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#222545 - 08/02/04 06:11 PM Indirect lending adverse action
RR Sarah Offline
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RR Sarah
Joined: Mar 2004
Posts: 2,492
Up North
I was wondering how other banks are handling applications where the bank approves the loan but didn't actually purchase the paper. (dealer found a lower rate somewhere else or buyer found other financing) Should we be doing adverse action notices (application withdrawn)? Any info would be greatly appreciated. Thank you!
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Lending Compliance
#222546 - 08/02/04 08:28 PM Re: Indirect lending adverse action
Tom Easterday Offline
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Joined: Oct 2000
Posts: 140
Orange County, CA
My bank does not do indirect financing any longer, but when we did, we would do nothing beyond notifying the dealer of our credit approval. Reg. B has a provision that no notice is required when you approve the request and reasonably expect the applicant to check back. I believe it's quite reasonable to believe the applicant would have checked back with the dealer. If your institution didn't get the deal, then the customer either had a better offer from another lender of they decided to not go through with the deal.
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#222547 - 08/02/04 08:36 PM Re: Indirect lending adverse action
RR Sarah Offline
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RR Sarah
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Posts: 2,492
Up North
Thanks for the reply Tom. (heavy sigh of relief)
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#222548 - 09/23/04 07:33 PM Re: Indirect lending adverse action
Anonymous
Unregistered

If you deny the deal, do you do an Adverse Action? If so, who do you send it to?

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#222549 - 09/23/04 08:16 PM Re: Indirect lending adverse action
Anonymous
Unregistered

We deal with indirect lending vehicle loans and when the loan officer denies the loan applicant the adverse action notification is done on the borrower and sent to the borrower.

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#222550 - 09/23/04 08:16 PM Re: Indirect lending adverse action
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,832
Bloomington, IN
202.9

(g) Applications submitted through a third party. When an application is made on behalf of an applicant to more than one creditor and the applicant expressly accepts or uses credit offered by one of the creditors, notification of action taken by any of the other creditors is not required. If no credit is offered or if the applicant does not expressly accept or use the credit offered, each creditor taking adverse action must comply with this section, directly or through a third party. A notice given by a third party shall disclose the identity of each creditor on whose behalf the notice is given.


In a previous life we made it a practice to send the AAN to the applicant. We didn't want to FU on whether they were offered or accepted credit elsewhere.
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#222551 - 09/23/04 08:30 PM Re: Indirect lending adverse action
rlcarey Offline
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rlcarey
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Galveston, TX
Dan,

I take it "FU" means "follow-up"?

I concur with your statement - in all my days dealing with indirect paper - sending the AAN direct was always the best choice.
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#222552 - 09/23/04 08:39 PM Re: Indirect lending adverse action
Dan Persfull Offline
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Dan Persfull
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Bloomington, IN
Quote:

Dan,

I take it "FU" means "follow-up"?




That's what I originally meant, but I guess with the sentence structure the other would fit also.
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#222553 - 09/24/04 03:28 PM Re: Indirect lending adverse action
Tom Easterday Offline
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Joined: Oct 2000
Posts: 140
Orange County, CA
We did the same in our past indirect lending days. Approvals only got a verbal back to the dealer while declines always had a written AAN mailed to the applicant.
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#222554 - 09/24/04 04:37 PM Re: Indirect lending adverse action
RR Sarah Offline
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RR Sarah
Joined: Mar 2004
Posts: 2,492
Up North
I see a recurring pattern wherein you all reference indirect lending as something done "in the past". There are obvious risks inherent in indirect lending but I feel like I may be missing something. Should I be waiting for the other shoe to drop or the bottom to fall out or something? I am not being sarcastic or beligerent...just concerned. I have tried to do some research on trends in indirect lending but have not found much. Anyone have any words of wisdom?
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#222555 - 09/24/04 04:49 PM Re: Indirect lending adverse action
rlcarey Offline
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rlcarey
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Posts: 79,617
Galveston, TX
Well, for me, I really do mean in the past as I am a consultant and am no longer on the industry side. Not sure about the rest of these fine posters

There is nothing wrong with indirect lending as long as you have the proper controls, dealer agreements and pricing in place. However, some traditional financial institutions do find it hard to compete with the GMACs of the world.
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#222556 - 09/24/04 05:56 PM Re: Indirect lending adverse action
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,832
Bloomington, IN
The bank I worked at several years ago did indirect lending, and to the best of my knowledge they still do.

My current employer (small community bank) does not have an indirect program.

As Randy noted, as long as you have proper controls there is nothing wrong with indirect lending and it can be a good source of new customers bank wide.
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#222557 - 03/22/05 07:32 PM Re: Indirect lending adverse action
river girl Offline
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Joined: Nov 2004
Posts: 1,005
My director of lending asked if on the adverse action notice we should reference the auto dealer or boat dealers name since the customer might not have a clue why they are receiving an adverse action notice from a bank that they did not contact. Does anyone / or did anyone include the dealer's info on the AAN?

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#222558 - 03/22/05 07:45 PM Re: Indirect lending adverse action
HRH Okie Banker Offline
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Joined: Jan 2003
Posts: 3,070
Oklahoma
We do put the Dealer name on the Denial. That does make it easier for the customer to understand why they are gettin a denial from an institution they have never contacted.
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#222559 - 03/22/05 09:50 PM Re: Indirect lending adverse action
JJohns Offline
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JJohns
Joined: Jun 2003
Posts: 682
IL
Same here. We include the dealer name and address on the AAN.
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#222560 - 03/23/05 01:46 AM Re: Indirect lending adverse action
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 79,617
Galveston, TX
The dealer must tell the customer that they are submitting an application to you for credit. This IS A MUST and you better have it thoroughly addressed in your dealer agreements. If you ever get an indirect applicant calling you saying they don't know why they got a AAN, you have got a problem. Without the dealer informing the appplicant that they are forwarding their application to you, the dealer turns you into a Credit Reporting Agency (and subjecting you to all the regulatory requirements of being an CRA) when you communicate whether the applicant was approved or denied back to the dealer.
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