Policy on Equal Credit Opportunity and Fair Lending

The following policy sets forth Frostbyte Motors’s policy on anti-discrimination, fair lending, and equal access to credit for our customers. This policy has been adopted by Frostbyte Motors and is effective immediately. The Owner of the dealership is the policy chief. Any changes to this policy must be approved by the dealership’s owner, depending on the nature and extent of the change.

Our dealership operates on an indirect auto finance model. In this model, we originate the retail installment sales contract (“contract”) and then sell the contract to a financial institution (“Finance Source”) who has approved or approves the contract for purchase. As a part of our business, it is the dealership’s goal to seek to make credit available to all customers who apply for credit and qualify under applicable to our finance management team.

It is the absolute policy of this dealership to make credit available to all qualifying applicants. In doing so, it is strictly prohibited for any dealership employee or agent, or any group of dealership employees or agents, to discriminate against any applicant for credit in any aspect of a credit transaction: (1) on the basis of race, color, religion, national origin, sex or marital status, sexual orientation, or age (provided the applicant has the capacity to contract); (2) because all or part of the applicant’s income derives from any public assistance program; or (3) because the applicant has in good faith exercised any right under the federal consumer credit protection classes not to apply for credit applications for customers in categories’ (e.g.; subprime, near prime, prime, super prime) containing similar credit qualifications should be sent. It is the responsibility of the finance manager dealing with the customer to know the finance sources to which the customer’s credit application should be sent based on the customer’s categorization, as determined by their credit score and any unique credit qualities that might make the credit score unreliable. If the manager has any doubts, he or she should immediately review the matter with the program chief.

It is imperative that any credit extended by this dealership not have a “disparate impact” on any of the protected classes cited in the preceding paragraph in relation to similarly-qualified other non-qualified applicants for credit in any aspect of the credit transaction, including the APR or other credit terms. The dealership will initiate appropriate review and monitoring procedures for similarly-qualified costumers to ensure that no reasonable interpretation of our credit activity can be interpreted as disparity impacting protected classes. All dealership employees and agents will be help personally accountable for compliance with this policy and any violations or apparent violations will be subject to appropriate disciplinary action including but not limited to termination or employment or agency.

For purposes of this policy, a “disparate impact” may occur if a qualified member of a protected class receives less favorable credit terms than a similar-qualified person who is not a member of a protected class, absent a legitimate business reason for the difference (which business reason could not have been accomplished by a less harmful means). So, for example, if a woman with a 650 credit score financing the purchase of the same vehicle as a man with a 640 credit score receives less favorable credit terms (e.g., higher APR, larger down payment requirement, shorter term that make monthly payments higher), then the discrepancy must be justified by a legitimate business need that could not have been accomplished using a different method that would not have generated the less favorable credit terms. However, such situations should be the exception not the rule and must be documented in accordance with this policy.

To implement this policy and with the goal of ensuring compliance with its goals, the following steps are being taken immediately:

1. All costumers will be asked if they have interest in financing their vehicle purchase and be encouraged to apply for financing at our dealership. All lease costumers will be encouraged to apply for lease financing at our dealership as well. No customer will be discouraged from applying for financing or otherwise told or implied that their credit does not merit that they apply.
2. All customers who inquire generally about financing rates before applying for credit (or who make an inquiry without wanting to apply for a credit at such time) will be quoted the identical “first pencil” prior to their credit report being accessed. The first pencil will be established by the program chief monthly for vehicle type and will generally be calculated as approximately the average APR, down payment, and term for the dealership’s customers who financed that vehicle over the prior two months. Payments will be quoted on the amount to be financed, the down payment, the APR, and the term. No payments may be quoted in ranges. The first pencil will be qualified to the customer to indicate that their terms may differ based on their individual credit profile and any special or promotional financing programs that may be in place for which they may qualify. The customer will be encouraged to submit a credit application. It will be made clear to each customer that their credit will be reviewed by fiancé sources with which we have a relationship.
3. Each customer who desires to apply for credit must sign a completed printed credit application prepared with information provided, and reviewed, by the customer. Signatures must be witnessed by the salesperson and valid, government-issued, photo identification must be provided by the customer. Credit applications may also be taken using our secure online credit application. The dealership will not accept credit applications over the phone. Once the credit application is taken, the sales or finance manager will pull the costumer’s credit report through DealerTrack or RouteOne.
4. If the sales or finance manager believes that the costumers credit is such that no finance source will provide an approval, he or she will discuss the matter with the program chief. The program chief will have the authority to decline the customer for credit provided such authority will be used only in extreme cases where the program chief believes with reasonable certainty that the customer will not qualify for credit with any of our finance sources. In such a case, the program chief will print an adverse action notice and hand it to the customer or mail it to the customer if the customer is not present. A copy of the adverse action notice must be retained in the deal jacket along with a notation of the date and time handed or mailed to the customer.
5. Otherwise, the customer’s credit application will be submitted to finance sources using ther dealerships financing and funding software. If any finance source approves the customer, the sales or finance manager will communicate an approval to the customer as long as the approval meets our dealership’s requirements for acceptable purchase terms from a finance source. Rates will be quoted in accordance with the dealership’s pricing policy. We will not quote payment ranges. All initial rates quoted (“the second pencil”) will start with the dealer reserve set at the same pre-determined level unless one of the factors listed on the exception rate justification form applies. The dealer reserve starting level may be changed by the dealership periodically though a written direction to all sales and finance employees but will not exceed a cap of: 2.5% for 12-60 moth term, 2% for 61-75 months, or a lower cap set by a finance source.

   In addition, for both purchase and lease transactions, all second pencil payment quotes must be based on the negotiated price of the vehicle without any other products or additions but must include destination taxes, and applicable fees. Payment packing (including optional “add-on” products in the initial payment quote or implying they are necessary to obtain the credit) in any form at any stage of the negotiation is strictly prohibited. All payment amounts will be calculated using out standard computer calculation for sales and lease payments under the terms of our dealership’s pricing policy and, as noted above must start with the same Dealer Reserve unless an exception applies. Any questions on payment calculations must be reviewed with the program chief.

6. In certain cases, the financing terms may be negotiable with the customer for the purpose of enabling out dealership to obtain the customer’s financing or for other legitimate business reasons not in any way related to the customer being in a protected class. The following reasons are examples that may support a reduction or an increase to the rate quoted as calculated pursuant to paragraph 5 above but in no event, will any person’s status as a protected class be considered as a factor in determining a rate:
   a) The customer indicates he or she has obtained a financing offer from another source (typically a bank or credit union) or dealer at more favorable terms.
   b) The customer indicates that the monthly payment cannot meet their budget and the customer does not have the ability to increase the down payment. In this case, the sales or finance manager should review buy rates on alternative approvals received for the customer from other finance sources, attempt to rehash with the finance sources, and quote an alternative set of credit terms if such alternative would result in a lower monthly payment for the customer. If no finance source’s approval will result in a lower payment to the customer, the sales or finance manager may submit credit application to additional finance sources in the group of finance sources initially identified in an effort to see lower monthly payment acceptable to the customer.
   c) The customer qualifies for a promotional rate advertised by the finance source such as a 0% rate or an employee rate. The program chief will review such promotional rates and advise on how to proceed.
   d) See the other reasons stated in exception rate justification form attached to this policy. These are the only reasons that can justify a reduction in the dealer reserve starting rate. The dealership may change the reasons from time to time but not in response to a particular transaction. The reasons will be determined by the dealership in all instances and exceptions are only permitted for the reasons stated in the exception rate justification form.
7. If a customer contracts at a rate that differs from the dealership’s standard pricing policy, the sales or finance manager will complete the “Exception Rate Justification” form attached to this policy. The form is for internal use only; the exception rate justification form must never be shared with the customer under any circumstances. The form must be completed and signed within 48 hours in its entirety with any supporting documentation attached, if possible. The sales or F&I manager who negotiated the final rate will sign and certify the facts in the exception rate justification form. A copy of the exception rate justification will be sent to the program chief and the original exception rate justification form will be maintained in the deal jacket.
8. Once the customer has agreed upon the terms for purchase and finance or lease of the vehicle, the finance manager will discuss optional aftermarket products with the customer. The customer is required to meet with the finance manager for this purpose before final contract or lease can be prepared of the vehicle delivered. This presentation will be made using the dealership’s aftermarket menu. All products will be presented with multiple payment quotes:  payments that include the offered item(s) and one that does not include the offered item(s), each labeled approximately. (cash customers will only be quoted the cash price of the individual products). Packages of items (e.g., rule” – 100% of our aftermarket products will be offered to 100% of customers 100% of the time. The customer will initial each product or package and sign the menu. Once the menu process has been completed, the finance manager will print or electronically store the customer-signed menu in the deal jacket, and prepare the final contract or lease agreement together with any other required documents in a quiet place in our dealership.
9. Anti-discrimination and fair lending are top priorities and values of this dealership. We will treat all our customers with respect and dignity.
10. The program chief will conduct periodic audits of deal jackets and contracts as well as interviewing sales and F&I personnel to monitor and assess compliance with this policy and make reports to senior management and the dealer principal. The program chief will conduct auditing and make such reports along with any possible suggestions for amendments to this policy not less frequently than twice per calendar year. A failure of any person to comply with any aspect of this policy will be grounds for immediate disciplinary action including but not limited to termination of employment. If any employee or agent observes or learns of any possible violation of this policy, they must immediately report such situation in confidence to the program chief. Failure to do so similarly results in disciplinary action.
11. All employees of the dealership will be required to attend training on this policy and its applicability to their positions within 30 days of publication of this policy and, for new employees or agents, within 30 days of hire. Annual retraining is also required within 12 months of prior training. The program chief will coordinate training and certification of completion of training and retain all records of employee completion of training. If an employee does not successfully complete training, they must be retrained promptly until they have passed the training test. If they fail three times, they must be terminated or reassigned to a position in the dealership that does not deal with customer negotiations.
12. Any question concerning this policy should be directed to the program chief.