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Newly enacted Dodd-Frank law has implications for F&I office

August 5, 2011
By Mark Scarpelli, Chicago Metro NADA Director
It’s hard to believe that it has been a year since Congress passed one of the biggest regulatory overhauls our nation has ever seen. I’m talking about the so-called Dodd-Frank law (also known as the Wall Street Reform and Consumer Protection Act), which takes aim at lending standards that Congress members believe led to the financial crisis of 2008 and 2009.
Thanks to our successful grass-roots campaign in 2010, dealer-assisted financing was saved from additional federal oversight under the Dodd-Frank law. But auto loans, and more specifically the processes our F&I offices use to issue them, have been affected by the new law, which includes several provisions related to disclosure of credit terms and action a creditor must take when turning down a loan application.
Here are two big changes every dealer should know about and some ways that the NADA is helping us comply with these new rules.
1. New credit score disclosures for adverse action notices – Beginning last month, creditors who use a credit score in taking adverse action (such as turning down a request for credit) are required to include the consumer’s credit score in the notices they provide to customers. To help dealers comply with this new rule, the NADA updated its “Dealer Guide to Adverse Action Notices,” explaining when an adverse action notice must be issued, what the notice must say, when dealers can rely on a finance source’s notice and other important issues. This guide also includes a model adverse-action notice that the NADA developed for dealerships, based on the government’s model notice. To download the guide, sign in to or sign up for NADA University at, select “Resource Toolbox,” then “Driven,” and “Legal/Regulatory.”
2. Changes to the Risk-Based Pricing Rule – Also included in the Dodd-Frank law were changes to the Federal Risk-Based Pricing Rule (RBPR), which requires dealers and other businesses that use credit reports and extend credit to consumers to provide a new notice, known as a Risk-Based Pricing Notice, to customers who receive credit on terms that are less favorable than the terms received by a “substantial proportion” of their other credit customers. (Note, however, that the changes to the RBPR do not affect dealers who issue Credit Score Disclosure Exception Notices in lieu of Risk-Based Pricing Notices.) NADA’s “Dealer Guide to the Risk-Based Pricing Rule” has been updated to account for these changes. To download the guide, sign in to or sign up for NADA University at, select “Resource Toolbox,” then “Driven,” and “Legal/Regulatory.”
In addition to the guides, NADA University has produced a brief video on the changes featuring NADA attorney Brad Miller. You can also view the archived webinar “New Credit Score Disclosures for Adverse Action and Risk-Based Pricing Notices” at in the Learning Hub under “Legal/Regulatory.”
In other news . . .
• The Internal Revenue Service has issued an updated Form 8300, effective July 1, 2011, that dealers must use to report cash transactions of more than $10,000. Cash payments of more than $10,000 in one transaction or in two or more related transactions must be reported to the IRS using the new form. For a link to the new form and details about cash reporting requirements, visit
• Prices of fuel-efficient used cars are expected to remain high in August. Although used-car prices likely peaked in June, average trade-in values of many popular, fuel-efficient small cars for the 2006-2009 model years are still expected to be 10 percent to 30 percent higher in August than they were at the beginning of the year, said Jonathan Banks, senior analyst with the NADA Used Car Guide. Average trade-in values for 3- to 5-year-old Toyota Prius are expected to be 30 percent higher in August 2011 compared to January 2011, according to the NADA Used Car Guide. Over the same time period, the Chevrolet Aveo is expected to be up 21 percent. “Car owners still have a lot of equity built up in their used cars, which puts them in a better financial position to make a down payment on a new vehicle,” Banks said.
• Former President George W. Bush and Sergio Marchionne, chief executive officer of Chrysler Group and chairman of Fiat Industrial S.p.A., are the scheduled keynote speakers for the 2012 NADA and ATD Convention and Expo in Las Vegas next Feb. 3-6. To register, visit
• CATA President David Sloan and I will be attending the annual NADA Washington Conference Sept. 20-21. We will meet with elected federal officials from Illinois, to educate our representatives on Capitol Hill. The better they understand how our business works, the better they can help us and our employees and customers. If you want us to deliver your message or convey a problem, contact me at or (847) 395-3600.