Pub. 4 2014 Issue 1

11 n five fair — continued on page 12 has begun examining banks with indi- rect auto portfolios, the number of banks sending these letters, and the number of letters dealers are receiving, has greatly increased. Some letters say they are just informational, and others ask the dealer for a meeting to discuss the bank’s find- ings. Sometimes dealers tell me they ignore these letters. That’s a mistake. The information the finance source has about your pricing practices could be very useful, and it is free. It could tell you things about inadvertent patterns in your markup practices of which you weren’t aware. Due to the very real fair lending risk I’ve just discussed, you should always check out this information. You might conclude that the creditor’s information doesn’t apply to your larger portfolio. After all, most creditors receive only a small percentage of a dealer’s contracts. It could be that higher average markups charged to female customers whose contracts were assigned to Bank A would be offset by lower aver- age markups to females whose contracts went to Bank B. In other words, it could all average out. But maybe it doesn’t. And if Bank A’s results are typical for your dealership, you should know this and take appropri- ate corrective action as soon as possible. Bank A paid someone a lot of money to analyze the markups in its portfolio both as a whole and dealer-by-dealer. You are getting this information at no cost. Don’t let it go to waste. Mistake #3 Worrying that you might incriminate yourself in talking to a bank that writes to you. Some dealers worry that creditors are trying to pass the fair lending buck to deal- ers, perhaps as a way of looking better to the CFPB. They worry that creditors might quote them out of context and make them look bad. These are not good reasons to avoid talking with your financing sources. First, as a practical matter, a bank or other creditor cannot pass the fair lending buck. If the CFPB finds significant markup disparities, it is going to take action against the bank or financing company - period. Even if the bank wanted to throw a dealer under the bus, it would do the bank no good. Second, all the bank is looking for from the dealer is an appropriate expression of concern and for the dealer to take whatever action necessary to avoid a repeat of the problematic markup results. The dealer’s response to the indirect creditor should be: 1. Wow! 2. These results surprise me. 3. Our dealership is committed to non- discrimination. 4. We’ll check into this. 5. Thanks for letting us know. Such responses are not incriminating. Nothing more is required.