I have read the section on Notification to Business Credit Applicants and have a couple of questions.

1) Revenues of $1,000,000 or less - If the applicant is a business entity (LLC) with a guarantor (owner of LLC) and part of the reason for denial was based on the guarantor's credit then the AAN should have said guarantor's credit score and information on that AAN, correct? Or should there be an AAN notice addressed only to the business with the denial reasons for the business and a second AAN for the guarantor with the personal reasons for denial?

2) Revenues of $1,000,000 or less - Does the AAN notice have to be sent within 30 days of completed application? Our credit analysis process can sometimes exceed 30 days past application date due to loan request volume in our commercial lending department.

3) Revenues more than $1,000,000 - it states that applicant should be notified within a reasonable time period. What would be considered reasonable? 60 days? 90 days? We send AAN for these denials as well.

Any information would be appreciated. Thank you.

1. A guarantor is not an applicant for adverse action purposes. A credit score disclosure is not necessary and no adverse action notice goes to the guarantor.

2. If the application is complete, you have 30 days to render a decision.

3. Notice provided in accordance with the timing requirements of §1002.9(a)(1) is deemed reasonable in all instances. 90 days, hmmmm - I doubt the regulators would be that reasonable......

Thank you for the information.

One more question. On the topic of staying within 30 days to render a decision on completed loan applications, what is your recommendation for complete application date for commercial loan requests. My take is when we receive the last piece of financial information (enough to make a credit decision) that our bank requires should be the application date.

Thoughts please.

My take is when we receive the last piece of financial information (enough to make a credit decision) that our bank requires should be the application date.

That makes sense to me.

Thanks again.

Kisha, to further explain the definition, a completed application is a "rolling date", based on the information that is received.

If the first thing a bank does is pull up a credit report, and the credit report is bad, the bank has 30 days from receipt of the CR to notify the customer.

If the CR is good and let's say the next step is to evaluate the cash flow, then the bank would be required to get the information from the customer as expediently as possible and when they receive it, they have 30 days to analyze it and notify the customer if it does not meet their underwriting criteria.

If all of the above is OK, they have 30 days from receipt of the appraisal to notify the customer if the collateral is not acceptable. (repeat as needed)

See "Application and completed application" in the definitions.
http://www.bankersonline.com/regs/12-1002/12-1002-002.html


Completed application from the commentary (same link)

6. Completed application—diligence requirement. The regulation defines a completed application in terms that give a creditor the latitude to establish its own information requirements. Nevertheless, the creditor must act with reasonable diligence to collect information needed to complete the application. For example, the creditor should request information from third parties, such as a credit report, promptly after receiving the application. If additional information is needed from the applicant, such as an address or a telephone number to verify employment, the creditor should contact the applicant promptly. (But see comment 9(a)(1)–3, which discusses the creditor's option to deny an application on the basis of incompleteness.)

Thank you Southern Banker! This is pretty much how our commercial process works. This is a big help.

What if we do not pull business credit reports? We pull consumer reports on the guarantors. Should we be denying the business listing guarantors do not qualify or something like that? And not send AA notice to guarantors.

The guarantors are not applicants from a AAN perspective. The denial notice would go to the business and if you choose to disclose reasons, the credit quality (or I guess lack thereof) of the guarantors would be an appropriate reason. Typically, commercial loans are not made on the strength of the guarantors as it is always a secondary source of repayment and there usually are enough other reasons to disclose without getting into the guarantor's creditworthiness.

One key to the timing requirements is that the applicant is not penalized for the bank's tardiness in handling the app. That is, we need X information (D&B as an example) on the borrower, "assistant, request the D&B." Assistant fails to request it. The bank doesn't "buy" that time because it failed to do something. You can't say you didn't have a completed app because you failed to take your own action.

We start tracking the 30 days from the date we receive the loan request and if we are missing financial statement the officer requests them from the customer orally. If the customer does not bring them in within the 30 days, we send out a notice of incomplete. Is this a correct process? We started doing it this way because the officers were holding on to commercial requests for months waiting for the financial statement and some were hmda reportable (investment property) and we didn't know how to report them (action type, action date). Is the notice of incomplete required for commercial loan requests?

Thanks

I know this is an old post. Hopefully someone will see it....

If we send an AAN to the business entity which applied for credit, and we denied the application based on the poor credit history of the guarantors, do we list the principal reasons specifically belonging to the guarantors on the AAN for the business entity? in this case, the guarantors had filed BK and were past due on their RE taxes.