guidance on credit discrimination in the indirect automotive finance market, putting dealerships and lenders on notice about potential audits and punishments. In response, Dealertrack recommended that dealers adopt and implement an Equal Credit Opportunity Act (ECOA) Fair Lending Policy, including complete documentation of any deviation from a dealer’s buy rate markup policy.
To help dealership develop a fair lending policy and better defend themselves in credit discrimination audits, Dealertrack made an Exception Rate Justification Form available to its Compliance solution subscribers last year.
Today, for the first time, this form is available online to Dealertrack subscribers. The form mirrors the process adopted by NADA for their Dealer Participation Certification Form template.
This subject continues to be a hot topic within the industry, as can be seen in a recent article in Automotive News. Click here for the full story.
According to Randy Henrick, associate general counsel, Compliance, Dealertrack, “It is critical that dealerships adopt a comprehensive fair lending policy to deliver on their commitment to equal credit opportunity for all, and to protect their businesses.”
The Exception Rate Justification Form helps sales and F&I managers provide an explanation in the deal jacket in instances when deviation from the dealership’s rate policy is necessary for a “significant non-discriminatory business reason.” For example, when a rate was a promotional rate offered by the Finance Source to all qualifying customers, or spot delivery deal was rejected by the intended lender, and the signed RISC could only be placed with another lender with a higher buy rate.
How are you protecting your dealership from any “disparate impact” claims? Do you have a comprehensive fair lending policy in place?