Even though the Rules went into effect on January 1, many remain confused about how to comply.
The Compliance Q&A article on page 51 of the January issue of Credit Union Magazine includes the following question:
“Who’s responsible for providing the risk-based pricing notice in an indirect lending transaction: the auto dealer or the credit union?”
Apparently the magazine editors believe that a fair amount of confusion still exists about how credit unions doing indirect lending can comply with the new rules. They answered as follows:
“The original creditor is responsible for providing the risk-based pricing notice (or the alternative credit score disclosure). The original creditor is the person to whom the obligation is initially payable. This is the case even if the loan is assigned to a third party, or if the original creditor isn’t the funding source for the loan. In some cases the auto dealer is the original creditor that extends credit contingent on the ability to assign the loan to a credit union or bank. In such cases, the auto dealer must provide the notice. But if the credit union is the original creditor, it will be obligated to either provide the notice or contract with the auto dealer to provide it. The credit union must have policies and procedures in place to verify that the dealer provides the notice with the applicable time periods.”
Integrated Lending Technologies has made it very easy for all lenders and dealers using the DILLS™ system to comply with the new rules. In the November 2, 2010 edition of the ILT Newsletter all lender users of DILLS™ were reminded about the new Rules and were informed about several actions being planned by ILT management to help them comply. In mid- December 2010 ILT management sent out a fax to every dealer using the DILLS™ system reminding them that the new Risk-Based Pricing Rules became effective on January 1, 2011 and alerting them that a Credit Score Disclosure notice for every applicant for an auto loan would be required by all lenders using DILLS™. On the morning of January 1, 2011 the following upgrades to DILLS™ were activated:
1. All dealers using the DILLS™ application can access a pre-filled Credit Score Disclosure notice for each applicant which follows Form B-4 provided in the Rules and which includes the applicant’s credit score and the name of the applicant and the dealer;
2. All lenders can also access a similar notice on their DILLS™ system;
3. The Credit Score Disclosure notice was added as a required document for funding of each loan to the documentation checklist for every dealer using the system;
4. The same item was added to the funding checklist for every lender; and
5. The dealer’s DILLS™ application submission page was modified requiring the dealer to warrant that each applicant was provided with a Credit Score Disclosure notice.
ILT’s actions in connection with the Risk-Based Pricing Rules are just another illustration of its commitment to timely advice and effective technological solutions for all its clients.