New Credit Freeze Law: What Does It Mean for Your Dealership?

This spring, the U.S. House and Senate overwhelmingly passed, and President Trump signed, the Economic Growth, Regulatory Relief, and Consumer Protection Act. The Act made several changes to the Dodd Frank financial reform law and other related statutes. The primary purpose of the law was to reduce regulatory burdens on financial institutions, particularly small banks.

One provision of this Act goes into effect September 21, 2018, and it may affect your dealership. It amends the Fair Credit Reporting Act to permit a consumer to freeze or unfreeze the consumer’s credit report at no cost and specifies procedures to do so. The provision only applies to the “big three” credit bureaus (Equifax, Experian, and TransUnion), but those are the three that provide the majority of credit reports accessed by car dealerships.

The law was designed to preempt credit freeze laws enacted by states, harmonize the credit freeze process for the big three credit bureaus, and permit consumers to better protect their credit histories. The effect of the law will be to make freezing and unfreezing a credit bureau easier. And that could mean a customer with frozen credit may come to your dealership seeking a spot delivery of a vehicle.

In that event, you may find you cannot access that customer’s credit. A consumer who wishes to freeze a credit report can do so by contacting each of the three credit reporting agencies individually, and each must implement the freeze in one business day. The consumer will be issued a notification number they must use to lift the freeze. Under the law, each of the credit reporting agencies must implement a system that allows a consumer to unfreeze a report within one hour of a toll free telephone call or a secure electronic request. If a consumer has the appropriate PIN you may be able to access a credit report within an hour of a request to unfreeze the report. But, a consumer may not be willing to wait for that or the consumer may not have the appropriate credentials.  You may want to inquire from a customer early in the sale process whether a freeze is in place so that an unfreeze request can be sent while other activities take place.