I. – General Statement
RED WHITE AND BLUE AUTOS, INC. is fully committed to complying with the letter and spirit of federal, state, and local laws and regulations that are designed to protect it's customers. This includes ensuring that all qualified credit applicants have equal access to credit and are treated in a manner that is fair, professional and consistent with the terms of the dealership’s Fair Credit Compliance Program. Engaging in any form of unlawful credit discrimination is destructive, morally repugnant and will not be tolerated by this dealership.
II. - Policy
This Fair Credit Program Policy Manual (“FC Manual”) summarizes Red White and Blue Autos, Inc.’s (“Company”) policies and program dealing with fair credit/lending with respect to Company’s business of offering and providing credit products and services, specifically its operations as a used car dealership. In this regard, Company has developed a Fair Credit Program (“FC Program”) that is intended to ensure that it complies with all applicable fair credit/lending laws and regulations (“FC Laws”) and reflects industry best practices with respect to offering and providing consumer financial services to its customers.
Company is committed to maintaining a culture of fair lending throughout the organization. As a result, Company will comply with all federal, state and local FC Laws. The goal of the FC Program is to carry out Company’s commitment to be dedicated to fair credit/lending principles and demanding of compliance. The FC Program applies to all aspects of the credit products and services offered by Company (collectively “Credit Products”), and across all of Company’s credit operations, including advertising, marketing, underwriting, origination, processing and any other services it provides in selling and arranging for financing of used vehicles to the public, and to all employees, agents and independent contractors that work for Company (“Personnel”), members of the Board of Directors, and persons who perform services for Company (“Service Providers”).
Company does not and will not discriminate against any applicant with respect to any aspect of a credit transaction on the basis of sex, marital status, race, color, religion, national origin, age (provided the applicant has the legal capacity to enter into a binding contract), the fact that all or part of the applicant’s income is derived from a public assistance program, the applicant’s good faith exercise of rights under the Consumer Credit Protection Act (15 U.S.C. §§ 1601 et seq.) (“prohibited basis” or “ECOA prohibited basis”), sexual orientation, military status, familial status, or disability (“nondiscrimination category”). This prohibition applies to “any aspect of a credit transaction” which means any stage or element of the credit process, which includes application, credit evaluation, credit decision, credit terms, servicing, collection and payoff. All Personnel and Service Providers shall treat all customers and prospective customers fairly and consistently throughout the entire credit process without regard to prohibited basis or nondiscrimination category. Collectively, the foregoing shall be referred to as the FC Policy. The Shareholders and Board of Directors have approved and adopted the FC Policy. This FC Policy will be published to all Personnel and Service Providers will be advised of it.
III. – Oversight and Training
The Chief Compliance Officer is the Company employee appointed as the Fair Credit Officer (“FC Officer”) to design, implement, manage and maintain the FC Program. The Board of Directors (“Board”), which is ultimately responsible for Company’s fair credit practices, provides oversight of and strategic guidance for the FC Program. The Board has delegated day-to-day authority to the FC Officer to develop, implement, maintain, and oversee the FC Program, on the Board’s behalf. The FC Officer will report directly to the Board of Directors. To the extent the FC Officer is required to perform a task, the FC Officer may appoint a person to act on his/her behalf.
All Company employees that work in the area of advertising, credit evaluation (analysis, underwriting, making credit decisions), or who otherwise interact with consumers or develop Credit Products, as well as Board and senior management members, are to receive initial, as well as, periodic and recurring training, on the laws and regulations pertaining to (i) fair lending, including the prohibition on discriminating on a ECOA prohibited basis or other nondiscrimination category, (ii) Company’s FC Program and FC Policy, and (iii) Company’s policies and procedures intended to reduce Company’s risks of violating FC Laws.
Company will require that all relevant service providers demonstrate their knowledge of the fair lending requirements that impact us and have sufficient policies in place.
IV. - Procedures
Company adopts the following specific procedures in compliance with its FC Policy:
Personnel shall not discriminate in granting, withholding, extending, renewing, or in fixing the terms or conditions of any credit on the basis of race, creed or religion, color, national origin, age, sex, marital status, receipt of income derived from any public assistance program, good faith exercise of rights under the Consumer Credit Protection Act of 1968, sexual orientation, military status, familial status, or disability.
Personnel shall not use a credit application form or any other form or document to inquire about the race, color, religion, national origin, or sex of an applicant or any other person in connection with a credit transaction, except as permitted under 12 C.F.R. § 1002.5 (including for the purpose of conducting a self-test that meets the requirements of 12 C.F.R. § 1002.15, and with respect to sex, to designate a title on an application form (such as Ms., Miss, Mr., or Mrs.) if the form discloses that the designation of a title is optional) and other applicable law. The foregoing applies to credit applications received over the telephone, internet or other medium.
In the event Personnel communicate directly with the applicant or another person in connection with the applicant’s credit application, Personnel shall not inquire, directly or indirectly, about the race, color, religion, national origin, or sex of an applicant or any other person in connection with a credit transaction, except as permitted under 12 C.F.R. § 1002.5 (including for the purpose of conducting a self-test that meets the requirements of 12 C.F.R. § 1002.15) and other applicable law.
In connection with evaluating an applicant for credit, Company’s underwriting process and Personnel may consider any information obtained, so long as the information is not used to discriminate against an applicant on a prohibited basis (i.e., race, color, religion, national origin, sex, marital status, age, receipt of income derived from any public assistance program, good faith exercise of rights under the Consumer Credit Protection Act of 1968), or based on sexual orientation, military status, familial status, or disability.
Personnel shall not ask about birth control practices or whether an applicant is going to have children. Personnel may ask about the number and ages of an applicant’s children or about dependent-related financial obligations or expenditures if the information is requested without regard to sex, marital status, or any other prohibited basis or nondiscrimination category. Personnel shall not make assumptions, or use aggregate statistics, relating to the likelihood that certain categories of persons will have children or will, for that reason, receive less or interrupted income in the future.
Personnel shall not refuse to consider the source of a credit applicant’s income, and shall not subject such an applicant’s income to discounting, in whole or in part, because of an applicant’s race, creed or religion, color, national origin, age, sex, marital status, receipt of income derived from any public assistance program, good faith exercise of rights under the Consumer Credit Protection Act of 1968, sexual orientation, military status, familial status, or disability.
Personnel shall not discriminate against a married person because such person does not use or is not known by the surname of his or her spouse.
Personnel shall not ask an individual applicant for information about a spouse or former spouse. However, if the applicant lives in a community property state, Personnel may ask for certain information about the spouse.
Personnel may ask whether the applicant will rely on alimony, child support, or separate maintenance payments from a spouse or former spouse as a basis for repaying the credit he or she is applying for. NOTE: Prior to doing so, the application must clearly explain, or if the application is taken verbally or the request occurs in a verbal discussion, the applicant must be told verbally, that this information is optional and that it does not need to be shared unless the applicant wants it considered in the credit decision.
Personnel shall not ask an applicant his or her nationality; but can inquire about permanent residency and immigration status. For example, an applicant’s immigration status and ties to the community (like employment and continued residency in the area) could bear on a creditor’s ability to obtain repayment. Therefore, creditors may consider immigration status, and they may differentiate between a non-citizen who is a longtime resident with permanent resident status and a non-citizen who is temporarily in the U.S. on a student visa. A creditor must be careful not to arbitrarily deny credit to some aliens, and not others, merely on the grounds that the ones denied credit are not citizens.
If an applicant is of age to legally enter into and be bound by a contract, Personnel shall not discriminate on the basis of age. If an applicant is not of legal age, the application shall be declined.
Personnel shall not discount or exclude from consideration the income of an applicant or spouse because of a prohibited basis, nondiscrimination category, or because the income comes from part-time employment or an annuity, pension, or other retirement benefit. However, Personnel may consider the amount and probable continuance of any income. When an applicant relies on alimony, child support, or separate maintenance payments in applying for credit, the creditor may consider the payments as income to the extent that they are likely to be consistently received by the applicant.
Personnel may consider whether an applicant’s income is from a public assistance program only for the purpose of determining a pertinent element of creditworthiness, such as likelihood of continuation of income. This would be similar to how any other type of source of income would be evaluated.
Personnel shall not take into account whether there is a telephone listing in the applicant’s name but may take into account whether there is a telephone in the applicant’s residence.
Personnel shall not make any oral or written statement, in advertising or otherwise, to applicants or prospective applicants that would discourage them from applying for credit.
When using credit history to evaluate an applicant’s creditworthiness, Personnel shall consider all of the following:
The credit history of accounts that the applicant and spouse are permitted to use or for which both are contractually liable;
On the applicant’s request, any information the applicant provides to explain that the credit history does not accurately reflect the applicant’s creditworthiness; and
On the applicant’s request, the credit history of any account reported in the name of the applicant’s spouse or former spouse that the applicant can demonstrate accurately reflects the applicant’s creditworthiness.
Personnel shall evaluate married and unmarried applicants by the same standards. If Company receives a joint application, the applicants shall not be treated differently based on the existence, absence, or likelihood of a marital relationship between the parties.
Personnel may consider state property laws directly or indirectly to the extent that they affect creditworthiness or the difficulty of recovering collateral upon default.
When an applicant is qualified for the applied-for credit, Personnel shall not require the signature of an applicant’s spouse or other person, other than a joint applicant, on any credit instrument. Unless it is clear that an application is “joint,” Personnel shall not assume that it is, even if the applicant submits information that includes details about a spouse or other person.
Personnel may request a cosigner, guarantor, endorser, or similar party if the applicant does not qualify separately for the applied-for credit, but shall not require that the additional party be the spouse.
With respect to advertising, marketing and otherwise seeking out customers, Personnel shall ensure that:
Advertisements do not state racial or ethnic limitations;
Advertisements do not use code words or use photos that convey racial or ethnic limitations or preferences;
Company not place an advertisement that a reasonable person would regard as indicating minority consumers are less desirable;
Company not advertise only in media serving predominantly minority or non-minority areas of the market;
Company not conduct other forms of marketing differentially in minority or non-minority areas of the market;
Company not market only through lead generators or other market representatives known to serve only one racial or ethnic group in the market;
Company not use a prohibited basis or nondiscrimination category in any pre-screened solicitation; and
Company not provide financial incentives to its personnel to place applicants in less advantageous Credit Products.
Personnel may not do any of the following on a prohibited basis or nondiscrimination category (i.e., race, creed or religion, color, national origin, age, sex, marital status, receipt of income derived from any public assistance program, good faith exercise of rights under the Consumer Credit Protection Act of 1968, sexual orientation, military status, familial status, or disability):
Refuse to deal with individuals inquiring about credit;
Discourage inquiries or applicants by delays, discourtesy, or other means;
Provide different, incomplete, or misleading information about the availability of credit, application requirements, and processing and approval standards or procedures (including selectively informing applicants about certain credit options while failing to inform them of alternatives?
Encourage or more vigorously assist only certain inquirers or applicants;
Refer credit seekers to other institutions, to more costly credit products, or to Credit Products with potentially onerous features;
Waive or grant exceptions to application procedures or credit standards;
State a willingness to negotiate;
Use different procedures or standards to evaluate applications;
Provide certain applicants opportunities to correct or explain adverse or inadequate information, or to provide additional information;
Accept alternative proofs of creditworthiness;
Offer or authorize modifications, deferrals, extensions, due date changes;
Impose or waive late charges and/or other fees;
Offer payment waivers, alternative payment options and/or settlements;
Initiate repossession or other collection remedies; or
Offer or handle redemptions, reinstatements or other policies that provide customers the right to retain collateral.
V. Internal Controls
The FC Officer will establish preventative and detective controls to ensure compliance with FC Laws and to mitigate the risk of violating FC Law. Internal controls should include, at a minimum:
Advertising and marketing. The FC Officer shall be advised of all advertising and marketing materials, campaigns and promotions (collectively, “Marketing Material”) prior to such being launched. Prior to the launch of any Marketing Material, the the FC Officer shall consider the FC Policy and make sure the Marketing Material is consistent with and does not violate it.
Product Development. The FC Officer shall be included in the new product development and existing product refinement process. Existing product refinement shall include any change, adjustment, variation, alteration, enhancement, or other modification of a product. Prior to the launch of any new product or refinement of an existing Credit Product, the FC Officer shall consider the FC Policy so that the new product and/or refinement to existing product are consistent with and do not violate it.
Application and Processing. Company shall review its credit application periodically to ensure compliance with FC Law. Furthermore, the FC Officer shall be advised of all online credit evaluation related processes, content and materials, including: (i) solicitations to apply online, via telephone, in-person or otherwise, (ii) the online credit application, or (iii) content about the online application process, or about any of Company’s application methods (collectively “Online Application”) prior to such being launched and/or changed. Prior to the launch/change of any credit application, including an online application, the the FC Officer shall consider the FC Policy so that any new credit application, including online application, is consistent with and does not violate it.
Credit Risk and Underwriting. The FC Officer shall review Company’s credit risk and underwriting criteria, including any credit scoring system information, no less than annually. The FC Officer shall be advised whenever the credit risk and/or underwriting are changed, and assess whether the proposed change(s) violates a FC Law, creates a fair lending risk, and is compatible with Company’s fair credit/lending culture. If the change(s) does not violate a FC Law, but creates or increases a fair lending risk, the FC Officer shall consult with an outside legal or compliance professional to determine how to proceed.
The FC Officer shall consider, in connection with its review of the credit risk and underwriting criteria, the results from monitoring as discussed below, and in particular, any indications of disparate treatment and/or disparate impact.
If Company has a credit scoring system (i.e., scorecard) or uses the system of third party, the system shall be:
Based on data that is derived from an empirical comparison of sample groups or the population of creditworthy and non-creditworthy applicants who applied for credit within a reasonable preceding period of time;
Developed for the purpose of evaluating the creditworthiness of applicants with respect to the legitimate business interests of Company using the system (including, but not limited to, minimizing bad debt losses and operating expenses in accordance with Company’s business judgment);
Developed and validated using accepted statistical principles and methodology; and
Periodically revalidated by the use of appropriate statistical principles and methodology and adjusted as necessary to maintain predictive ability.
The foregoing information shall be documented and maintained by the Credit Department and a copy provided to the FC Officer.
Pricing. The FC Officer shall review Company’s pricing of inventory no less than annually. The FC Officer shall be advised whenever pricing strategy is changed, and assess whether any proposed change violates a FC Law or creates a fair lending risk. If the change(s) does not violate a FC Law, but creates or increases a fair lending risk, the FC Officer shall consult with an outside legal or compliance professional to determine how to proceed. The FC Officer shall consider, in connection with its review of the pricing, the results from monitoring as discussed below, and in particular, any indications of disparate treatment and/or disparate impact.
Targeted Marketing and Referral Programs. The FC Officer shall be advised of all targeted marketing and referral programs during their development (collectively “Marketing and Referral Programs”). Prior to the launch of any Marketing and Referral Program, the Personnel involved shall certify to the FC Officer that theFC Policy was considered and the Marketing and Referral Programs are consistent with and do not violate Company’s FC Policy
Service Provider Relationships. Company shall notify its Service Providers of Company’s commitment to fair lending and requirement that Service Providers comply with all FC Law. Service Providers shall be required to certify to Company that they are committed to fair credit/lending and to complying with FC Law. Service Providers shall be subject to Company’s Vendor management program.
Servicing and Collection. Company usually sells its accounts immediately upon origination. Therefore, it does not generally service and collect accounts. In the event that this changes, then Company will amend this policy to include how it will comply with its fair lending obligations in this area.
Complaint Management. Company shall maintain a record of any complaints it receives with respect to fair lending (e.g., complaints that allege discrimination on any prohibited basis or other nondiscrimination category, or that allege a pricing concern) as part of its Complaint Management Policy.
Any fair lending complaint shall be referred to the FC Officer. The FC Officer shall review the complaint and relevant facts, and work with Senior Management to resolve the matter with the applicant or customer. Additionally, the FC Officer shall assess the matter to determine what action should be instituted, including, but not limited to, reviewing and/or making a change(s) to Company’s FC Program.
The FC Officer shall receive reports from Company’s Complaint Resolution System as to fair lending related complaints. The FC Officer shall analyze the complaint data to identify any trends in the volume, type and frequency of complaints. This information shall be used to detect and mitigate any risks that relate to compliance with FC Law. The results and findings shall be included in reports to the Audit Committee on fair lending matters.
Compensation. All Personnel who are involved in creating and/or modifying compensation and incentive programs shall receive fair credit/lending training. The FC Officer shall be advised of all compensation and incentive programs (collectively “Compensation Program”) prior to being launched. Prior to the launch of any Compensation Program, the FC Officer shall consider the FC Policy and determine the Compensation Program is consistent with and does not violate it.
Training. The FC Officer shall ensure that a training program is implemented for all Personnel, as appropriate given their job duties and Company’s fair credit/lending risk.
With respect to any monitoring, review, testing, self-assessment or audit contemplated or conducted, the FC Officer shall consider the following factors:
Whether it should be conducted pursuant to the advice and supervision of counsel.
Whether the results, reports, work papers or associated documentation must be disclosed to a regulator upon request, or are privileged under § 1002.15 of Regulation B.
The FC Officer shall ensure that the following types of monitoring, reviews, self-assessment and testing are conducted as necessary:
Monitoring Company’s policies and procedures to ensure they are updated or revised as necessary and monitoring Company’s training programs, including those of relevant Service Providers, to ensure that they provide appropriate training with respect to fair lending, and to ensure that those programs and materials are updated or revised as necessary.
Monitoring and reviewing on an ongoing basis customer complaints involving fair credit/lending issues.
Monitoring and reviewing on an ongoing basis, litigation involving fair credit/lending issues.
Reviewing credit decisions – underwriting and pricing – to ensure they are consistent with FC Policy and do not present any fair credit/lending issues, including disparate treatment or disparate impact. These reviews shall be conducted on a periodic basis, which shall be no less than annually.
Reviewing exceptions – underwriting and pricing – to ensure they are consistent with FC Policy and do not present any fair credit/lending issues, as well as for indicators of disparate treatment or disparate impact. These reviews shall be conducted on a periodic basis, which shall be no less than annually.
Considering, on an annual basis, whether a fair credit/lending risk assessment is appropriate given its size, complexity, Credit Products, and other appropriate factors.
As part of periodic compliance reports to Shareholders, the FC Officer shall include a discussion of the FC Program, any relevant issues, regulatory developments and emerging issues, and critical areas of risk.
The FC Officer, together with the Shareholders, shall consider whether the results/findings under any of the above-described monitoring warrant further review or analysis, or potentially indicate a systemic issue(s).
Depending upon the results/findings of any of the above-escribed monitoring or the results of any additional review/analysis, the FC Officer, together with Shareholders, shall consider whether: (i) corrective action is appropriate, (ii) remuneration is appropriate for an affected applicant/customer, and/or (iii) whether changes are required to Company’s FC Program.
VII. Recordkeeping and Prompt Corrective Action
Company will retain the original or a copy of the following records:
A. For Applications. Company shall retain the following for 25 months after notice is provided to the applicant of the action taken or a notice of incompleteness is provided to the applicant: (i) any application received and any other written or recorded information used in evaluating the application that was not returned to the applicant at the applicant’s requests; (ii) the notification of the action taken by Company; (iii) a statement of the specific reasons for any adverse action taken concerning the applicant; and (iv) any written statement received from the applicant alleging a violation of the ECOA or its implementing Regulation B.
B. For Existing Accounts. Company shall retain the following for 25 months after notice is provided to the applicant of the adverse action taken regarding an existing account: (i) any written or received information concerning the adverse action; and (ii) any written statement received from the applicant alleging a violation of the ECOA or its implementing Regulation B.
C. For Other Applications. Company shall retain the following for 25 months following the date on which Company receives an application for which an adverse action notice is not required (e.g., when an applicant withdraws an application before Company has made a decision concerning the application): all written or recorded information in Company’s possession concerning the applicant, including any notation of Company’s action.
D. With Regard to Enforcement Proceedings. Company shall retain all fair lending records beyond 25 months if Company has actual notice that it is under investigation or is subject to an enforcement proceeding for an alleged violation of the ECOA or its implementing Regulation B. Company shall retain this information until final disposition of the matter unless an earlier time is allowed by agency order or court order.
VIII. Periodic Legal Review
Company will actively monitor legal and regulatory changes that require changes to this Policy and any of the policies, procedures, or documents that support it, and will adopt any and all changes required to ensure that Company is in compliance with all applicable laws at all times.
The FC Officer will review this Policy annually to ensure that it remains current (taking into consideration, at a minimum, changes and developments in the law, changes and developments in Company’s operations, industry best practices, audit/testing results, complaint data, Company’s litigation, and a study/analysis of exceptions). In connection with this review, the FC Officer will ensure that a legal review is conducted, if necessary within Officer’s discretion.