Dealer Voodoo founder Jim Maxfield's concern lies with prescreens in the service drive. Because service customers are not visiting the dealership to buy a vehicle, he questions whether dealerships have the right to pull those customers' credit files.
"The law has a carve-out for permissible use," he said. "You can argue that there's a permissible use for a soft pull on a test drive on a $40,000 car."
"The question becomes if you come in for an oil change, [does the dealer] have the right to run that under a permissible use clause?"
His solution, via Dealer Voodoo's Conquest Equity product, is to examine public record data points to determine creditworthiness. Conquest Equity models individual customers for creditworthiness and household cash flow based on 7,000 publicly obtained data points and removes the need for a soft pull, Maxfield said.
Ken Luna, vice president of corporate affairs at CreditMiner, guessed that a number of dealers are likely violating the Fair Credit Reporting Act every day by neglecting to mail customers firm offers of credit.
"Dealerships are just now getting to where they know what a soft pull is," he said. The prescreen vs. prequalification distinction throws them off even more, he added.
Equifax's Giamalvo said that even if some dealers are in the dark now, they are striving to learn. "I can't begin to tell you how many calls I've been on with dealers who have their legal counsel on the phone with them. They really want to understand it on a deep level," he said.
Giamalvo also sees no legal concern regarding prescreens in the service lane. "If you can help make a customer make a decision based on their creditworthiness while they're sitting in the service lane, I think it's a net win."
John Palmer, CEO of ProMax Unlimited, said his company has done more than 3 million prescreens in the seven years it has offered them and has "not had a single compliance or customer complaint."
The dealership can print the firm offer of credit from the ProMax system. But if ProMax sees that it hasn't been printed within 48 hours, ProMax prints the document and mails it to the customer.