Car Dealers Running Your Credit Without Permission

When a car dealer checks your credit score by running your credit report, this is likely to show up on your credit report as a “hard” inquiry, which could negatively affect you by lowering your credit score. The importance of credit scores should not be underestimated. Lenders and other service providers, such as insurance companies, rely in part on these scores to decide whether to offer you services and at what rate. You usually pay higher interest rates on loans if you have a low credit score.

Your credit report is private, up to a point. Generally, a car dealer cannot run your credit report without your permission. If you are looking for financing from the car dealer, you will most likely be asked to sign a document allowing the dealer to run your credit for this purpose. A car dealer can run your credit without your permission if you already have an existing credit relationship; that is if they are already a creditor to you. Even then, the car dealer is only allowed to run the report only in relation to maintaining your account or for collection purposes.

Rights Under the Fair Credit Reporting Act

The federal law that protects consumer rights when it comes to credit reports is the Fair Credit Reporting Act (FCRA). Under section 604 of this law, there are several people or entities that are allowed to look at your credit report. Some of these people include:

• a person with a court order allowing them to look at the credit report;
• a company with written permission from the consumer to look at the credit report;
• potential creditors and employers;
• existing creditors;
• insurance underwriters providing insurance to the consumer; and
• government agencies.

For potential creditors, such as a car dealer, and for employers, the consumer’s express permission is required. This means that in most cases, you have to give written permission allowing the car dealer to view your credit report.

If a car dealer purposefully runs your credit report without your permission, they are liable for any damages this causes you, and at the minimum they have to pay you $1,000. A judge can also award attorney’s fees, and any other amount the judge thinks will keep the car dealer from repeating the illegal action of running consumer credit reports without permission. When the car dealer runs your credit report without your permission, but does so negligently, without intending to, then the $1,000 guaranteed damage award noted above does not apply.

However, you need to make sure that your rights really have been violated under the law, and that you are not filing anything just to harass the car dealer. If you file anything with the court simply to harass the other side, and you lose, you can be liable for the other party’s attorney’s fees yourself.

In addition to the protection you have under the FCRA, you may have additional rights and protection under state law. If you find out that your rights have been violated, an attorney can help you file suit in state or federal court against the violators.