Guidelines on Application Retention for Dealerships

Are you working at a dealership, or own one? Familiar with the guidelines on application retention for dealerships, specically the one you work for or own?  We are sure you have had a customer come in who is interested in purchasing or leasing a vehicle. During this process, at some point, you will run their credit. Now, as this is a standard procedure, what happens if that customer is no longer interested in the vehicle, or the original terms cannot be met? What happens to that customer’s application? Do you simply shred it because you do not want their personal information to be compromised? It is good that you are concerned about a customer’s sensitive information; however, this move can cost you in the long run. This is where the guidelines on application retention for dealerships comes into play.

To elaborate, what would happen for instance if a customer comes back to the dealership and says that they never gave anyone permission to run a credit check? What proof does the dealership have if its standard procedure is to shred applications?  This is where guidelines on application retention for dealerships are important and need to be followed.

Here are 3 tips for your dealership to stay safe:

• In general, a creditor must preserve all written or recorded information connected with an application for 25 months (12 months for business credit)
• A provision of the FACTA gave consumers the right to sue creditors for completing a credit check without their consent for up to 60 months. Therefore, keep approved, rejected and dead deal applications for 60 months.

• For Internet applications, have an organized system for storage and recovery of each application for five years.

 Adverse Action Notice, Timely Notices and Recordkeeping

They said timing is everything and that is very true, especially when it comes to adverse action notices. Did you know that an adverse action notice must be sent within 30 days of receiving the application if the dealer cannot arrange for the requested financing? If a counteroffer is deemed unacceptable by the customer, the notice must be sent to the customer 90 days after delivering the counteroffer.

In the case of incomplete applications — and no notice of incompleteness is sent — the adverse action notice must be sent to the customer within 30 days of receipt of the incomplete application.

There are also rules governing how long a customer’s personal information must be stored after an adverse action notice is issued. The ECOA requires a customer’s information be kept on file for 25 months after a customer is notified of a credit approval, adverse action, or application incompleteness.