A United States District Judge recently ruled that whenever automobile loans are financed by banks or other financial institutions, dealers must provide the consumer with credit report information that explains interest rate decisions, the Fulton Sun reports. The ruling, which greatly affects the National Automobile Dealers Association (NADA), applies to all "three-party" transactions where the dealer agrees to extend financing to a consumer and then assigns the loan to a third party, the news source states. In these scenarios, it is sometimes customary for a dealer to increase the interest rate of a loan of lease because of information received on a customer's consumer credit report
. Under Judge Ellen Huvelle's ruling, dealers must now tell the consumer where they got the report information, and offer guidance to consumers about how to get a copy of their credit history to dispute any inaccuracies. "This ruling will make it easier for consumers to learn about unfavorable information in their credit reports. Not only will this give them an opportunity to correct any inaccuracies, but it also provides a key tool needed to combat identity theft or fraud," said Stuart Delery, acting assistant attorney general for the Civil Division, as quoted by the Sun. "The auto dealer is in the best position to provide this information because the dealer interacts directly with the consumer and establishes the credit terms in the agreement that it enters with the consumer." The ruling essentially requires auto dealers to comply with the Fair Credit Reporting Act, explains Automotive News, and also protects the consumer from identity theft and fraud. However, NADA feels it is getting the short end of the stick. "This decision effectively requires these dealers to purchase credit reports for the sole purpose of populating the Risk Based Pricing Notice or the alternative Credit
Score Disclosure Exception Notice that must be given to consumers," wrote NADA's chief regulatory council
Paul Metrey, as quoted by the media outlet. "Not only does this create what NADA believes to be unnecessary transactional costs on a continual basis, it also increases the flow of sensitive information whose exposure could harm consumers." NADA does intend to appeal the ruling to the federal court of appeals in Washington, although Huvelle dismissed its claim that the ruling violates the Administrative Procedure Act, under which government agencies create rules and regulations necessary to implement and enforce major legislative acts.