Buying your first car can feel exciting when everything seems to be going smoothly. But after you decide to shop around for another auto loan after the first option did not meet your needs, you found that a different lender has already approved an application you never made. If the dealer never discussed that lender or its terms with you, you may wonder what this means for you.
Here are the key issues to consider when this happens.
When a dealer can submit your information
A dealer can often send your information to lenders if you allow them to arrange financing, but that does not give the dealer unlimited authority to pursue any loan it chooses. The important question involves the permission you gave. For example, if you never agreed to have the dealership seek financing through a particular lender or you had already withdrawn from the purchase, those deserve closer attention.
How the application could affect your credit
An unauthorized application could affect your credit if the lender performed a hard inquiry. That can have a small effect on your score, although credit-scoring models generally group multiple auto-loan inquiries made within a short period as one inquiry when you shop for financing.
Check your credit reports to see whether the lender appears there and whether the entry shows an inquiry or an actual account. That distinction matters because an approved application does not necessarily mean you have accepted or funded a loan.
Whether you can cancel the loan
An approved application does not necessarily create a completed auto loan that you must repay. Before assuming you need to cancel a loan, find out whether you signed a loan agreement, whether the lender funded the transaction and whether the dealership completed the vehicle purchase.
If you never agreed to the financing, ask the lender for the application and related records so you can determine exactly what happened.
What you can do about an unauthorized application
You can start by asking the lender when the application arrived, who submitted it and what information the lender received. Keep copies of your communications with the dealer, especially anything showing that you declined or canceled financing.
Federal credit-reporting rules generally require a permissible purpose before someone obtains your consumer report. FTC guidance has also stated that when a loan application gets forwarded to additional lenders, consumer consent can provide that purpose.
If the records show that the dealer submitted an application without the authorization you gave, you may have grounds to challenge the conduct. Depending on what happened, potential claims could involve consumer protection or credit-reporting laws rather than simply labeling the conduct as fraud.
Protect your credit and your rights
An unexpected approval does not automatically prove that a dealer acted unlawfully, but you should not ignore an application you never authorized. Gather the loan records, credit-report entries and communications with the dealership, then review them with an attorney who can determine whether the dealer exceeded your authorization and what remedies might apply.