Kelly’s Korner – Disclosing the APR
Q: Why do I need to disclose the APR on my deal worksheet if I am not located in California or Washington where disclosure laws apply?
A: The Consumer Protection Law of 1968 – 12 CFR 226 Regulation Z/ Truth in Lending – applies to all 50 States and all U.S. territories. While states may have individual requirements for advertising, the disclosure law is consistent: You must fully and completely disclose the terms and conditions of a credit transaction to your customer before the customer signs the credit agreement. The purpose of this regulation is to ensure that the consumer can compare the true cost of the credit purchase.
Kelly Enterprises has completed due diligence regarding this issue. The state attorneys general we have contacted have clearly stated that dealerships must provide full disclosure, including the APR and term of the loan, when discussing payments with customers.
Sales consultants may feel uneasy about looking a customer in the eye while quoting a double-digit APR. However, I maintain that sales consultants are usually more anxious about APR than their customers. The facts are that 15 million people filed for bankruptcy in 2002, credit scores are not improving, and most of your customers will not be surprised that they do not qualify for an “A+” tier APR.
If you are already practicing full disclosure, you know that you greatly reduce customer anxiety when you make the disclosure at the outset. You immediately establish credibility with your customer and can begin negotiations with everyone fully informed. Honesty is not only the best policy here; it also improves your production. Full disclosure usually means higher CSI and more gross profit in your deals.
OIADA Newsletter, June 2003.