Under the Equal Credit Opportunity Act (“ECOA”), creditors who deny credit or change the terms of credit arrangements must notify applicants of the specific reasons why. At issue in the Sixth Circuit’s recent decision in Tyson v. Sterling Rental, Inc. is whether a “middle man” like a car dealership is a “creditor” that must meet the ECOA’s notice requirement. The Sixth Circuit held that yes, car dealerships and other intermediaries qualify as “creditors” that must provide notice of adverse actions if they participate in financing arrangements for their customers.

In Tyler, the Plaintiff made a down payment for a used car from defendant Car Source. For the rest of the car’s cost, Plaintiff was put on a financing plan. Plaintiff provided pay stubs and bank statements to Car Source, and Car Source set the terms of the financing agreement by inputting Plaintiff’s financial information into a computer program. Car Source then assigned the agreement to a third party, Credit Acceptance Corporation (“CAC”), which ordinarily would provide Car Source an advance if it was satisfied with the financing terms. In this case, however, the terms were based on an overestimation of Plaintiff’s monthly income, either due to an error by the salesperson or the computer program. Discovering the discrepancy, CAC refused to pay Car Source an advance.

Car Source demanded that the customer come back to the store and pay an additional payment of $1,500 to keep the car. It is undisputed that Plaintiff was never provided with written notice explaining why the terms of her credit arrangement were changed. The primary issue on appeal was instead whether Car Source is a “creditor” for purposes of the ECOA who was required to provide notice. The statute defines such creditors as those who “in the ordinary course of business, regularly participate[] in a credit decision, including setting the terms of the credit.”

Car Source argued that it was merely a middle man between the applicant and CAC, to whom the financing agreement was assigned. The Sixth Circuit disagreed, noting that Car Source set the terms of the deal, bore the consequences of the financing falling through, and made the unilateral decision to change the terms of the existing credit arrangement. Adopting the Seventh Circuit’s “continuum” analysis, the court held that even “middle men” such as dealerships are required to provide notice so long as they regularly participate in credit decisions. The court also concluded that injunctive relief is available to private parties under the plain language of the ECOA, and it reinstated Plaintiff’s statutory claim for conversion under Michigan law.