Question & Answer

Question: Our check security company has given us a sample adverse action form to use when refusing to open a deposit account because of information the company gives us regarding the consumer. It looks like a short form of adverse action notice without the reasons. Is this correct?

Answer: It probably is. The Fair Credit Reporting Act does not require you to provide the reasons for the action. You simply have to state the action you are taking and provide information about the consumer reporting agency that provided the information. So you have to include the key items of information such as the fact that you used information provided by a consumer reporting agency, the name, address and telephone number of the agency, the fact that the agency did not participate in making the decision, and a statement that the consumer has the right to have errors corrected.

For deposit accounts, you do not have to provide any notice when the information comes from within the bank or from a third party other than the consumer reporting agency. The consumer reporting agency disclosure applies to all adverse action using a consumer's report. The third party notice requirement is limited to credit application and decisions. So, if you contacted another bank given as a reference and learned that the customer is suspected of kiting checks and is frequently overdrawn, you would not have to provide a notice. You would simply politely decline to open the account.

Copyright © 1997 Compliance Action. Originally appeared in Compliance Action, Vol. 3, No. 2, 4/97