A change to the Fair Credit Reporting Act that allows customers to "freeze" their credit reports free of charge acts as a temporary shield from fraudsters and identity thieves, but the freeze also can slow a transaction in the F&I office to a glacial pace.
Three changes to the Fair Credit Reporting Act that Congress approved in May took effect Friday. The act now allows customers to voluntarily pause access to their credit reports, which can prevent fraudsters from stealing credit information for schemes and halt unsolicited offers of credit in their mailboxes.
In addition to the freezing ability, the act extended the minimum time that consumer reporting agencies include an initial fraud alert in a consumer's file from 90 days to one year, and it changed the notice of the Summary of Consumer Rights and the Summary of Consumer Identity Theft Rights to include the security freeze right.
Terrence O'Loughlin, director of compliance for Reynolds and Reynolds, who is based in Fort Lauderdale, Fla., says the change is just another wrinkle in the law that auto retailers should consider in their operations.
Dealers now must be wary of customers who have put their credit information on ice, he said.
"A customer will say, 'Gee, I really want to buy a spanking-new $35,000 car and drive away with it right now,' and a dealer is going to have to say, 'No, I don't think we can do that because we can't check your credit,' " O'Loughlin said.
Asking earlier in the sales process whether a credit score is frozen could prevent a slowdown in the F&I department. The law stipulates that credit agencies are required to release a credit score in an hour, providing enough time for the dealership to obtain that information by the time the customer reaches the F&I portion of the transaction.
However, O'Loughlin recommends that customers who know they will be applying for credit take steps to unfreeze their report before visiting the dealership.
The National Automobile Dealers Association issued a notice to members advising they consult with their legal counsel to learn whether their responsibilities change in how they issue the Summary of Consumer Rights notice. They should also consult with their provider of that notice to ensure it includes the changes, NADA said.
O'Loughlin echoed NADA's advice but clarified that dealers are off the hook for almost all transactions when it comes to providing the full notice because they're not a credit reporting agency. If dealers use credit histories in their hiring practices, he says, they would have to provide the notice.