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CIP and Indirect Lending
by Lucy Griffin, BOL Guru
What about the loan customers you never see? How do you identify them? Clearly, you cannot look the customer in the eye and ask to see their driver's license. Presumably (we hope) the car dealership has done that before letting the customer test drive a car. But this doesn't take the burden off of you. You still need to determine the customer's identification and provide the customer with the CIP notice.
When lending is indirect, the lender must rely on the underwriting process to evaluate the credit application and to determine the identification of the customer. To do this, the lender must look carefully at information collected, including name, address, credit report, and any other documentation. The best sources may be independent of the customer, such as the credit report and any verifications you obtain.
CIP means looking at the credit report for more than the customer's score. It means doing more than scanning the report for judgments and bankruptcies. It means reviewing the biographical information carefully to evaluate the honesty and substance of the applicant. The credit report is the best resource for identifying this customer. Then put the report into the context of the rest of the application. If something doesn't add up, you may need to take additional steps - or simply deny the application.
Then there is the pesky problem of how to get adequate notice to the applicant. Clearly, you should provide copies of the notice to any dealer that takes applications for you. However, we recommend that you not rely on the dealer to provide the notice. So you might also send a second notice in your first communication directly to the customer.
First published on BankersOnline.com 9/8/03
Author Lucy Griffin is the editor of the ComplianceAction, a print newsletter published 16 times a year, featuring articles, action steps, charts, calendars, trend info and more.
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