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#225185 - 08/09/04 04:45 PM Risk-based Pricing & AAN
etm614 Offline
Platinum Poster
etm614
Joined: Jan 2003
Posts: 695
Massachusetts
We are just dipping our toe in on risk-based pricing whereby an applicant who doesn't meet our underwriting guidelines for an auto loan at our one-size fits all rate will be considered for a new program at a higher rate. All applicants who would be denied are automatically reviewed for the higher rate with no customer request or contact. If the loan is still denied, we issue the standard AAN. If the loan is approved at the higher rate, I believe that the customer should receive an AAN and counteroffer (using the C-4 model notice). Am I correct on the AAN part? Thanks.

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#225186 - 08/09/04 09:27 PM Re: Risk-based Pricing & AAN
Jack Holzknecht Offline

Gold Star
Joined: Aug 2001
Posts: 330
Louisville, KY
Your situation might be considered as either an approved application (he applied for a loan and got a loan) or an accepted counter-offer (he applied, didn't qualify, was countered offered and accepted). Either case may not trigger an adverse action notice. The facts dictate what actually happened. If a counteroffer is accepted, no AAN is required. Is the "new program" with your bank or with another lender? Did the customer specifically apply for the "one-size fits all rate"?

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#225187 - 08/10/04 03:32 PM Re: Risk-based Pricing & AAN
etm614 Offline
Platinum Poster
etm614
Joined: Jan 2003
Posts: 695
Massachusetts
These customers apply for a loan at our standard one-size-fits all rate. When they don't qualify based on credit issues (e.g. prior chargeoffs, late pays, etc.), they are told they do not qualify for that product and are then offered a loan at a higher rate. That is why I believe that they should receive the combined AAN and counteroffer notice.

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#225188 - 08/10/04 05:45 PM Re: Risk-based Pricing & AAN
Love those Regs Offline
Gold Star
Joined: Apr 2002
Posts: 296
Southern State
In that case, I think the AAN/Counter is needed.
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Opinions are mine and subject to change frequently

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#225189 - 08/10/04 08:48 PM Re: Risk-based Pricing & AAN
SJB Offline
Diamond Poster
SJB
Joined: Jun 2002
Posts: 1,210
California
Double check your advertising so you do not end up with allegations of "bait & switch."
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My opinions are not legal advice and are worth what you paid for them.

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#225190 - 08/11/04 08:21 PM Re: Risk-based Pricing & AAN
Jack Holzknecht Offline

Gold Star
Joined: Aug 2001
Posts: 330
Louisville, KY
Quote:

When they don't qualify based on credit issues (e.g. prior chargeoffs, late pays, etc.), they are told they do not qualify for that product and are then offered a loan at a higher rate.


If an applicant accepts a counteroffer no adverse action notice is required. The combined counteroffer/AAN is helpful when the applicant doesn't immediately accept the counteroffer. If the combined form is sent immediately, then the application does not have to be tracked to see if the applicant accepts the counteroffer or not.

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#225191 - 08/13/04 12:56 PM Re: Risk-based Pricing & AAN
upstateNY Offline
Platinum Poster
Joined: Apr 2003
Posts: 933
New York State
Quote:

Quote:

When they don't qualify based on credit issues (e.g. prior chargeoffs, late pays, etc.), they are told they do not qualify for that product and are then offered a loan at a higher rate.


If an applicant accepts a counteroffer no adverse action notice is required. The combined counteroffer/AAN is helpful when the applicant doesn't immediately accept the counteroffer. If the combined form is sent immediately, then the application does not have to be tracked to see if the applicant accepts the counteroffer or not.


Pegasus, would you agree that this customer would need to be given the new Risk-based pricing notice under section 311?

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