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#2183370 - 06/27/18 07:46 PM Indirect Auto Lending - Risk Based Pricing Notice
Anonymous
Unregistered

Scenario:
Suzy Q goes to a car dealership and applies for an auto loan.

ABC Car Dealer takes all of Suzy's information and submits an application into ABC's online engine that sends the info to X number of lenders.

The lenders pull the applicant's CBR, and use this information to determine whether or not that want to take on the loan. (This would constitute risk-based pricing, correct?)

Ultimately, XYZ Lender ends up taking on the loan and originating since Suzy's credit score and risk factors exceed XYZ's minimum thresholds. The loan originates, and ABC Car Dealer provides the applicant with the Risk Based Pricing Notice (not XYZ Lender), and Suzy drives off in her new Benz.

Since XYZ Lender used a consumer report in connection with their decision to ultimately grant credit, and the decision is based off of the level risk, is the lender also required to disclose the Risk Based Pricing Notice? Or would documented proof that the dealer provided the Risk Based Pricing Notice comply with the requirements of §1022.70?

Thank you.

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#2183398 - 06/27/18 10:05 PM Re: Indirect Auto Lending - Risk Based Pricing Notice Anonymous
Stephen McCall Offline
New Poster
Joined: Jun 2018
Posts: 17
My thought would be that if the creditor has an arrangement with the auto dealer, and it is outlined in their policy and procedures that the dealer is responsible for providing the RBPN within the applicable timing period, then the lender's obligation is satisfied per §1022.73(c)(2)

(2)Application to certain automobile lending transactions. When a person to whom a credit obligation is initially payable grants, extends, or provides credit to a consumer for the purpose of financing the purchase of an automobile from an auto dealer or other party that is not affiliated with the person, any requirement to provide a risk-based pricing notice pursuant to this subpart is satisfied if the person:

(i) Provides a notice described in §§ 1022.72(a), 1022.74(e), or 1022.74(f) to the consumer within the time periods set forth in paragraph (c)(1)(i) of this section, § 1022.74(e)(3), or § 1022.74(f)(4), as applicable; or

(ii) Arranges to have the auto dealer or other party provide a notice described in §§ 1022.72(a), 1022.74(e), or 1022.74(f) to the consumer on its behalf within the time periods set forth in paragraph (c)(1)(i) of this section, § 1022.74(e)(3), or § 1022.74(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 § 1022.74(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.

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#2183527 - 06/28/18 04:26 PM Re: Indirect Auto Lending - Risk Based Pricing Notice Anonymous
Dan Persfull Offline
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 46,635
Bloomington, IN
The lenders pull the applicant's CBR, and use this information to determine whether or not that want to take on the loan. (This would constitute risk-based pricing, correct?)

No

Ultimately, XYZ Lender ends up taking on the loan and originating since Suzy's credit score and risk factors exceed XYZ's minimum thresholds. The loan originates, and ABC Car Dealer provides the applicant with the Risk Based Pricing Notice (not XYZ Lender), and Suzy drives off in her new Benz.

Since XYZ Lender used a consumer report in connection with their decision to ultimately grant credit, and the decision is based off of the level risk, is the lender also required to disclose the Risk Based Pricing Notice? Or would documented proof that the dealer provided the Risk Based Pricing Notice comply with the requirements of §1022.70?

Nothing in these 2 comments implies risked based pricing took place. It only addresses the lender, based on the information obtained in the consumer report, decided to approve the loan. If none of the loan terms (such as rate or repayment period) were based on the information obtained in the consumer report then risk based pricing did not take place
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

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