“Terms” vs. “Types” of Credit

When a loan application is denied, compliance isn’t necessarily the first thing many loan officers think about.  Why waste time on an Deb11application that isn’t going anywhere when you could put your time and effort into one that will?  While it isn’t wrong to think this way, it’s still very important to ensure that the adverse action compliance requirements in both Regulation B and the Fair Credit Reporting Act are being met.

Did you know that adverse action notice requirements can differ depending on whether an applicant applies for a certain “term” of credit versus a particular “type” of credit?  If you don’t offer a particular type of credit, an adverse action notice is not needed.  For example, if an applicant applies for a home loan but your bank does not make home loans of any kind.  On the other hand, if an applicant applies for a 30-year home loan but your bank only makes 5-year home loans, an adverse action notice IS needed.  In this case, you do make home loans, just not the term the customer requested.

Looking for more answers to adverse action notice questions?  Join us for our Adverse Action Notices webinar on June 21, 2017.

Deb Irving

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