One of the biggest issues facing dealerships in the sales process is compliance. There are a number of pitfalls dealers face. Many of these have to do with “transparency.” This basically means being certain the dealership personnel treat everyone the same -- especially when matching them up with the correct financing. Finance reserves are a hot topic right now between NADA and the CFPB (Consumer Finance Protection Bureau). The Credit Bureaus are also watching ongoing discussions about making sure that any rates quoted are not out of synch with what an individual is purchasing, and the rates quoted based on the prospects current credit position. On top of all of this there are the federal and state laws that issue serious penalties for being careless with an individual’s private information, especially their Social Security Number (SSN) and Date of Birth (DOB). It is all too easy for dealership personnel to simply write down this information and sell it on the black market. If an audit happens, and this information is found lying out on top of a desk in the showroom (even if it is in a folder), then fines usually are in the 10K range, or more, per occurrence.
So, what’s the solution?
Well, to help with “all of the above,” the Bureaus have cooperated by helping to design a system that can show a prospect what rates they qualify for up front, by every lender the dealership uses (with reserves included if the dealership wishes). It shows how much the prospect qualifies for based on their soft credit score (this does not impact their credit and does not need a Social Security Number or Date of Birth). Breaking out the lenders is actually optional for the dealership, so it just depends on sales philosophy. This helps the dealership know up front what the correct vehicle and rate are for the prospect. The prospect can either apply on the dealer’s website, or in person, with a special credit app – And, best of all, SSN or DOB are NOT needed!
Once the vehicle has been narrowed down, instead of asking for the SSN and DOB, a series of personal questions are then asked from the Credit Bureaus database (i.e. what address did you live at 4 years ago?) 4 different addresses are given as possible answers along with “none of the above.” Once 4 to 6 of these type of questions are answered correctly, the bureaus then feel comfortable enough to proceed with the loan approval process without asking for a SSN or DOB. Remember, the bureau already knows who the individual is supposed to be from the short pull. They already have the SSN and DOB. These questions are simply to verify that the person is who they say they are. If they answer the questions correctly, then all the required information is processed through the DealerTrack or RouteOne system. The dealership never even sees the SSN or DOB.
This is great for everyone. Consumers will love not having to reveal this information in order to buy a vehicle. Dealers will not have to worry about being fined, as they will never have this data. They can even advertise the fact they do not ask for the SSN or DOB. In the early tests of this system, anywhere from 60 to 70 % of the individuals were able to go through the process. For the small percentage that did not get approved, there were a variety of reasons why they may not have “passed,” such as credit score too low, credit too new, mismatched names, etc. In those cases, then the regular hard pull still had to be done. But with 60-70% flying through the process, this is a win-win for all concerned.