Adverse Action Required if CS Not High Enough?

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Question:

We had a customer wanting to know if she could qualify for 100% financing. We had her sign a credit authorization. Her scores were not high enough to qualify for the 100% financing. We did not take an application - adverse action necessary?

Answer:

Yes, you denied her a loan. You also have to ask what permissible purpose you had to obtain the credit report under your contract with the credit bureau. Almost all credit bureau contracts that banks have do not permit the pulling of credit reports solely based on a written authorization. This also represents a red flag for the prescreening of customers from the fair lending perspective. The rule of thumb in most banks is no credit application = no credit report.

First published on BankersOnline.com 5/13/13