IBA Compliance Connection

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Where do we send the FCRA/ECOA adverse notice if the applicant is a business and we also pull credit reports for the individual business owners? Are there any privacy concerns for co-applicants who receive another co-applicant’s information on an adverse action notice?

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We recommend sending a combined ECOA/FCRA adverse action notice to the primary applicant, which in this case would be the business itself. In addition, we recommend sending FCRA adverse action notices to any individuals whose consumer credit reports you pulled, such as co-applicants, guarantors, and the business owners.

Under the Equal Credit Opportunity Act (ECOA) and Regulation B, when there are multiple applicants for credit, you need only send the adverse action notice to “the primary applicant where one is readily apparent.” 12 CFR 1002.9(f). However, the Fair Credit Reporting Act (FCRA) adverse action notice requirements apply to “any consumer” who is subject to the adverse action. 15 USC 1681m. As the Federal Trade Commission (FTC) explained in an advisory opinion, even though the primary applicant receives the combined ECOA/FCRA adverse action notice, you also must provide each co-applicant with “his or her own separate notification” under the FCRA. Advisory Opinion to Stinneford (July 14, 2000).

After the FTC opinion was written, Regulation B’s definition of “applicant” was broadened to include “any person who is or may become contractually liable regarding an extension of credit,” such as a guarantor. 12 CFR 1002.2(e). For that reason, we recommend also providing FCRA adverse action notices to loan co-applicants and guarantors. Further, another FTC opinion suggests that you must provide an FCRA adverse action notice for every consumer report that you pull, such as a report for a business owner, even if he or she was not a co-applicant or guarantor. See Advisory Opinion to Tatelbaum (July 26, 2000) (note that a separate point in that opinion was superseded in a second opinion, known as Tatelbaum II).

As for any privacy concerns for the co-applicants, we believe those were addressed in the supplementary information for the Federal Reserve Board’s most recent final rule amending Regulation B. The Board declined to provide privacy protections for co-applicants and noted that “[w]hen a person agrees to be a co-applicant, guarantor, or similar party . . . there is (or should be) a general understanding that information will be shared.” 68 Fed. Reg. 13144, 13151 (March 18, 2003).