Skip to content
BOL Conferences
Page 2 of 2 1 2
Thread Options
#1475450 - 12/02/10 08:56 PM Re: RBPN and indirect lending.... Sheldon Hendrix
Here4Life Offline
100 Club
Joined: Feb 2010
Posts: 121
This is exactly what we are going to do.

Return to Top
#1475913 - 12/03/10 05:17 PM Re: RBPN and indirect lending.... Trees
Trees Offline
Power Poster
Joined: Apr 2005
Posts: 4,013
Read the Reg in its entirety. Used my brightest highlighter. Still have questions. Our dealers do not pull the credit reports, as the reg uses in its example. The get an application and shop it to some banks. We are one bank. We pull the credit report and let the dealer know the terms for which we will finance the loan. We learn only after the customer has signed the contract whether or not the dealer took our deal or some other bank's terms. This is too late, obviously for the bank to send the notice. Then I saw where the regulators pointed out the possibility that the customer will get notices from lots of banks if we all send the notice as we have "approved" the loan (although the customer doesn't know this yet. I am still mixed up with the timing and who sends under the process we have in place. Does any other bank work like us? Need to discuss - my dime. PM me. Also, we are using tiers. Do we sitll have to send the bar graph and indicate their score???

Return to Top
#1477440 - 12/07/10 10:53 PM Re: RBPN and indirect lending.... Trees
CalifDreamin Offline
Diamond Poster
CalifDreamin
Joined: Mar 2002
Posts: 2,262
Far from Calif
For those having the dealer provide the notice....is anyone willing to share the notification they gave to their dealers regarding this?

We already have in our contracts that they will comply with the regs, so I don't think this needs a contract amendment, but certainly a notice that they sign and return acknowledging they know the requirements, they will comply, and will evidence compliance in the files.
_________________________
The opinions expressed are mine and do not necessarily reflect those of my employer
_._._._._._.
A.S.A.P.
Always
Say
A
Prayer
<><

Return to Top
#1477951 - 12/08/10 07:37 PM Re: RBPN and indirect lending.... MB Guy
DoorKey Offline
100 Club
Joined: Nov 2002
Posts: 228
Wisconsin
We do not make indirect auto loans, but we do make indirect auto leases. Would leases be covered? Would we need to provide the RBPN or the credit score exception notice?
_________________________
REMEMBER...Compliance is fun!

Return to Top
#1478071 - 12/08/10 09:05 PM Re: RBPN and indirect lending.... DoorKey
CarolinaComplian Offline
Member
Joined: Mar 2010
Posts: 67
good ol south
We do have an indirect lending department. It is my opinion that the notice should be given by the dealer.

Trees-We are in the same boat. The dealers do shop. When the customer signs the note the note states thier name as the borrower and the dealer's name as the creditor. Once you reach the end of the note. Our bank is listed as an assignee. It is for this reason I believe this task should lie in the hands of the dealer.

After speaking to one of the indirect lenders, they say we basically buy the loan from the dealer.

My main question is: how do we ensure the dealer is complying with the regulation?

Flamingo- How is the statement worded,regarding compliance for the dealer on your contract?

Return to Top
#1478332 - 12/09/10 03:31 PM Re: RBPN and indirect lending.... CarolinaComplian
DD Regs Offline
Power Poster
DD Regs
Joined: Nov 2008
Posts: 4,132
Somewhere in the middle
"Under the new Risk Based Pricing Notice section of the Dealer Agreement, Dealer agrees that for both Installment Contracts and Loans it will use the "other extensions of credit- credit score disclsoure" exception specified in the Risk Based Pricing Rules, and will provide the model form of notice specified in the Risk Based Pricing Rule for use with that exception to each applicant for an Installment Contract or a Loan.

Further, Dealer is hereby put on notice that for each Loan submitted to (Your Bank Name)for funding, the applicable notice for each applicant for the loan using the "other extensions of credit-credit score disclosure" exception form will be required for funding. If the form is not included with the paper work sent in for funding, we will not fund the Loan until we get a copy of the notice provided to the applicant."
_________________________
I'm only responsible for what I say, not for what you understand.

Return to Top
#1478735 - 12/09/10 08:51 PM Re: RBPN and indirect lending.... DD Regs
Sheldon Hendrix Offline
Diamond Poster
Sheldon Hendrix
Joined: Jun 2006
Posts: 1,194
South
I'm scared about relying on a dealer to provide the notice, at least while all of this is still getting sorted out by the CRA's. If I can't get my provider to fully automate a solution for me at this stage (3 weeks until compliance date), then I'm not confident that a dealer would have any better luck.

For now, we're sticking to our original plan of faxing the notice over when the approval is communicated to the finance manager who will then provide it to the applicant prior to signing the contract.

Return to Top
#1478742 - 12/09/10 08:59 PM Re: RBPN and indirect lending.... Sheldon Hendrix
Book Nerd Offline
Gold Star
Book Nerd
Joined: Jun 2007
Posts: 447
New England
That's what we are doing as well.
_________________________
Sometimes the questions are complicated and the answers are simple. - Dr. Suess

Return to Top
#1479564 - 12/13/10 03:16 PM Re: RBPN and indirect lending.... Book Nerd
Trees Offline
Power Poster
Joined: Apr 2005
Posts: 4,013
I atill want to fax over the notice. Now we are all over the place as to whic notice. We base pricing on tiers, and our Credit bureau is recommending that we go with the notice with the charts at the end. We will have to have a means of sorting out the notices so that the ones in the top tier don't get it. Are you lucky guys also using the model form with the graph at the end??

Return to Top
#1479850 - 12/13/10 08:04 PM Re: RBPN and indirect lending.... Trees
Sheldon Hendrix Offline
Diamond Poster
Sheldon Hendrix
Joined: Jun 2006
Posts: 1,194
South
Yes, but if you are using that one you just provide it to everyone as opposed to the tiered (or credit score proxy if using a different pricing model). Those methods are only applicable for the RBPN notice, not the credit score exception notice.

Return to Top
#1480245 - 12/14/10 03:56 PM Re: RBPN and indirect lending.... Sheldon Hendrix
Trees Offline
Power Poster
Joined: Apr 2005
Posts: 4,013
I didn't think the loan products we were dealing with would fall under one of the credit score exceptions. How did you derive that??

Return to Top
#1480702 - 12/14/10 11:29 PM Re: RBPN and indirect lending.... Trees
DoorKey Offline
100 Club
Joined: Nov 2002
Posts: 228
Wisconsin
We work with indirect dealers. We do offer risk based pricing based on credit scores. The dealer may or may not have pulled a credit report. When we receive the application for consideration to purchase the deal, we pull a credit report and based on the credit we tell the dealer what we would be willing to offer. If the customer agrees to our offer, the credit obligation is written between the customer and the dealer. We are named as an assignee. As such, the RBPN is the obligation of the dealer and not our obligation.

Our bank wants to complicate things and wants to send out the H-1 notice to those applicants who do not receive our best offer. I do NOT think that we should do this. First, by sending the notice, I am concerned that we could be considered an agent for the dealer and I do not think that is a position that we should put ourselves in. Second, we don't even know if our offer is accepted until after the contract has been signed and presented to us for purchase. Third, at the time of our application review the customer is NOT our customer, but that of the dealer. I do not think that we should be communicating directly with the dealer's customer.

I think that it is the dealer's obligation to provide the notice. If the dealer complies, then great. If the dealer is out of compliance, we have no obligation regarding the notice...not our problem.

Would anyone agree with me? Or am I off base?
_________________________
REMEMBER...Compliance is fun!

Return to Top
#1480715 - 12/15/10 01:52 AM Re: RBPN and indirect lending.... DoorKey
Needs To Know Offline
Member
Needs To Know
Joined: Jun 2003
Posts: 80
Someplace Warm
Doorkey,

We are also doing indirect dealer loans.

You said "If the dealer is out of compliance, we have no obligation regarding the notice...not our problem."

I would have to disagree to the extent that the commentary section on the final rule states that "...and maintains reasonable policies and procedures to verify that the auto dealer or other party provides such notice to the consumer within a reasonable amount of time." This is on page 2738 for the Federal Register notice, column 3.

We have made changes to our policies and procedures to make sure that the contract includes a copy of the notice that the dealer provided to the consumer is obtained, added to our checklists, etc.

Return to Top
#1480869 - 12/15/10 03:33 PM Re: RBPN and indirect lending.... Needs To Know
DoorKey Offline
100 Club
Joined: Nov 2002
Posts: 228
Wisconsin
Needs to Know -- Your reference to page 2738 refers to when the initial creditor is the financial institution. In our case, the dealer is the initial creditor and we are the assignee. Section 222.75(b)(2) states "Purchasers or assignees. A purchaser or assignee of a credit contract with a consumer is not subject to the requirements of this subpart and is not required to provide the risk-based pricing notice described in §222.72(a) or (c), or
satisfy the requirements for and provide the notice required under one of the exceptions in §222.74(d), (e), or (f).

I conclude, therefore, that we, as an assignee, have no duty to provide the notice and I find nowhere in the regulation that we have an obligation to ensure that the dealer has policies and procedures in place to provide the notice. We do have contractual language with the dealer that makes them responsible to comply with state and federal laws and regulations. If we know that they do not comply, then we will need to change our relationship with the dealer.
_________________________
REMEMBER...Compliance is fun!

Return to Top
#1482743 - 12/19/10 10:00 PM Re: RBPN and indirect lending.... DoorKey
Sheldon Hendrix Offline
Diamond Poster
Sheldon Hendrix
Joined: Jun 2006
Posts: 1,194
South
I just noticed this from the recently released Interagency Exam Procedures.

Originally Posted By: DoorKey
For automobile lending transactions made through an auto dealer that is unaffiliated with the institution, the institution may provide a notice in the time periods described above. Alternatively, the institution may arrange to have the auto dealer provide a notice to the consumer on its behalf within these time periods and maintain reasonable policies and procedures to verify that the auto dealer provides the notice to the consumer within the applicable time periods. If the institution arranges to have the auto dealer provide a credit score disclosure for loans not secured by residential real property, the institution complies if the consumer receives a notice containing a credit score obtained by the dealer with these time periods, even if a different credit score is obtained and used by the institution.


This may provide some comfort for those struggling with whether their proposed processes will pass the smell test.

Return to Top
#1486861 - 12/29/10 04:15 PM Re: RBPN and indirect lending.... DoorKey
Dutch Offline
Gold Star
Joined: Nov 2005
Posts: 262
DoorKey:

For whatever it is worth, our bank handles indirect financing like yours does and our interpretation is the same as yours. We have notified our dealers of their responsibility but are not planning to do anything more.

Since a bit of time has elapsed since you first posted your comments, I am wondering....are you still proceeding as originally planned?

I, like you, am not finding anything to suggest the bank needs to do anything when it is the assignee in an indirect deal, and I concur, the reference that Needs to Know made to page 2738 does not pertain to our scenario.

Your thoughts today?

Return to Top
#1486891 - 12/29/10 04:49 PM Re: RBPN and indirect lending.... Dutch
Oursisnottoreasonwhy Offline
Platinum Poster
Oursisnottoreasonwhy
Joined: Nov 2004
Posts: 503
Central Illinois
I agree with DoorKey and Dutch and I am sure the new CFPB will be all over the car dealerships doing compliance audits as soon as they are let loose.....:)

Return to Top
#1486896 - 12/29/10 04:56 PM Re: RBPN and indirect lending.... Oursisnottoreasonwhy
Sheldon Hendrix Offline
Diamond Poster
Sheldon Hendrix
Joined: Jun 2006
Posts: 1,194
South
Originally Posted By: Oursisnottoreasonwhy
I agree with DoorKey and Dutch and I am sure the new CFPB will be all over the car dealerships doing compliance audits as soon as they are let loose.....:)


Or... they could stick to banks and expect us to enforce it as they've done in the past with numerous other issues. Time will tell.

Return to Top
#1486909 - 12/29/10 05:07 PM Re: RBPN and indirect lending.... Sheldon Hendrix
Oursisnottoreasonwhy Offline
Platinum Poster
Oursisnottoreasonwhy
Joined: Nov 2004
Posts: 503
Central Illinois
Maybe my sarcasm wasn't obvious enough smirk
Last edited by Oursisnottoreasonwhy; 12/29/10 05:08 PM.
Return to Top
#1487873 - 12/31/10 03:07 PM Re: RBPN and indirect lending.... Oursisnottoreasonwhy
Trees Offline
Power Poster
Joined: Apr 2005
Posts: 4,013
We don't believe the examiners will let the banks off so easily. Therefore, we are running a credit report and providing the notice, via fax, to the dealer along with our decision. We are doing this based on the fact that we are the one making the final decision and we use a tiered pricing system provided to the dealers. We will have our friends here this year, usually in the Spring. If they want us to change, I'll let you all know. There is no way I will rely on dealers to provide the notice on their own unless the examiners tell us this is OK...

Return to Top
#1488112 - 12/31/10 07:21 PM Re: RBPN and indirect lending.... Trees
Sheldon Hendrix Offline
Diamond Poster
Sheldon Hendrix
Joined: Jun 2006
Posts: 1,194
South
The way I understand the rule, is if the note is made immediately payable to the Bank, then it is the Bank's responsiblity to provide the notice. But, if the note is initially payable to a dealer, but then assigned to the Bank, then it is the dealer's responsibility to provide the notice.

Our indirect operations have the note made payable directly to us, so we are responsible for providing the notice.

Return to Top
#1488863 - 01/04/11 02:53 PM Re: RBPN and indirect lending.... Trees
Dutch Offline
Gold Star
Joined: Nov 2005
Posts: 262
Trees: I know this all sounds too good to be true, but quite honestly, I don't know what grounds the regulators would have to make banks provide the notice when they are the assignee in a transaction. Section 222.75 spells it out pretty clearly. Maybe, just maybe, banks are finally catching a break! We are hanging our hat on the written word (see page 2759 of the Federal Register) as we are clearly the assignee on all of our indirect deals.

Return to Top
#1489847 - 01/05/11 04:50 PM Re: RBPN and indirect lending.... Dutch
DoorKey Offline
100 Club
Joined: Nov 2002
Posts: 228
Wisconsin
Dutch -- Based on your question posted on December 29, yes, we are proceeding as I had indicated. He have, however, added a statement to our approval letter to the dealer that reminds the dealer of its notice responsibiliy.
_________________________
REMEMBER...Compliance is fun!

Return to Top
#1491163 - 01/06/11 10:54 PM Re: RBPN and indirect lending.... DoorKey
Dutch Offline
Gold Star
Joined: Nov 2005
Posts: 262
DoorKey: We ended up doing the same thing; added language to our approval letter in an effort to remind dealers of their responsibility.

Appreciate the feedback - thanks for taking the time.

Return to Top
#1497024 - 01/19/11 05:07 PM Re: RBPN and indirect lending.... Dutch
DD Regs Offline
Power Poster
DD Regs
Joined: Nov 2008
Posts: 4,132
Somewhere in the middle
If I am reading all this correctly, it would appear to me we could allow (read contract the dealer )to provide the RBPN (exception notice ). Even if it is not the credit report or score we used to make our decision.

From the FFIEC Exam Manual


**For automobile lending transactions made through an auto dealer that is unaffiliated with the institution, the institution may provide a Section 222.74(e) notice in the time periods described above . Alternatively, the institution may arrange to have the auto dealer
provide a Section 222.74(e) notice to the consumer on its behalf within these time periods and maintain reasonable policies and procedures to verify that the auto dealer provides the notice to the consumer within the applicable time periods. If the institution arranges to have the auto dealer provide a Section 222.74(e) notice, the institution complies if the consumer receives a notice containing a credit score obtained by the dealer, even if a different credit score is obtained and used by the institution. (12 CFR 222.73(c)(2))

From the REg 222.73(c)(2)(ii)
(ii) Arranges to have the auto dealer or other party provide a notice described in §§222.72(a), 222.74(e), or 222.74(f) to the consumer on its behalf within the time periods set forth in paragraph (c)(1)(i) of this section, §222.74(e)(3), or §222.74(f)(4), as applicable, and maintains reasonable policies and procedures to verify that the auto dealer or other party provides such notice to the consumer within the applicable time periods. If the person arranges to have the auto dealer or other party provide a notice described in §222.74(e), the person's obligation is satisfied if the consumer receives a notice containing a credit score obtained by the dealer or other party, even if a different credit score is obtained and used by the person on whose behalf the notice is provided.
_________________________
I'm only responsible for what I say, not for what you understand.

Return to Top
Page 2 of 2 1 2