On May 24, 2018, a new federal law was created amending the Truth in Lending Act (TILA); named the Economic Growth, Regulatory Relief, and Consumer Protection Act. Beginning September 21, 2018, customers will be able to place a “freeze” on their credit file with the three major credit reporting agencies, and be able to temporarily “thaw” their credit file without fees. A credit “freeze” stops access to credit files and disallows applications for new credit for that individual. The rule was created to allow consumers to make it more difficult for identity thieves to open new accounts in consumers’ names.
Given the new law, it is likely that after September 21 some customers seeking to purchase vehicles on credit will have placed a “freeze” on their credit file and will have forgotten to lift the “freeze” before arriving at the dealership. With a “freeze” in place, neither the dealership, nor any potential lenders, will be able to access the customer’s credit file.
In these cases, a customer will need to temporarily “thaw” their credit file. The process is intended to be streamlined under the new law and customers will able to adjust their credit status by phone or online through the Federal Trade Commission (“FTC”) and/or by contacting the three major credit bureaus directly. Details regarding this process can be found at https://www.identitytheft.gov/. The FTC indicates once a request is made by a customer, the “unfreezing” is required to be performed within an hour.
Dealers should be aware of the additional steps a customer may need to take to allow for financing to be obtained for the purchase. A customer unfamiliar with the process, or having forgotten their previous credit “freeze,” may need to be reminded of the necessary steps and can be directed to the website above. Additionally, credit “freezes” may create issues for assigned lenders. We recommend you contact your lenders and discuss any potential issues which may arise.
If you have any questions, please do not hesitate to contact a member of our Dealer Practice Group for guidance at 248-645-9300 or by email.
Chuck LeFevre, Chair – [email protected]
Lawrence F. Raniszeski – [email protected]
Michael J. O’Shaughnessy – [email protected]
Eric R. Bowden – [email protected]
Alycia Pallach Wesley – [email protected]
Nicholas J. Ranke – [email protected]
