New risk-based pricing provisions of the Federal Trade Commission's Fair and Accurate Credit Transactions Act, or FACTA, require creditors to make available the reasons for customers' credit terms based on their individual credit scores. These new provisions became effective on Jan. 1.
To help credit unions, CUDL has developed a new tool to assist credit unions that are looking to provide auto dealer partners with credit score disclosure notices. The tool allows credit unions to provide dealers with the necessary disclosure notices though the dealer's lending platform.
"Generally, the FACTA pricing rules were primarily created in an effort to improve accuracy of consumer credit reports and essentially get consumers to review their credit reports and make sure everything is accurate on them," explained Monika Perkins, director of credit union solutions for CUDL.
Creditors are required to present these to consumers to explain to them how they came up with the terms of the loan, how the credit score can be used to determine terms of their loan and how important having good credit is, Perkins said.
"CUDL evaluated these notices and how this impacts credit unions," Perkins said.
Contractually, when a credit union is working in an indirect manner, with an auto dealer for example, the dealer is the original lender in the transaction.
"That essentially makes the dealer responsible to send those rules to the consumer," Perkins said. "Most dealers have a solution in place so that when they pull credit it automatically pulls that letter. In our scenario, the dealer doesn't actually pull credit from their system and has asked the lender to provide notice to the consumer. We made this tool available to our credit unions."
The tools allows the credit union to make the letters available on the CUDL system. There is a form available that makes the data available to the dealer.
"It really is just printing a form," Perkins said. "It's prefilled with the required information. The credit union has to do the upfront process to make it available to the dealer. It is the credit union's form. We are just providing that mechanism so that the credit union can make it available to the dealer."
It's still too early to predict the response from CUDL's customers to the new tool.
"I know that our credit unions were pretty happy when we did implement it in the end of December, so that they had that back up for the dealers that needed assistance. We haven't heard much since that point. We're expecting a positive response."
To CUDL, what is really important is the relationship between credit unions and dealers, Perkins said.
"We are very happy to solidify that relationship between our credit unions and our dealers," she said. "That was the major reason why we developed this tool. There are other major business needs this tool will help, too, but that was really the major reason."
There is no cost to the credit unions for use of this tool.
"It fell right on through some current technology that we already provide, so it was really an extension of what we already provide," Perkins said, "with no heavy investment at all. We have some pretty flexible technology in that area."
The only requirement for the credit unions to have this tool available to them is that CUDL must have the credit union credit data.
At present, CUDL is not expecting all credit unions to use this service because most of the dealers already have a solution in place.
"A small percentage of credit unions will use this, but having this available if they need it is important," Perkins said.
There is also no training involved for the credit unions "because we use our existing design, which is very intuitive," Perkins added. "We sent out some communication as a training guide just so they would know how to implement it, but a very low level of training is required just because they are already familiar with that design."