This may have been discussed before but I did a search and could not find anything. At a recent compliance seminar we were told, as of April 15, an adverse action need only be sent to the applicant; we are not required to send it to co-applicants, guarantors, etc. Where can I find this?

"B" has long allowed you to send it only to a primary applicant, if one is identified. 202.9(f) (old and revised Reg. B)

Now I'm totally confused. This was briefly mentioned at the VBA compliance school. Quoting the Fair Lending tract in the school's manual:

"Regulation B: New and Improved"
(VII) Adverse Action and Notification:
(D) Who gets the notice?
2. Privacy between co-applicant is deemed waived.
a. "When a person agrees to be a co-applicant, guarantor, or similar party, however, there is (or should be) a general understanding that information will be shared."

Our instructor said this was effective as of April 15.

This relates to a slightly different issue. The new "B" says that if you and I apply together, I am your co-borrower, and we are denied because my credit stinks, under the old rule there was some privacy/confidentiality question on them telling you that my credit stinks. Instead, under the old rule, the bank may send you (primary applicant) the notice saying "unqualified co-borrower". The new rules clarify that you should be specific and say, "Andy's credit stinks", or words to that effect.

When people apply together, privacy/confidentiality is waived and dirty laundry can be aired.

FYI, the effective date was April 15, 2003. The mandatory compliance date is 04-15-2004.

The more I read, the more I see things are tweaked here and there. Training is recommended when you get the opportunity.

Additionally, much was rearranged so your audit workpapers may need revision as well if they contain cites like mine do.

Our standard practice was, and will remain, we type ONE Adverse Action notice that states the reasons for decline.

If the FCRA notice is triggered, then it also shows on the Adverse Action notice.

The Adverse Action notice names all applicants, and each one is mailed a copy.

When there are two applicants a creditor cannot send a combined ECOA/FCRA adverse action notification to only the primary applicant if the application is denied, even in part, based on information in a co-applicant's consumer report. In that circumstance, the co-applicant has been the subject of "adverse action" and must be provided his or her own separate notification to satisfy the requirement of Section 615(a) of the FCRA..

Bonnie, do you send a notice to each applicant when they live at the same address?

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Bonnie, do you send a notice to each applicant when they live at the same address?

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Our procedure is to mail as many copies as there are applicants. However, if they are at the same address, both notices may go in the same envelope.

Andy - I have tried to find the wording in Reg B that states that privacy is waived when people apply together but am unable to locate it. Can you give me the exact paragraph/section where this is disclosed?

Thank you,
Greg

Look in the preamble to the Reg B Commentary Revision under the discussion of Section 202.9 (b)(2)

Revised Commentary for Reg B
Many commenters were concerned about the co-applicant's or
guarantor's privacy when the reasons for adverse action pertaining to creditworthiness are given to the primary applicant. When a person agrees to be a co-applicant, guarantor, or similar party, however, there is (or should be) a general understanding that information will be shared. Accordingly, the rule has been adopted as proposed.

202.9(b)(2) says you have to give specific reasons. The reg itself doesn't say privacy between two applicants is gone, but the FR did say this,

" Section 202.9(b)(2), adopted as proposed, clarifies that whether a creditor's denial of credit is based on the creditworthiness of the applicant, a joint applicant, or guarantor, the reasons for adverse action must be specific. For example, a general statement that ``the guarantor did not meet the creditor's standards of creditworthiness'' is insufficient.

The legislative history of the requirement to provide specific reasons for adverse action indicates that the purposes of the disclosure are to help achieve the anti-discrimination goals of the ECOA and to educate and inform consumers. These dual purposes are served by the clarification in Sec. 202.9(b)(2). For example, the disclosure may discourage a creditor from discriminating based on a co- applicant's or guarantor's race, sex, age, or other prohibited basis.
Also, the disclosure may help educate and inform applicants, co- applicants, or guarantors as to reasons for denial that are not apparent from looking at their credit report.

Many commenters were concerned about the co-applicant's or guarantor's privacy when the reasons for adverse action pertaining to creditworthiness are given to the primary applicant. When a person agrees to be a co-applicant, guarantor, or similar party, however, there is (or should be) a general understanding that information will be shared. Accordingly, the rule has been adopted as proposed." at Page 13144 3-18-03 Vol. 68 No. 52.

I just read this thread, and needed to make sure that I was clear in regards to 2 people applying for 1 loan.
If Mr. & Mrs. Smith apply for a loan and we turn them down whether it's because of his credit alone or both of theirs, would it or would it not be O.K. to print on the AAN Mr. & Mrs. Smith......... and then send them each a notice with both names appearing to the same address?

Thanks

Regulation B allows you to send one to the primary applicant, however, FCRA requires a notice to each applicant regardless of marital status or age. I had this conversation yesterday with a FDIC compliance examiner who was informed of this by Regional office dated 1/22/2003. Compliance Examiners will be looking for violation of FCRA. Wouldn't be nice if regulations and regulators could agree on all subjects?

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If Mr. & Mrs. Smith apply for a loan and we turn them down whether it's because of his credit alone or both of theirs, would it or would it not be O.K. to print on the AAN Mr. & Mrs. Smith......... and then send them each a notice with both names appearing to the same address?

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We list all applicants on the adverse action letter and mail a copy to each one. They applied jointly, they get declined jointly.

I'm going to switch gears slightly to ask a question regarding the requirement to include the name and address of the creditor on the Notice:

Section 202.2(l) of Reg B defines a creditor:

" Creditor means a person who, in the ordinary course of business, regularly participates in a credit decision, including setting the terms of the credit. The term creditor includes a creditor’s assignee, transferee, or subrogee who so participates. For purposes of § 202.4(a) and (b), the term creditor also includes a person who, in the ordinary course of business, regularly refers applicants or prospective applicants to creditors, or selects or offers to select creditors to whom requests for credit may be made. A person is not a creditor regarding any violation of the Act or this regulation committed by another creditor unless the person knew or had reasonable notice of the act, policy, or practice that constituted the violation before becoming involved in the credit transaction. The term does not include a person whose only participation in a credit transaction involves honoring a credit card."

OK, here's my question: Does "person" (as used in the definition) refer to the natural person making the credit decision, or the financial institution? "Person" seems so, well, personal, that it leads me to believe it is the loan officer directly. Therefore his/her name is the name to be typed on the Adv Act Notice. However, logic argues that simply providing the name of the bank is enough, and it isn't necessary to get as detailed as "Jane Doe, VP".

Can anyone help me? I currently have no consistency on what my branches are doing for this.

Keep reading in the definitions at letter
(x) - Person means a natural person, corporation, government or governmental subdivision or agency, trust, estate, partnership, cooperative, or association.

-> whack! <- (that's the sound of me slapping my forehead in an "of course!" gesture)

Good gravy. How many times was I told at compliance school to KEEP READING! Thank you for helping me in my moment of impatience.

So, I guess that answers my question. It's OK to use either the loan officer's name OR the bank's name.

As the instructor at VBA's school, let me add a bit here. First, thanks, guys, for the quotes from the Fed's document. The Fed published this to clarify the issue and to settle concerns about potential privacy violations. As such, it is a statement of policy without a definitive effective date. The April 15 dates can always be followed.

The Fed has spoken with regard to Regulation B, but this does not necessarily settle the issue with respect to FCRA. So let's make a list:

It is OK, under Regulation B, to give reasons to either or both applicants regarding credit weakensses of either or both applicants. This does not violate privacy of either applicant.

It is OK under Regulation B to give one adverse action notice to multiple applicants. This can be addressed to one or all applicants. It is also perfectly OK to give everyone a notice.

FCRA still insists that each consumer whose report was used must receive an individual notice. This notice simply tells the consumer that the report was used, and tells the customer the specifics about the credit reporter.

Stay tuned. The Fed is still working on regulations regarding FCRA and they might -- just might -- do something about this.

By sending one notice to two people you haven't met the requirement of sending notice "to the consumer". You can't assume under FCRA that a notice to a couple means that each received it.