Commercial Loans - Adverse Action Letters

This is how we address denials to business applicants in our Advanced Lending Manual:

Notification to business credit applicants:
[Section 202.9(a)(3) - page 7218]

Businesses with gross revenues of $1,000,000 or less in its preceding fiscal year are subject to the same notification requirements as consumers are, except that:

1. The statement of action taken may be given orally or in writing, when adverse action is taken;
2. Disclosure of an applicant’s right to a statement of reasons may be given at time of application, instead of when adverse action is taken, provided the disclosure:
   1. is in a form the applicant may retain;
   2. contains a statement that the bank will give specific reasons for the action taken within 30 days of an applicant’s request, provided the request is dated within 60 days of the bank’s original notification of action taken;
   3. contains the Equal Credit Opportunity Act notice;
   4. contains the name and address of the bank; and
   5. contains the name and address of the bank’s regulator.
3. For an application made solely by telephone, a bank may give an oral statement of the action taken and of the applicant’s right to a statement of reasons for adverse action.

With regard to businesses that had gross revenues in excess of $1,000,000 in its preceding fiscal year, a bank shall:

1. Notify the applicant, orally or in writing, within a reasonable time of the action taken; and
2. Provide a written statement of the reasons for adverse action and the Equal Credit Opportunity Act notice if the applicant makes a written request for the reasons within 60 days of being notified of the adverse action.

If a commercial applicant withdraws the request, the bank does not need to send any type of letter or acknowledgment. The bank did not take adverse action so nothing is triggered.

First published on BankersOnline.com 12/04/06