Hesterberg: Level of F&I paperwork is 'ridiculous'
 | Group 1's Hesterberg: The adverse action notice requirement is "good for the post office, bad for us." |
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State and federal regulations that mandate extra paperwork on F&I transactions have reached "ridiculous" proportions, says Earl Hesterberg, CEO of the Group 1 Automotive dealership group.
Exhibit A: The tougher rules for "adverse action" notices that took effect in 2011.
Customers who applied for credit and were turned down, or who had a "stipulation" added to their contract other than the terms originally requested, are entitled to an adverse action notice. The kicker is that the lenders on those same transactions have to send out letters as well, Hesterberg says.
"Our company alone is sending out over 9,000 of these letters per month. The absurd fact is that the lenders are required to send out the same letter," Hesterberg says.
Starting July 21, 2011, under Federal Trade Commission rules, if the customer's credit score was used in the adverse decision, the adverse action notice must provide a credit score disclosure with specific details, including which credit bureau was used and the high and low range of scores.
"So what happens is a customer who receives a stipulation on a loan application, or is rejected, gets two letters reminding them of their credit quality. Good for the post office, bad for us from an expense and customer satisfaction perspective," he says.
Hesterberg says state governments add to the paperwork burden. "Did you know that when a husband and wife buy a car in Texas [with a trade], they are required to sign up to 56 times and 9 initials?" He says requirements are similar in several other states. "It is ridiculous what we are putting our clients through to purchase their vehicles!"
You can reach Jim Henry at autonews@crain.com.
