Coapplicant Adverse Action Notices

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Question:

For adverse action notices where it is our procedure to send out the notice with reasons, how do we handle a borrower and coborrower situation where we are declining the borrower for one reason (delinquent credit obligtions) and the coborrower for another reason (too high debt to income ratio). Do we put all reasons on one adverse action notice and let the applicants figure out which reason applies to whom or can we send out two separate notices and copy both applicants with the others adverse action notice? Which way makes more sense?

Answer:

Under 202.9(f), When an application involves more than one applicant, notification need only be given to one of them, but must be given to the primary applicant where one is readily apparent.

That said, the cleanest method, especially if it included credit bureau information, is to send each applicant their own notice with only the reasons applicable to them. This would concur with Fair Credit Reporting Act requirements and the FTC's Stinneford opinion. This opinion requires separate notices when credit bureau information is the reason for denial.

This would apply to the commonly combined FCRA/ECOA notice.

First published on BankersOnline.com 12/3/01