Adverse Action Notice

The Federal Government considers automobile dealers to be creditors under various regulations, including the Equal Credit Opportunity Act and the Fair and Accurate Credit Transactions Act. Both of these regulations require creditors to send a consumer an adverse action notice under certain circumstances.

Additionally, the plaintiffs’ bar has filed a barrage of litigation against automobile dealers in various parts of the country alleging violations of these acts in cases where the dealer allegedly failed to send an adverse action notice.

Based on recent litigation, most industry experts feel that a dealer should consider sending an adverse action notice if the dealer:

• Accepts a credit application, runs a credit bureau report and does not submit the application to a financing source for consideration.
• Accepts a credit application, submits it to financing institutions and none of them approve the credit application. The adverse action notice sent by the finance institutions may not fulfill the dealer's obligation to send the adverse action notice.
• Spot delivers a deal, is unable to secure funding and unwinds the deal.
• A dealer runs a credit bureau and does not deliver the vehicle.

gvo3 & Associates is skilled at determining the various scenarios that appear to require an adverse action notice and has developed a methodology to audit for adverse action notification compliance.