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Watching Out for the Boomerang Effect

January 2007, F&I and Showroom - Feature

by Joe Bartolone - Also by this author

I’m not an expert at reading body language, but after a while you can tell when someone doesn’t fully comprehend the question you are asking. Some people squint, others tilt their head to one side, a few look upward with a pondering look, and then there’s always the “deer in the headlights” glare.

As compliance consultants, gvo3 & Associates’ primary goal is helping dealerships understand their risks and exposure with regard to compliance issues in the sales and F&I departments. We accomplish this through an interview process and a very thorough review of the documentation found in the deal jackets. During the course of a compliance review, one of the questions we always ask the dealership’s management staff is if they would describe their adverse action notice process. This is when we usually get the funny looks. Then we ask the same question by substituting adverse action notice with the words “turn down letter.” This usually puts everybody back on the same page. What we find is that most dealerships do not have a defined process to deal with adverse action notices.

Several prominent attorneys and other industry experts have written excellent articles on the subject in industry publications such as F&I Management and Technology. If you haven’t read them, I would strongly suggest you do. In this article, I will focus on identifying areas of potential exposure, developing a documented process, and offer my insights on implementing an automated solution to address the issue.


When going through a deal file, we look at each completed credit application, the credit reports and the fax backs from each lender. We can determine from these documents whether all of the applicants have been submitted for consideration to a lender. At some point in the sales or F&I process, the dealership has taken the credit application on the buyer and co-buyer to run a credit report on both applicants. Occasionally, one of the applicants may have a significantly lower credit score than the other. The F&I manager or desk manager decides not to submit one of the applicants because he or she could affect the tier level or deal approval. This is probably the right thing to do to get the deal approved, but it is also one of those situations where you are required to send a notice informing the applicant of your actions.

Special Event Sales

Special event sales are designed to generate a lot of floor traffic in a short period of time — typically two or three days. These may occur at the dealership or at an offsite location (e.g., a stadium used-car sale). There is always some form of promotion, giveaway, or enticement to draw customers — which can sometimes attract hundreds of potential buyers to the event. The sales staff is challenged to quickly sort through the traffic to find the qualified buyers. This is usually accomplished by requiring each visitor to complete a short registration form in order to qualify for the promotion. Many times, the registration form includes blanks for the customer’s name and address, social security number, date of birth, and language in micro print authorizing the dealership to check his or her credit history. Note that this practice would probably not make the top 10 list of recommended ways to comply with Reg. B, ECOA, FCRA and FACTA regulations. There is typically a stack of screened credit reports that were not submitted to lenders and a stack of conditioned deals that never got delivered at the end of the promotion. All the paperwork is put in the dead deal file. At the end of the day the closed deals are counted, the cash spiffs are paid, and everybody is giving high fives. Does anyone ever remember the dealer or GM asking, “OK, whose turn is it to send out the adverse action notices?”

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