Dodd-Frank Law Takes Effect with Implications for F&I Office

Stephen Wade — August, 2011


Stephen W. Wade
 2011 NADA Chairman
It is hard to believe it's been a year since Congress passed one of the biggest regulatory overhauls our nation has ever seen. I'm talking about the so-called Dodd-Frank law (also known as the Wall Street Reform and Consumer Protection Act), which takes aim at lending standards that Congress members believe led to the financial crisis of 2008 and 2009.

Thanks to our successful grass-roots campaign in 2010, dealer-assisted financing was saved from additional federal oversight under the Dodd-Frank law. But auto loans, and more specifically the processes our F&I offices use to issue them, have been affected by the new law, which includes several provisions related to disclosure of credit terms and action a creditor must take when turning down a loan application.

Here are two big changes every dealer should know about and some ways NADA is helping us comply with these new rules.

1. New credit score disclosures for adverse action notices – Starting July 21, creditors who use a credit score in taking adverse action (such as turning down a request for credit) are required to include the consumer’s credit score in the notices they provide to customers. To help dealers comply with this new rule, NADA has updated its “Dealer Guide to Adverse Action Notices,” explaining when an adverse action notice must be issued, what the notice must say, when dealers can rely on a finance source’s notice and other important issues. This guide also includes a model adverse-action notice that NADA developed for dealerships based on the government’s model notice. To download the guide, sign in to or sign up for NADA University at, select “Resource Toolbox,” then “Driven,” and “Legal/Regulatory.”

2. Changes to the Risk-Based Pricing Rule – Also included in the Dodd-Frank law were changes to the Federal Risk-Based Pricing Rule (RBPR), which requires dealers and other businesses that use credit reports and extend credit to consumers to provide a new notice, known as a Risk-Based Pricing Notice, to customers who receive credit on terms that are less favorable than the terms received by a “substantial proportion” of their other credit customers. (Note, however, that the changes to the RBPR do not affect dealers who issue Credit Score Disclosure Exception Notices in lieu of Risk-Based Pricing Notices.) NADA’s “Dealer Guide to the Risk-Based Pricing Rule” has been updated to account for these changes. To download the guide, sign in to or sign up for NADA University at, select “Resource Toolbox,” then “Driven,” and “Legal/Regulatory.”

In addition to the guides, NADA University has produced a brief video on the changes featuring NADA attorney Brad Miller. You can also view the archived webinar “New Credit Score Disclosures for Adverse Action and Risk-Based Pricing Notices” at in the Learning Hub under “Legal/Regulatory.”

For more comprehensive news from NADA, click here to sign up for NADA's award-winning e-newsletter, NADA Headlines. It's free and provides a daily look at what's happening in the automotive industry. Feedback or questions about this column may be sent to