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CATA to host seminar on NADA Fair Credit Compliance Program

March 14, 2014
By Mark Scarpelli, Chicago Metro NADA Director
Recent allegations by the federal Consumer Financial Protection Bureau assert that finance sources which purchase credit contracts from dealers create a "significant risk" of fair credit violations when they allow dealers to exercise discretion in determining the amount they earn for qualifying and extending credit to consumers. The ongoing CFPB fair credit initiative has created uncertainty regarding dealership compliance obligations under the Equal Credit Opportunity Act.
The NADA Fair Credit Compliance Policy & Program, introduced in January, is based on a compliance program that two dealers adopted in 2007 consent orders to resolve Department of Justice allegations of unintentional credit discrimination. While neither the DOJ nor any other federal agency have stated that adopting this approach satisfies the requirements of federal law, it nevertheless provides a useful template for dealers to consider in developing their own approach to fair credit compliance. The publication contains: (i) a brief overview of this issue; (ii) general and specific instructions for completing the Fair Credit Compliance Program template; and (iii) the actual Program template.
Paul Metrey, the National Automobile Dealers Association’s chief regulatory counsel, will visit the CATA on April 24 for a special seminar to provide an overview of the NADA Fair Credit Compliance Program. Dealers and their appropriate managers are encouraged to register to attend.
This voluntary approach to fair credit compliance is designed to help dealers who adopt it to both promote their commitment to fair credit compliance and strengthen their ability to demonstrate that they have taken a consistent approach to the pricing of consumer credit.
Dealers who adopt this or a similar approach would individually establish a pre-set amount of compensation their dealership would include in credit offers to every consumer, unless any one of several predetermined and pro-competitive reasons for deviating from that amount is present in the transaction. The approach also provides that any person offering an extension of credit must record and document any deviation from the dealership’s pre-set amount of compensation. Finally, it establishes a periodic review process for management personnel to examine the documentation and, if necessary, take corrective action.
The NADA program was developed in conjunction with the American International Automobile Dealers Association and the National Association of Minority Automobile Dealers.