Topic: Adverse Action Notices
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Can we obtain a numerical credit score when running credit reports on our employees?
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We believe that you may be able to obtain an employee’s numerical credit score, provided that you obtain the employee’s authorization after clearly disclosing that you are pulling a numerical credit score (not an employee credit report). The FCRA expressly allows you to obtain a “consumer report” for any “employment purpose,” provided that you follow…
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Can we take an adverse action against a bank employee based on the employee’s credit report or credit score?
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We are not aware of any state or federal laws that would prevent you from taking an adverse action against an employee based on a credit report or credit score, with one caveat (discussed below). State and Federal Law: State law: Illinois’s Employee Credit Privacy Act prohibits most employers from retaliating against an employee based…
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When must we notify applicants of an adverse action? We thought it was required in three days.
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A creditor must notify an applicant of an adverse action with 30 days after receiving a completed application. 12 CFR 1002.9(a)(1)(i). You may be thinking of the early disclosure rules, which require banks to send out the early disclosure and good faith estimate within three business days. 12 CFR 1026.19(a)(1)(i)
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How much detail is required in the “Description of Action Taken” section of an adverse action notice?
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Neither the FCRA nor the ECOA require a description of the account transaction or request, though the ECOA regulations require adverse action notifications to include a “statement of the action taken,” which implies that the creditor would have to provide some information about the request on which the adverse action was taken. 12 CFR 1002.9(a)(2).…
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If we use a merged report with multiple credit scores as the basis for an adverse action, how do we disclose the name and contact information of the agency providing the score?
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We recommend disclosing contact information for the reseller of the consumer credit information, though you may want to confirm this with your regulator. Under the Fair Credit Reporting Act, you are required to disclose the contact information for the “consumer reporting agency” providing the credit score used by the bank and the name of the…
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If we request an applicant’s credit score for a consumer loan, and the score is “N/A”, how do we handle listing the four key factors in the adverse action disclosure?
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You are not required to disclose the applicant’s credit score because the applicant does not have a credit score (unless your institution used information from the report to create its own credit score for the applicant). Dodd-Frank amended the Fair Credit Reporting Act (FCRA) to require creditors to include additional information in adverse action disclosures…
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When we use a tri-merge credit report, which credit score should we report on an adverse action notice?
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The Federal Reserve’s commentary on the new adverse action notice requirements directly addresses the issue of reporting a credit score when a bank used multiple scores, and it gives banks the choice of “disclosing any of the credit scores that it used” to comply with this requirement. See Final Rule, Equal Credit Opportunity, 67 Fed.…
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If we reject a customer’s deposit account application but offer an account without overdraft privileges, is that an adverse action?
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Equal Credit Opportunity Act (ECOA) As to the adverse action issues in offering second-chance checking accounts, the ECOA’s and Regulation B’s notification requirements do not apply to decisions on allowing a customer to open a depositary account. The regulations require notification of an adverse action only when a bank refuses to grant “credit,” which is…
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Can a bank turn down a home equity credit application for no reason other than the applicant has a serious gambling problem? Our bank is in a small town and has all of the applicant’s financial information, but the credit is perfect, the home has value, and the income is there.
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Regulation B allows a creditor to consider “any information obtained” in connection with an application for credit, as long as the information is not used to discriminate against an applicant on a prohibited basis. We are not aware of any law or court decision that prohibits a creditor from considering an applicant’s gambling history. 12…