Powersports lenders need to be aware that permissible reason is required to pull a consumer’s credit or else they are subject to up to a $1,000 fine, David Gemperle, partner at Nisen & Elliot LLC, told Powersports Finance.
Gemperle noted that there “seems to be confusion” among some lenders over what are permissible purposes for checking credit.
“Maybe I want to send the consumer an offer, but I don’t know if I want to waste the mailer on him,” Gemperle said. “I’ll just pull the credit and see. [The lender] just kind of noodles around people’s credit report because [they’re] thinking that [they] might want to make [the consumer] an offer on an individual basis.”
However, a lender shouldn’t pull credit until it is doing business with the consumer or the consumer has asked for credit.
“My guess for lenders that are not aware [of this rule] would be that it is the marketing department driving the efforts to sign up customers,” Gemperle added. “There’s a whole gamut of rules related to advertising finance that powersports maybe is not as focused on when they’re creating their marketing and when they’re deciding whether they have a right to check somebody’s credit.”
Consumers are typically unaware when lenders are checking their credit, so lenders have likely “already gotten away with it,” Gemperle said, but if an investigation is launched after the fact, the lender that obtained the consumer report under false pretenses or knowingly without a permissible purpose is liable to receive a fine up to $1,000.